Explainer: Will Germany’s energy cap point for the way for Ireland and rest of EU?

Germany is proposing to tackle this by putting a cap on the profits of energy producers who generate electricity from non-gas sources like wind, solar, coal and nuclear. The price set for the energy will be the same, but the excess over the cap will be handed over to the German government and used to support consumers, partly through a cap on electricity prices for households up to a certain amount of usage.

Where these profits currently accrue to depends on the contracts between wind farm operators and energy supply companies — wind farm operators say that in many cases the price they receive is capped ant the benefits accrue to the suppliers, some of whom in turn warn that any windfall tax could be counterproductive. How much revenue might be raised for the exchequer would depend on where the cap was set.

The Irish Government is committed to some form of windfall charge and if this is way the rest of the EU goes, then it may well be followed here. Key issues still be to discussed are the impact on the supply of energy of this scheme and what it would mean for longer-term investment, particularly in renewables. There are also fears of financial pressure on energy companies in many EU countries due to the volatility of the market — and policymakers will not want to make this worse.

Source: News Formal (newsformal.com)

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