Background: EU Council Regulation 2022/1854
On 6 October 2022, the Council of the European Union adopted Council Regulation 2022/1854 on an emergency intervention to address high energy prices (the Regulation), which contains several measures related to the current situation on the EU energy market. In short, the measures include (i) an obligation for EU member states to decrease electricity consumption, (ii) the introduction of a price cap on market revenues for certain electricity producers and (iii) the introduction of a ‘solidarity contribution’ for companies and permanent establishments in the EU active in the oil, natural gas, coal and refinery sectors. For more information regarding the ‘solidarity contribution’ for the oil, gas, coal and refinery sector we refer to our recent website post.
A 90% tax for market income above EUR 130 / MWh
In a letter to Parliament dated 30 November 2022, the Minister of Climate and Energy and the State Secretary of Finance presented their plans to implement the price cap on market revenues. The price cap is set at EUR 130/MWh, and market income generated above this cap will be subject to a 90% tax.
This price cap applies to electricity produced via so-called ‘inframarginal technologies’. For the Netherlands, these include electricity generated from wind, solar, hydropower, biomass, biogas, waste, coal and nuclear energy. For (solid and gaseous) biomass fuels, other than biomethane, the Netherlands sets the cap at € 240/MWh. The Netherlands also opts for a specific cap on market revenues for the sale of electricity from coal, which will have a specific method of calculation.
Furthermore, for production installations that receive SDE+-subsidy with a base amount (basisbedrag) above EUR 130/MWh, the cap will be set at the base amount.
It is stated that the relevant market income means the gross income excluding costs and not the ultimate profit realized. However, the letter also states that the income that is actually received is relevant, meaning that for instance price hedges will be taken into account.
The price cap is applicable during the period of 1 December 2022 through 30 June 2023. Supplementary documents suggest that an earlier starting date has been considered, but that this explicitly has been rejected by the government.
How the tax is calculated
The tax will be calculated on a monthly basis, meaning that for each calendar month the total market income needs to be dividend by the total MWh produced. If this number exceeds EUR 130 / MWh, the excess will be subject to the 90% tax.
The cap will not be applicable for production installations with a capacity below 1 MW. With respect to PV-projects this corresponds roughly to 3.000 panels.
The tax will be a one-time tax to be paid at some point after the period of 1 December 2022 – 30 June 2023. It is envisaged to be a self-assessment tax, similar to the VAT-return.
Reduction obligation electricity consumption
The Regulation contains measures which require EU member states to decrease electricity consumption. However, the Dutch government announced that this obligation does not require additional domestic legislation. In summary, ongoing energy saving initiatives will be expanded to meet the reduction obligation.
Many details are still unknown, and the government is working on a separate legislative proposal to implement the temporary price cap, which it intends to publish – after approval by the House of Representatives and Senate – no later than 30 June 2023. The envisaged entry into force date would then be 1 July 2023 with retroactive to 1 December 2022.
We would like to note that these announcements and the envisaged legislative proposal may be subject to further amendments by both the government and parliament.
Feel free to reach out in case you have any questions regarding the above.