November 24 (Renewables Now) – The German government’s plan to introduce a power price brake that includes a tax on windfall earnings generated by renewable energy operators has faced vehement opposition from industry players and associations.
The draft law that was presented by the federal government on Tuesday will hurt the investment climate for renewable energy in the long term and put the country’s climate targets at risk, according to the Federal Association of Renewable Energy (BEE).
The draft bill stipulates that the skimming-off of windfall earnings should enter into force retroactively as of September 2022 and be applied at least until June 2023. The proposal does not set a firm time frame for the tax and gives an option for an extension until the end of 2024, which is raising concerns and causing uncertainty in the sector, according to BEE.
Germany is exiting fossil energy and at the same time is wreaking havoc on renewable energy, thus willingly and unnecessarily risking the progress made so far in the energy transition, said BEE’s head Simone Peter.
The draft bill also aims to skim off revenues instead of profits and this deprives companies of a large amount of liquidity, which is urgently needed for investments in the expansion of renewables, Peter said further.
The draft law puts renewable energy at a disadvantage position compared to fossil fuels such as coal or natural gas, deters investments and is not legally secure, BEE explained further in the statement. The association expects that the potential introduction of the law would trigger a wave of lawsuits from across the industry.
A group of three renewable energy companies called on the German government in an open letter to make amendments to the proposed law. Naturstrom, Green Planet Energy and EWS Schoenau fear that the tax in its current form would mean doom to medium- and long-term power purchase agreements (PPAs) which are an important instrument for ambitious wind and solar projects.
Prices agreed in wind and solar PPAs usually are well below the level of the current spot market price and if the federal government passes the current proposal, it will skim off these green PPAs not based on their actual earnings, but on the basis of the spot market earnings which are much higher, according to the three companies.
The solar industry has also sharply criticised the draft which provides for strong interventions in the solar market and a temporary skimming of revenue from operators of solar power plants with a capacity of over 1 MW, the industry association BSW said in a separate statement.
The association warns that the proposed legislation would turn into a brake for billions of investments in the energy transition, especially in subsidy-free solar projects, and urges the government to amend the draft.