From January 1st, the electricity price brake will come into effect in Germany.

For private consumers and small companies, the bill is capped at 40 cents per kilowatt hour.

This applies to the basic requirement of 80 percent of historical consumption.

With this measure, the government wants to relieve the burden on citizens who are suffering from high energy costs.

Rainer Hank

Freelance author in the business section of the Frankfurter Allgemeine Sunday newspaper.

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Subsidized prices mean that someone has to pay the difference between the market price and the capped price.

With the gas price brake, which takes effect parallel to the electricity price brake, the state bears the costs and gets into debt for it.

Ultimately, future taxpayers will finance our current relief.

With the electricity price brake, the state wants to recover part of the costs from the energy producers and be compensated for their high profits.

In this way, an amount in the double-digit billions should come together.

“Skimming off excess profits” is a rather outrageous measure in a market economy, and one that is also poorly justified.

Of course, every state gets a part of the private profits to finance public tasks (from education to infrastructure to defense).

To do this, he enacts tax laws that apply equally to all companies concerned, regardless of where the profits come from and how high they are.

The electricity price brake, on the other hand, is an arbitrary intervention for certain companies.

If this catches on, chance profits, for example from stock market speculators, can also be skimmed off in the future, which are also not justified by special performance or high costs.

Production costs vary

The President of the EU Commission, Ursula von der Leyen, has made a name for herself as a keen skimmer.

She announces “profound reforms” of the electricity market regime for the coming year.

The current electricity market design, which brings producers unjustifiably high profits with low production costs, is no longer up to date.

So we've come to the point where Brussels decides which profits in which sectors are up to date and which aren't.

Politicians prove with such statements that they have not understood what they criticize.

I recommend a short video by Lion Hirth to anyone who wants to understand it.

The man is an economics professor at the Hertie School in Berlin, has been dealing with energy prices for many years and is a member of the federal government's gas price commission.

I guarantee anyone who takes a look at it despite the unwieldy address, a steep learning curve with many aha moments.

You can learn, for example, why beer costs the same in the morning and in the evening, regardless of demand, while the price of electricity fluctuates extremely over the course of the day.

Prices on the electricity market are formed in the so-called merit order.

The production costs of the last power plant still required are decisive for the price of electricity.

This price applies equally to all producers.

Wind turbines or nuclear power plants produce particularly cheaply, lignite and hard coal power plants have higher costs, and the conversion of gas into electricity is particularly expensive.

If the demand for electricity is particularly high, generating electricity from gas determines the price for all producers and consumers.