German parliament approves windfall tax

Germany's Bundestag has approved the introduction of a windfall levy on excessive earnings from renewable energy generation as part of a package of measures meant to cap gas and electricity prices through April 2024.

The tax will apply to wind, solar, hydro, waste-to-energy, nuclear and brown coal-fired power plants of over 1 MW with a retroactive effect as of December 1, 2022. The levy will be paid until June 30, 2023 but its term can be extended to April 30, 2024.

The German government says that the tax is designed in a way that guarantees appropriate revenues for the operation of renewable energy plants and claims that it will not deter investors from new renewable energy projects and power purchase agreements (PPAs).

The proceeds from the windfall levy will be used to finance the electricity, gas and heat price brakes which are at the core of a EUR-200-billion (USD 212.38bn) package that Germany has launched as a response to skyrocketing wholesale prices of natural gas in the wake of the war in Ukraine.

The introduction of the levy faced fierce criticism from industry players and associations which consider it a threat to the investment climate for renewable energy in the long term and believe that it puts the country's climate targets at risk.

Clean power provider Green Planet Energy said last week that it plans to take legal action against the law. The company's criticism is focused on the fact that reference prices from the spot market, which are usually well above the PPA prices, will play a role in the calculation of the tax for wind and solar power plants that market their electricity via PPAs.

(EUR 1 = USD 1.062)

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