Germany: Constitutional Court approves windfall tax for energy companies

Germany’s Constitutional Court ruled last week in favor of a government policy that required renewable energy producers to hand over excess revenues to help cover rising electricity costs during the 2022/23 energy crisis, Reuters reported.

A lawsuit brought by 22 operators of renewable energy plants challenged the provisions of Germany’s electricity price cap law, which required producers to pass on excess profits generated from electricity sold between December 2022 and June 2023, according to Agerpres.

The funds were used by the authorities to cap electricity prices for households and companies, in an attempt to cushion the sharp rise in energy prices following the start of Russia’s invasion of Ukraine and the disruption of Russian energy exports to Germany.

The plaintiffs argued that the measures unfairly targeted renewable energy producers, while gas-fired power plants, which the plaintiffs said were to blame for the price hikes, were exempted from the windfall tax. The plaintiffs also argued that the consumer support measures should have been financed by means with a wider impact on society.

Thursday’s ruling by judges at the Constitutional Court means that the Berlin government will no longer be required to return the estimated 750-850 million euros to the affected operators, good news for Germany’s already strained public finances.

The President of the German Constitutional Court, Stephan Harbarth, stated that this collection of windfall profits “was justified as a reaction to an exceptional situation on the electricity market, which arose after the start of the war in Ukraine in February 2022.”