Revenue cap (skimming of excess revenues) · Glossary

A revenue cap (in German: Erlösabschöpfung) is a statutory and usually time-limited restriction on certain revenues of electricity generators. The legislator sets a revenue ceiling. Whatever a plant earns above it must be surrendered in whole or in part. A general profit tax is based on a company's annual profit. The revenue cap, by contrast, is based on electricity volumes and prices, that is, on euros per megawatt hour of electricity generated and fed in, within a precisely defined period. In Germany and the EU, the instrument was used during the energy price crisis of 2022/23. In Germany, its legal designation was "skimming of excess revenues" (Abschöpfung von Überschusserlösen).

Background: Why excess revenues arose in 2022

After the Russian attack on Ukraine, gas supplies fell significantly and gas became very expensive. As a result, wholesale electricity prices also rose sharply. The reason lies in price formation on the electricity market. In the day-ahead auction on the day-ahead market, all successful bidders in a trading period receive the same price, the so-called pay-as-cleared procedure. Bids are ranked according to the merit order: plants with low marginal costs are dispatched first. The price is set by the most expensive bid that is still needed to meet demand. In 2022, this was frequently a gas-fired power plant.

So-called inframarginal plants, whose own costs were well below the market price, benefited from this, for example wind and solar plants, run-of-river hydropower plants, nuclear power plants and lignite power plants. They achieved high market revenues without their own short-term costs having risen correspondingly. Politically, these revenues were called windfall profits or excess revenues. This is a political assessment and neither a technical nor an accounting category. The revenues are "windfall" in the sense that they do not stem from better performance by the plant but from an exceptional scarcity situation in the gas market.

The EU requirement: cap of 180 euros per megawatt hour

Council Regulation (EU) 2022/1854 of 6 October 2022 limited the market revenues of generators from the sources listed in Article 7 to a maximum of 180 euros per megawatt hour of electricity generated (Article 6). These include in particular renewable energies, nuclear energy and lignite. According to the Regulation, excess revenues are the positive difference between the market revenue per megawatt hour and this cap. The Council justified the level as follows: until February 2022, the expected wholesale price peaks had been well below 180 euros. The limit therefore lies above the original investment expectations and leaves generators enough room to cover their investment and operating costs. Member States were allowed to set stricter limits or limits that differ by technology. Germany did so. The revenue cap applied for a limited period from 1 December 2022 to 30 June 2023.

The Regulation also provided for a temporary solidarity contribution for companies in certain fossil fuel sectors. This was based on profits and not on electricity revenues per megawatt hour. It is therefore more of a windfall profit levy than a revenue cap.

The German implementation in the Electricity Price Brake Act

In Germany, Part 3 of the Electricity Price Brake Act (Strompreisbremsegesetz, StromPBG) implemented the skimming. The Act entered into force on 24 December 2022. According to Section 1, the skimming was primarily intended to finance the relief of final consumers through the electricity price brake. The most important rules:

Period: The scheme covered electricity generated in the federal territory from 1 December 2022 to 30 June 2023, as well as hedging transactions to be performed in that period. An extension by ordinance until 30 April 2024 at the latest would have been possible. The Federal Government refrained from doing so.
Plants: Excluded were plants that, in a calendar month, used exclusively or almost exclusively natural gas, hard coal, biomethane, light heating oil, liquefied petroleum gas or certain process gases. As a rule, plants of up to 1 megawatt and electricity consumed without using a grid were also excluded. According to the Federal Network Agency (Bundesnetzagentur), storage facilities were likewise excluded. Those affected were therefore primarily larger wind, solar, biomass and hydropower plants as well as nuclear, lignite and mineral oil power plants.
Calculation: The basis was the spot market revenue. This is the hourly grid feed-in multiplied by the German day-ahead price. From this, a technology-specific revenue cap, including safety margins, was deducted. For most technologies, this cap was well below the 180 euros of the EU requirement.
Skimming rate: Under Section 14(1), 90 percent of the excess revenues had to be paid over. 10 percent remained with the operator so that it still has an incentive to generate electricity, especially in expensive hours. In certain special cases, 100 percent was due.
Adjustments: The excess revenues were adjusted by the result from hedging transactions. If a plant was marketed under a plant-specific marketing contract, for example a PPA, the revenue from that contract could replace the spot market value. If the adjustment resulted in a negative amount, it could be offset against later settlement periods.
Procedure: Operators calculated the amounts themselves (self-assessment) and paid them to the grid operator to whose grid their plant was connected. The money flowed on to the transmission system operators, which used it to finance the relief amounts. The Federal Network Agency monitored the procedure after the fact. Settlement was initially made for December 2022 to March 2023, and quarterly thereafter.

