The Dutch government has announced an upper limit for solar and wind power generation profits as part of the EU’s “Taxation within the border” plan. The limit is set at 130 euros/MWH (equivalent to $136) to curb excessive energy profits. This is below the European Commission’s proposed threshold of 180 euros/MWH, and will be implemented from December 1, 2022 to June 30, 2023. The EU predicts that member states can generate up to 117 billion euros ($123 billion) in revenue from this upper limit. The Dutch government plans to invest all income in reducing home electricity bills.
The government will propose an implementation bill to the House of Representatives in spring 2023 and the tax will apply from December 1. The government will continue to discuss the best taxation method with industry organizations. In September 2021, industry analysts expressed concern about the possibility of taxing renewable energy from zero renewable energy sources.
The tax of 130 euros/MWH will apply to producers with a capacity of 1MW or more, which is equivalent to a photovoltaic power station with about 3,000 solar components. The upper limit for biomass energy generation will be 240 euros/MWH ($252), while coal power will have a flexible upper limit depending on the pricing.
The tax is designed with European member states to provide some funds for reducing electricity prices. However, Solar Power EUROPE has expressed deep concern about the inconsistent taxation of various member states and urges countries to abide by the upper limit of 180 euros/MWH to avoid incomparable taxation of solar power generation.
Industry analysts are also concerned that solar energy is most likely to be taxed since it is the cheapest energy. This could effectively slow down investment and market growth in the industry.
Some are worried that taxation will affect companies with fixed power purchase agreements. Before prices rose earlier this year, some manufacturers locked in electricity prices with contractors, meaning that the price increase’s benefits would be passed on to the contractor. According to consulting company Aurora Energy Research, if manufacturers must pay taxes, they may need to recover the income required for investment rather than surplus profits.
The UK and Spain have also levied significant profit taxes on energy companies and generators this year, and member states have adopted the EU’s taxation method. The Dutch government has said that the planned investment’s market price is 40-70 euros/MWH and that there is still room for profit at the upper limit of 130 euros/MWH.