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SKIMMING OF ELECTRICITY MARKET REVENUES

The current energy and supply crisis also poses great challenges for us and our customers, suppliers and business partners. The current market situation with regard to electricity and heat production is difficult, even extremely critical for some market participants. The situation could get even worse.

In mid-November, the German Cabinet paved the way for the planned gas and electricity price brakes as well as the skimming of revenues in a corresponding bill. This draft also provides for the skimming of electricity market revenues from renewable energy plants. This regulation will take effect as of December 1st. Here, 90% of all electricity market revenues from bioenergy plants (except biomethane) above a reference value are to be skimmed off. Revenues from the spot market, from demand-responsive (flexible) power generation and from forward transactions and long-term contracts are also to be skimmed off.1

Due to the reference values set out in the cabinet draft, many industry associations are alarmed. Bioenergy associations, e.g. the Fachverband Holzenergie (association for the wood energy sector in Germany), are calling for solid biomass and waste wood, such as biomethane, to be excluded from the skimming as a matter of principle. Due to the massive increases in fixed and variable production costs in recent years, and especially since the start of the war in Ukraine, it is essential for bioenergy plant operators to be able to refinance past and possible future cost increases through higher electricity revenues.2

It is a fact that price and cost developments have been dramatic in some cases since 2021. Fixed and variable costs of wood-fired CHP plants have risen massively, especially in the area of fuel procurement.3 For example, compared to the beginning of last year, waste wood prices have increased tenfold. These high material prices can no longer be paid if the revenues are skimmed off and an electricity price brake is introduced.

The Fachverband Holzenergie warns that in the vast majority of cases power and heat generation from wood and other solid biomass would no longer be economically viable, i.e. plants would go bankrupt and be missing from the energy market.

At the Brüning Group, we are also extremely critical of the skimming off of revenues, especially in view of the relatively low reference values, and can very well understand the objections of the industry associations. The increased costs are a massive problem, as we experience daily in our business exchanges. Stocks could now also pose a further challenge with material that may have been purchased at too high a price.

In our opinion, conditions must be established that create a “healthy” balance for all market participants and enable economic efficiency, whether for power plant operators or suppliers. This is a very fine line – one man’s grief may sometimes be another man’s joy, but a wave of threatening insolvencies certainly helps no one.

In addition, biomass can make an important contribution to the energy transition. A major advantage is that, unlike energy from wind power or photovoltaic plants, it is base-load capable. In such difficult times as we are currently experiencing, it would therefore be irresponsible to do without this energy supplier.


[1] Source: Fachverband Holzenergie in BBE [BioEnergy Association] (German only: Argumentationshilfe Erlösabschöpfung bei HHKW)

[2] Source: Electricity price brake, revenue skimming: Federal government curbs bioenergy – energiezukunft (German only)

[3] Source: Fachverband Holzenergie in BBE (German only: Argumentationshilfe Erlösabschöpfung bei HHKW)

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