Calculation example

A simplified example: A wind power plant subject to skimming feeds in 10 megawatt hours in one hour. The day-ahead price is 250 euros per megawatt hour. The spot market revenue is therefore 2,500 euros. The revenue cap applicable to the plant, including margin, is assumed to be 130 euros per megawatt hour. The excess revenue is then 120 euros per megawatt hour, a total of 1,200 euros. Of this, 90 percent must be paid over, that is 1,080 euros. The operator keeps 1,420 euros. If the operator had previously sold the same volume on a forward basis for 150 euros per megawatt hour, the hedging adjustment reduces the excess. Without this adjustment, money would be skimmed that the operator never actually received. The example also shows that the unit of euros per megawatt hour is decisive. The skimming concerns the difference per quantity generated and not the company's profit.

Revenue is not profit

Revenue, contribution margin and profit are different quantities. An operator may see high exchange prices and yet have long since sold its volumes at lower prices. It bears fuel, CO₂, maintenance and financing costs. For power plants, decommissioning obligations are added. A windfall profit levy would try to capture an extraordinary profit after all these costs. The revenue cap works more coarsely with prices and volumes because these can be measured and administered quickly. This makes it manageable in a crisis. At the same time, the risk increases of misrepresenting the actual economic situation of a plant. The German Act addressed this only partially with technology-specific caps, safety margins and adjustments for hedging transactions. In addition, the calculation was in principle based on exchange prices and not on revenues actually achieved. This was a central point of dispute.

Effect on the electricity price

A common misconception is that a revenue cap lowers the exchange electricity price. It does not. The price on the spot market continues to be formed by supply, demand, and fuel and CO₂ prices. The skimming only applies afterwards and redistributes part of the revenues. Consumers notice this only if the money flows back in a targeted way. In Germany, this happened through the electricity price brake. For households and smaller consumers, the price was capped at 40 cents per kilowatt hour for 80 percent of consumption, for consumption in 2023. The fact that natural gas and hard coal were excluded also had technical reasons. Had they been included, this could have altered the dispatch order of power plants and led to higher gas consumption.

Constitutional assessment in Germany

In its judgment of 28 November 2024 (1 BvR 460/23 et al.), the Federal Constitutional Court (Bundesverfassungsgericht) dismissed the constitutional complaints of 22 operators of renewable energy plants. The Court saw a significant interference with freedom of occupation but considered it proportionate in view of the exceptional situation. The interference was mitigated by the limitation to seven months. In addition, substantial parts of the crisis revenues had remained with the operators before December 2022. An important finding: the Federal Government does not generate any revenue of its own through the skimming. It is a redistribution between benefiting generators and burdened consumers. In the Court's view, financing the electricity price brake solely from the budget would not have been an equally suitable, milder means. Further complaints, for example from biogas operators, were likewise unsuccessful in 2025. The judgment concerns only the German rules for this period. It is not a blank cheque for future skimming measures.

Significance for investment and market design

For the energy transition, the instrument is a double-edged sword. Wind and solar plants are capital-intensive. Their costs arise mainly during construction and financing, not in ongoing operation. If investors have to expect that high revenues in crises will regularly be skimmed while they bear low revenues themselves, their risk-reward profile shifts. They may then demand higher returns or switch more strongly to regulated remuneration models such as the two-sided contract for difference. Such a contract limits excess revenues contractually from the outset instead of skimming them afterwards. The Federal Constitutional Court did not consider false investment signals decisive in the specific case because it concerned an unexpected, war-related scarcity.

In short: the revenue cap is a time-limited, rule-based correction of exceptional electricity revenues. It is not a substitute for a sustainable market design. It makes visible that a technically correctly formed market price can have distributional effects that are not politically accepted. How it works depends on how the cap is set, how contracts and hedges are taken into account, which plants are covered and what the funds are used for. In Germany and the EU, the skimming ended on 30 June 2023. Settlement, audits and legal disputes relating to it may continue beyond that date.

Sources

Verordnung (EU) 2022/1854 des Rates vom 6. Oktober 2022 über Notfallmaßnahmen als Reaktion auf die hohen Energiepreise — Rat der Europäischen Union / EUR-Lex; 2022-10-06. Erwägungsgründe 27–29; Art. 2 Nr. 9; Art. 6 Abs. 1; Art. 7; Art. 22
Gesetz zur Einführung einer Strompreisbremse (Strompreisbremsegesetz – StromPBG) — Bundesministerium der Justiz / gesetze-im-internet.de; 2022-12-20 (Stand: zuletzt geändert durch Art. 19 G v. 18.12.2025). § 1, § 2 Nr. 21–22, § 3, § 5 Abs. 2, § 6, § 13 (Teil 3)
§ 14 StromPBG – Grundsatz — Bundesministerium der Justiz / gesetze-im-internet.de; unbekannt. § 14 Abs. 1 bis 3
Funktionsweise der Strompreisbremse — Bundesnetzagentur; unbekannt. Abschnitt Abschöpfungsseite
Urteil des Ersten Senats vom 28. November 2024 – 1 BvR 460/23, 1 BvR 611/23 — Bundesverfassungsgericht; 2024-11-28. Leitsatz; Rn. zu § 13 StromPBG und zur Verhältnismäßigkeit (u. a. Rn. 113)

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Edited by eCMS on 11.11.2026 19:47