Electricity Prices Soared, Germany Started Power Cuts and Increased Windfall Profits Tax which Reach to 90%

Since the Ukraine crisis broke out, due to the backlash effect of EU sanctions against Russia, European energy supply has been tight, and natural gas and electricity prices have soared, resulting in high overall inflation and pressure on the European economy.

To this end, Europe launched targeted measures to curb electricity prices. In October, the European Council officially approved the emergency measures proposed by the European Commission to control energy prices. The three main points of the measures are electricity restriction, price limit, and windfall profit tax. EU member states agreed to take the initiative to reduce electricity consumption by 10% between December 1 this year and March 31 next year, including a 5% reduction in electricity consumption during peak hours. The specific measures to reduce power consumption are determined by the member states themselves.

This week, Germany has begun to draw up measures to curtail electricity and draw up a draft electricity windfall tax, which includes fossil energy and clean energy. When electricity prices for solar, offshore wind and nuclear energy exceed 130 Euros per megawatt-hour, the German government will impose a windfall tax of 90% on the excess to power companies. The windfall tax for fossil energy is even lower, lignite power generation and fuel oil exceeding 52 Euros per megawatt-hour and 28 Euros per megawatt-hour will be levied windfall profits tax.

This week, Ralf Tissler, head of the German Federal Office for Civil Protection and Disaster Assistance (BBK), advised Germans to stockpile necessary supplies such as bottled water and canned food that can last at least ten days in advance. This can deal with the impact of sudden power outages that may be caused by energy shortages.

Tissler said that there is a high probability of short-term and regional power outages in various parts of Germany this winter, including power outages caused by energy shortages, and targeted temporary power reduction measures taken by relevant departments to ease the overall supply pressure. He also emphasized that January and February 2023 will be a period of high incidence of such sudden power outages.