Aurora study: Renewables profitable even after profit skimming (online presentation on Friday)

Energy market research firm Aurora Energy Research has analyzed the German government’s plans for skimming windfall profits from power producers and their implications for wind power and photovoltaics. The plan, as far as known so far, is that operators of renewable energy plants (and nuclear and lignite power plants) will have to transfer 90 percent of their profits generated on the spot market from December 2022 to June 2023, if they exceed a legally defined limit. Separate regulations are envisaged for other sales channels such as forward markets or direct purchase agreements – i.e. also for power purchase agreements (PPAs).
Admittedly, the planned levy »at first glance means a considerable cut in revenue,« says the study’s lead author, Lars Jerrentrup. According to the study, the losses would range from 32 to 55 percent, and PV plants would have higher losses than wind power. Nevertheless, this would have »hardly any impact« on the long-term profitability of the plants. First, the skimming is planned only for a foreseeable period of time, and second, »the caps are set and provided with safety margins in such a way that the plants remain profitable.«
Because of the rise in electricity prices, the expansion of renewables in Germany is »profitable for the first time on a large scale without subsidies«, according to Agora. Even with the skimming for the planned seven-month period, renewable plants could »achieve higher lifetime returns than ever before and would be profitable even without subsidies.«
According to the study, the actual market intervention is less critical than the uncertainty caused by it, not only with regard to the exact form of the skimming or its possible extension in the coming year, but »also due to plans of the EU Commission for a fundamental reform of the electricity market design,« says project manager Kornelia Stycz. Policymakers at national and EU level should therefore »create clear and reliable regulations on the future rules of the game in the electricity market as quickly as possible.«
Details and further results of the analysis will be presented in a free webinar on Friday (November 18, 11:00 to 11:30 a.m., in English; see press release).
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