In early November 2022, executives from several new energy power developers, including Orsted A/S, SSE Plc, RWE AG and Iberdrola SA, gathered at the House of the Chancellor of the Exchequer, hoping that the British government could change the "new energy, especially wind power" policy. windfall profits tax” policy. Just a few days ago, the new British Chancellor of the Exchequer, Jeremy Hunt, announced that the scope of the UK's "windfall profits tax" applies to the field of new energy power generation, and all revenues of new energy power generation companies whose electricity sales price exceeds 75 euros per megawatt-hour , are required to pay a tax of up to 45%. This policy will be implemented from January 1, 2023.
Orsted A/S and SSE Plc are the largest offshore wind power developers in Europe. The British government's "window profits tax" policy will inevitably have a greater impact on their future income, so they have expressed their protests against the British government.
The windfall tax in English is windfall tax, windfall originally means "fruit blown by the wind, windfall", so it is a tax used by the government to adjust the excessive income of enterprises. The windfall tax has been around for more than 30 years, and it was created as early as the British Thatcher era.
The reason why the British government extended the scope of the "window profit tax" to the field of new energy power generation is because the energy crisis triggered by the Russian-Ukrainian war in Europe in 2022 will cause electricity prices to soar, and ordinary residents can no longer afford such high electricity costs. The government hopes to repay the residents through taxation.
According to data from Bloomberg, in October 2021, the electricity price in the UK will be 0.21 GBP/kWh, in April 2022 it will be 0.28 GBP/kWh, and by October 2022, the electricity price has risen to an astonishing 0.52 GBP/kWh. The annual increase is 148%. Although the cost of power generation is also rising behind the scenes, power operators have become the biggest beneficiaries of this energy crisis, while ordinary residents are the biggest victims.
In the UK, the common practice of new energy power development is to sign medium and long-term subscription contracts with the government. The government purchases electricity produced by power companies at a fixed price, and the price of these electricity is within a reasonable price range. Therefore, all electricity sales that belong to the subscription agreement will not be affected by the "windfall profit tax" policy, because they do not meet the "windfall profit" standard.
The electricity that participates in market-oriented transactions will be under the strict supervision of the "windfall profit tax". As the largest wind power country in Europe, the UK will pay a high windfall tax for nearly half of its wind power generation.
In addition to the United Kingdom, many countries in the European region will or have already imposed a "windfall profit tax" on new energy power generation.
The German government has imposed a windfall tax on renewable energy power generation since December 1 this year, and 90% of the tax on electricity revenue above 130 euros/MWh is required.
In addition, Norway, Finland, the Netherlands, Italy and many other countries have "window profit tax" restrictive policies for renewable energy power generation.
Under the shadow of the European power crisis, European governments hope to fill the fiscal deficit by increasing taxes.
However, the heavy taxation is tantamount to making things worse for the already difficult European new energy industry.
While the income of new energy power station developers decreases, they will inevitably reduce investment in bidding, which will lead to a decline in new energy installed capacity in Europe.
Previously, the supply chain crisis in Europe and the government's cumbersome approval policy have caused new energy companies to complain.
On the one hand, European governments are reiterating their reliance on and support for new energy installations, but on the other hand, they are creating obstacles for the development of new energy. Ironically, the target of new energy installed capacity in Europe has also become confusing.