Is it right to skim them from energy producers?

The special profits that accrue to the electricity producers from the war-related price jumps with the same production base and without any creative or technological intervention are classic “windfall profits”. In times of an energy crisis, when a society’s solidarity is being tested, it is right to siphon off these chance gains in order to mitigate the consequences for those who suffer from the dislocations.

That is why not only the head of the United Nations and the EU Commission are in favor of skimming off profits, but also three quarters of Germans.

Italy, Spain, Great Britain and Hungary have already siphoned off windfall profits in the energy sector in different ways. Nothing else is happening in Germany now. The fact that the coalition does not speak of “excess gains” but of “accidental gains” is due to the effort to make the instrument as legally secure as possible. Now the challenge remains that skimming off the special profits via a revenue cap does not lead to new distortions on the energy market.

>> Read also: Price limit on the electricity market could be set at 200 euros per megawatt hour

Critics of an excess profits tax or levy often argue that it is arbitrary. Then, they argue, the vaccine manufacturer Biontech would also have had to pay such a fee and future innovations would not take place. But that’s not true. There is one crucial difference: Biontech found an answer to a central problem with an innovative product during the pandemic and was rewarded for it. In contrast to the electricity market, it is not a windfall profit.

Electricity pricing should be changed uniformly in Europe. According to experts, this will take a long time. Uniform revenue or price caps for particularly profitable electricity producers will probably not be implemented quickly across Europe either. For a transitional period in which prices are as crazy as they are now, the federal government should carry out its plan to skim off the special profits of the electricity producers alone and quickly.

Cons: Once again botch

Well-intentioned is sometimes the opposite of well-done – this is especially true when it comes to energy policy.

By Jens Münchrath

The “excess gain” is now called “accidental gain” – the rhetorical contortions alone raise the suspicion that the federal government has developed an instrument in a hurry because political hygiene requires it. The traffic light coalition partners can be sure of the enthusiasm of the vast majority of citizens when they say: “Take the dishonestly made profits from energy producers, traders or even speculators! Give them back to the people!”

At first glance, the request seems legitimate. Who would deny that there are countless players in the highly complex and state-regulated energy markets who unexpectedly collect gigantic profits because the gas-linked electricity price is capricious.

At second glance, the concept of “accidental gain” is not just a dash of populism, but also considerable arbitrariness. And once again: first announce something quickly – after all, the people thirst for it – and then see if it works. Haste before thoroughness – at least it doesn’t look like professional political craftsmanship. The messed up gas allocation says hello.

One thing is certain: there are more questions than answers this time. Why should companies be penalized that have wisely invested in renewable energy? What prices serve as the basis for calculating the fee for companies that sell their electricity via long-term contracts or forward transactions?

So how can chance profits be defined for companies that market a large part of their electricity over the long term if the spot market price does not offer a suitable benchmark. And anyway: In a market economy it is always difficult – some say presumptuously – to want to distinguish between good (non-accidental) and bad (accidental) profits.

>> Read also: As Robert Habeck was made a laughing stock by the highly acclaimed minister

In politics, well intentioned is sometimes the opposite of well done. It will be interesting to see what the details will look like that Economics Minister Robert Habeck is now having worked out in his ministry. The past actions of the great communicator are not exactly encouraging. As has been the case for German energy policy in recent years, there is hardly any other area of ​​policy that has caused so much economic damage. Missed energy transition, EEG monster, Nord Stream 2 disaster – and these are just a few of the keywords.

The market cannot do everything better. Even worse than the market’s failures, however, are poor political conditions. It is to be feared that the levy on “random profits” will add another sad chapter to German energy policy. In the end, the current intervention is not only necessary because of the Ukraine war, but above all as a result of misguided state interventions in the past.

More: How the system of random profits and electricity price brake could work