This is how profits are skimmed off
The traffic light turns the EEG surcharge upside down
By Max Borowski
09/05/2022, 16:44
The federal government wants to relieve electricity customers with billions, which it wants to take from the producers. ntv.de explains exactly how the planned mechanism works, what that has to do with the EEG surcharge and whether it’s even worth it.
The federal government wants to relieve electricity customers with billions, which it wants to take from the producers. ntv.de explains exactly how the planned mechanism works, what can go wrong and whether it’s even worth it.
What’s the problem anyway?
The prices on the electricity exchanges have recently risen to astronomical heights. This is due to the fact that – partly because a large part of the nuclear power plants in France have failed – the supply of electricity is scarce. Some utility companies need electricity for their customers so badly that they are willing to pay so much that power plant operators also run expensive gas-fired power plants. Because the price of gas has increased more than tenfold within a year, gas power plant operators are currently charging a multiple for their electricity.
This high price then has to be paid on the exchange for cheaper electricity produced from other sources. The basic function of an exchange is that it determines an equilibrium price based on supply and demand for a uniform good such as a megawatt hour of electricity at a specific point in time in a specific network. For electricity that comes from cheaper sources than gas-fired power plants, there is a gigantic profit margin on the electricity exchange. The federal government speaks of “accidental profits”.
What does this have to do with me as a consumer?
The exchange price is not the same as the electricity price for end consumers. Electricity is not only traded on the stock exchange. Many electricity suppliers generate some of the electricity they sell themselves or have direct supply contracts with power plant operators. The exchange serves many providers to secure themselves in the longer term with so-called futures – i.e. delivery obligations months or years in advance. Therefore, the current price increases on the electricity exchange will not reach consumers one-to-one and only gradually. In addition, the electricity price that consumers pay consists largely of surcharges and taxes. But in the end, unless the government intervenes, customers will have to pay utilities.
What exactly is the traffic light government planning to do?
The relief package contains a concrete proposal: This plan for the electricity market consists of two parts: On the one hand, a maximum price for a basic electricity requirement for consumers is to be set. How high this price is exactly and how large the relevant amount of electricity per household has not yet been decided. The difference between the purchase price, which will probably also be high in the coming months, and which the utility companies pay for part of their electricity, and the capped sales price for end customers is to be reimbursed from a levy pot. The grid fees paid by electricity customers are also to be subsidised.
This allocation pot is fed from the second part of the traffic light electricity plan: a mechanism that is supposed to “skim off” the “random gains”. This mechanism provides that the price on the stock exchange is determined as before from supply and demand. This means that the expensive gas-fired power plants will probably continue to set the price for the foreseeable future. Power plant operators who do not generate their electricity with gas but, for example, cheaply with a nuclear power plant that has been written off for years, no longer get paid this price in full. Everything that exceeds an upper limit – which is also still to be determined – will be paid into the allocation pot as “accidental profit”.
How do you come up with something like that?
Such a system has existed in a similar way in the German electricity market for many years, namely for electricity generation that is subsidized under the Renewable Energy Sources Act (EEG). However, most of the time the money flowed in the opposite direction from consumers to producers. EEG-supported systems receive a guaranteed, fixed price for the electricity generated, which has been below the market price for years. The difference was paid from the EEG allocation account, which consumers paid into in turn. Even if the EEG surcharge has now disappeared from the electricity bills, the account still exists and the operators of the relevant systems receive their fixed EEG purchase price.
However, the stock exchange price rose far above this fixed price months ago. Instead of money being paid to the producers of wind and solar energy from the allocation account, all the money that electricity buyers pay on the exchange, but which exceeds the EEG fixed price, is now accumulated here. This system, according to which everything above a certain price limit goes into a levy account, is now to be extended to all non-gas electricity producers in a similar way.
Can something go wrong?
Some experts fear that this intervention could seriously disrupt the market. If generators find out that they can earn significantly less from selling electricity on the exchange than the customers are willing to pay them, they could try to sell their electricity more off the exchange. That would be bad for the transparency and efficiency of the market. The power grid is an extremely sensitive system. Failure to precisely balance supply and demand at all times can have catastrophic consequences. How strong the intervention in the market will be will depend on where the line for skimming off profits is drawn.
Is it worth it?
Potentially, huge sums of money could be redistributed with this system. To put this into context: more than 17 billion euros have accumulated in recent months from the “skimming off” of the sales proceeds of the EEG systems on the electricity exchange. According to the Federal Association for Renewable Energy (BEE), this could already save every household in Germany by 400 euros. What is actually in it for consumers if the levy mechanism is extended to other electricity producers depends, among other things, on the price limit that has yet to be determined and on the extent to which electricity is also subsidized for companies.