German state scheme scoops up €417 million of electricity companies’ windfall profits

The German state scooped up approximately 417 million euros of electricity companies' windfall profits during the energy crisis in the first four months the relevant scheme was in place, the economy ministry (BMWK) announced in a press release. The scheme applied to profits above a set margin generated from December 2022, to the end of June 2023. “As [the spot prices on the electricity market] have been declining since the beginning of 2023, the total amount in the first billing period [December to March] was lower than the higher electricity prices in autumn 2022 would have suggested,” the BMWK wrote. Germany introduced the scheme to co-fund support measures for consumers during the energy crisis in December 2022, and announced it would not extend it past 30 June 2023 in view of “secure electricity supply, falling electricity prices, and thus a lack of revenue from the levy.” When the scheme was first presented in September 2022, finance minister Christian Lindner said he expected it to bring a double-digit billion euro sum into the state’s coffers. Revenues generated between April and June will be announced in November.

In the wake of Russia’s invasion of Ukraine, profit margins of energy companies with low operational costs multiplied due to rising energy prices, while many consumers faced difficulties paying their energy bills. The government decided to collect parts of these unexpected gains, also to help co-fund the “energy price brakes”, which offered support payments to households and businesses for gas and electricity consumption. Most of the gains made at the height of the energy crisis were not affected by the tax, however, since the measure only included profits generated since 1 December 2022, at which point costs for most energy products had already peaked.

Germany is set to spend much less on its energy price support programmes than expected, as consumer prices remained only a few cents higher than the threshold above which the government would offer payments. According to the economy ministry, the cost of the electricity price brake for the state will amount to approximately 9 billion euros by the end of July 2023, a fraction of the 43 billion originally earmarked for it.