EU plans for a revenue cap on energy producers may harm renewable energy producers.
may fall short of their intended goals, at least where renewable energy ambitions are concerned, according to Rystad Energy research. The EU’s proposal to temporarily cap the revenues of inframarginal electricity producers is aimed at capturing the windfall profits of renewable energy producers, which are benefitting from low production costs during this episode of high electricity prices.
Claims that renewables are making windfall profits during the crisis are therefore more complex than the European Commission and others suggest. Targeting all types of plants with such a non-tailored policy confuses the market and calls into question the effectiveness of the response.
While the revenue cap would apply to all renewable energy plants, only about 40% are benefiting from the current crisis. Since 2000, most European governments have put in place subsidy policies to incentivize renewable energy development. These schemes, known as feed-in-tariff , feed-in-premium , and contract-for-differences , have been widely subscribed to by early renewable energy developers, as they offered lucrative offtake tariffs relative to average electricity prices.
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