Hope for fleeced households? A new “electricity price brake”, financed by skimming off the profits of large companies, should bring noticeable relief. But the traffic light government itself does not yet know exactly how all this is supposed to work.
Kevin Kühnert warns to hurry. “It has to be quick now,” said the SPD general secretary on Monday to the newspapers of the new Berlin editorial company about the ambitious electricity plans for the traffic light. The Germans could “rely on the price brake coming.” Chancellor Olaf Scholz (also SPD) also assumes that the introduction of the price brake will not drag on “for weeks and months”.
But what exactly is supposed to happen there?
That is the open question. Because neither the “electricity price brake” nor the “profit skimming” at energy companies, from whose funds the “brake” is to be financed, details are known. According to the federal government, the plan is for the price of electricity on the stock market to always be based on the cost of the most expensive power plant required to generate electricity – the so-called “merit order”. As a rule, these most expensive providers are gas-fired power plants that can flexibly feed in their electricity when demand increases.
However, the gas price has exploded in recent months due to the sharp drop in deliveries from Russia. As a result, the generation costs for gas-fired power plants have also skyrocketed, while the favorable generation costs for wind or solar energy have remained at a low level. Thanks to the “merit order”, however, the wind or solar producer receives the same market price for his electricity as a gas supplier. The result is fairytale profits, especially for producers of renewable forms of energy. A wind power provider can already produce electricity for 40 euros per megawatt hour, but on Monday afternoon he would have gotten 308 euros in so-called “Day Ahead” trading on the electricity exchange in Leipzig – a profit of more than 650 percent.
It is precisely these “accidental profits”, as Chancellor Scholz calls them, that the traffic light coalition now wants to skim off. For this purpose, a maximum price is set that the producers are allowed to keep for themselves, everything about it goes to the state. In principle, this is similar to the so-called “contracts for difference” model, which exists in Great Britain, for example: the producers receive an average price that can sometimes be below or sometimes above the actual stock exchange price.
Bureaucratically, this works like a reverse EEG surcharge, as Scholz explained. The surcharge, which was abolished in July, was based on an independent financing mechanism that ensured that money got from the consumers to the network operators. This channel can now easily be reversed.
But where does the traffic light set the limit? How much does she want to collect? That is still unclear. Finance Minister Christian Lindner (FDP) said on Sunday that he would deliberately not name a sum because it depends on many factors. In other words: the exact limit has yet to be discussed.
And this border has to sit. If they are set too low, there is no real relief for the citizens. If they are set too high, the urgently needed investments in renewable energies will be slowed down. Because large energy companies in particular use part of their profits for the future: RWE, for example, wants to invest around 50 billion euros in the expansion of renewables by 2030. The economist and “business wise” Veronika Grimm warned in the “Frankfurter Allgemeine Zeitung” (FAZ) that one should not overshoot the target when skimming off the chance profits. “We urgently need these investments in order to overcome the energy crisis in the medium term.”
Other experts, on the other hand, fear that skimming off profits will have unforeseen consequences. A quick intervention in a complex system like the electricity market can quickly lead to loopholes and unintended consequences. Industry circles say that many important details are still unclear. “However, this depends, for example, on whether, in the worst case, it can be worthwhile for the producers to withhold their output,” says an industry representative. “That would be bad.”
As “questionable from a regulatory point of view”, Dr. Tobias Hentze from the Cologne Institute of the German Economy (IW) came up with the idea of skimming off profits. In addition, says Hentze, this new source of financing is “connected with uncertain income” – because it depends, among other things, on the development of electricity prices on the exchange. However, that is currently hardly foreseeable. The project is “just as incalculable as the resulting relief for electricity customers,” said IW boss Michael Hüther of the “Rheinische Post”. It is a “vague solution, the volume and effect of which remains unclear”.
The other part of the equation, the so-called “electricity price brake”, also has many unanswered questions. This is to be financed from the funds from the profit skimming, but no details are known here either. The only thing that is certain is that customers should receive a certain amount of electricity at a reduced price. If you need more than the amount subsidized by the state, you have to pay the usual price. In this way, the price brake primarily benefits poorer households: They have to spend a larger part of their income on energy costs, but consume less electricity than richer households.
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But here, too, the exact levels are of crucial importance: How much electricity does each household receive at a discount? The average consumption of an average single or family household? More? Fewer? And at what price? At an electricity price like before the Russian invasion of Ukraine? Or somewhere in between? So it is not yet clear how big the relief will be that private households and companies will feel.
Some households could expect 100 percent of their electricity consumption to be capped, Greens leader Omid Nouripour said on Monday on Deutschlandfunk. As an example he gave a family in a small apartment. According to a sample calculation published by Federal Minister of Justice Marco Buschmann (FDP), the basic consumption could be 75 percent of the average consumption. According to the calculation, the electricity price cap for this amount could be 30 cents per kilowatt hour. The grid fees are also to be subsidised.
According to the provisional sample calculation, families with children could save more than 300 euros per year. On Monday, the Federal Ministry of Economics also left open whether the new electricity price brake should apply to all households or only to those with low incomes. There are also still unanswered questions about implementation at the technical level. Do the municipal utilities now have to recalculate all of their electricity bills? Caritas President Eva Maria Welskop-Deffaa said that how the electricity price brake should succeed has not yet been convincingly presented.
However, the federal government is initially relying on an agreement at European level before it goes into the details. On Friday, the energy ministers of the EU member states will meet for a special session in Brussels. A common regulation should be found there. In the previous week, a paper by the EU Commission was leaked outlining several reform proposals for the electricity market. In the paper available to FOCUS online, the Commission also advocates skimming off profits and “interventions in the final price” financed from this.
Important, however: According to the Commission, these two measures must be linked by an energy-saving offensive. Because a price cap initially promotes energy consumption instead of reducing it. However, there is nothing to be read about austerity measures in the traffic light relief package.
With reference to the EU paper, Scholz was convinced that the introduction at European level would succeed “quickly”. However, the coalition partners are also prepared to implement the skimming off of profits and the electricity price brake on their own if necessary. It is therefore possible that the first details will arrive by the end of the week. Until then, both the functionality and the effect of the electricity measures remain unpredictable.
