BERLIN, Jan 17 (Reuters) – German spending on its gas and electricity price caps could be lower than expected due to falling energy prices on futures markets, which will also reduce revenue from an unexpected profit levy for energy companies, the finance ministry said.
When asked whether lower energy prices had prompted the government to change the spending forecast of the allocated energy aid package, a ministry spokesman said: “The actual financing needs depend heavily on the further development of gas and electricity prices for end users.”
Germany last year unveiled a 200 billion euro ($216 billion) aid package to protect homes and industry in Europe’s largest economy from rising energy prices, including gas and electricity price brakes.
As part of that plan, Berlin plans to spend around 83 billion euros on these price brakes this year, the ministry said, adding that the Windfall Profit levy is expected to bring in tens of billions of euros in revenue to partially fund the energy cap .
“Since the economic plan was adopted, gas and electricity prices on the futures markets have fallen, which could lead to lower spending on the gas and electricity price brake,” the ministry said.
European benchmark gas prices for the Dutch front month have fallen nearly 85% to around €53/MWh from their peak of over €340 per megawatt hour (MWh) last August as countries managed to build up huge gas reserves ahead of winter, those who have not yet done so have been strained due to unusually mild temperatures.
According to the Federal Ministry of Economics and Technology, it is not possible to estimate directly how falling gas prices will affect the total volume of the aid package, since consumer prices depend on individual contracts with energy suppliers.
It’s very possible that the new cheap consumer prices will have little impact on the overall average price, the ministry told Reuters, adding that industrial consumers face even greater uncertainty.
“Against the background of these uncertainties and for reasons of budgetary prudence, the ministry believes that caution should be exercised in the event of a hasty reduction in the planning of funding requirements due to the current low end-user prices,” said a spokesman for the ministry.
Data on the actual aid needed should be available in the coming months, allowing for a more robust forecast of how much cash is needed, he said.
Germany has been criticized for its huge government energy aid package, which far exceeds what other nations in the European Union can afford.
A lower spending bill on energy subsidies would free up cash at a time when European governments are being asked to significantly increase support for green investment in industry.
The EU fears that without further investment in this area, European companies will increasingly migrate to the United States, which has a $369 billion scheme to subsidize green energy production.
On Tuesday, European Commission President Ursula von der Leyen outlined plans to allow more state aid for clean-tech sectors and launch a new EU fund to support green industrial investment to try to tackle uneven spending among EU countries .
($1 = 0.9246 euros)
Reporting by Riham Alcousa, Kate Abentt and Susanna Twidale, editing by Miranda Murray, Gareth Jones and Sharon Singleton
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