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Energy Fees Cripple German Households

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Moving to clean energy will cost a pretty penny in Germany-
  • Why it matters

    Why it matters

    Prohibitive electricity surcharges no longer work as the primary way to finance the switch to renewable energy in Germany, writes our author. The heavy taxation is unsustainable, unfair and may end up hurting the process it was set up to support.

  • Facts

    Facts

    • Renewable energy surcharges raise €20 billion annually, or about $25.3 billion.
    • German households pay 92 percent more for energy than in 2000.
    • Industry and businesses pay over 75 percent more than in 2000.
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  • Audio

    Audio

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For the first time in 12 years, added charges for expanding renewable energies will drop slightly in the coming year, but consumers hardly have reason to celebrate. According to the German Federal Statistical Office, private German households now pay 92 percent more for energy than in 2000. Industry and businesses pay over 75 percent more.

Why? About three quarters of the price of electricity is made up of fixed levies, charges or taxes to develop renewable energies, secure connections to offshore wind power, or hook on to the power grid. Customers cannot escape these charges by switching to cheaper energy providers.

So the question is why consumers barely profit from sinking purchase prices. Although many suppliers pass the costs on to their customers, the scope for competition is limited. Procuring and distributing energy make up barely 25 percent of the price.

Some have tried to escape the added charges by producing energy for themselves. But the government is gradually abolishing this privilege.

Lowering the German Renewable Energy Act surcharges is hardly more than a flash in the pan. Added charges raise €20 billion annually, or about $25.3 billion, and they will be maintained for the foreseeable future. Though the surcharges will drop next year, they likely will rise again.

Moreover, charges for using electricity and gas grids will become an ever-increasing burden. Some network operators have announced increases for next year that will more than cancel out lower renewable energy surcharges. And the state also takes a lot for each kilowatt hour through value-added and electricity taxes.

Some have tried to escape the added charges by producing energy for themselves. But the government is gradually abolishing this privilege as self-producers have to pay a fee for electricity not taken from the grid.

Sooner or later the present system of power fees will totally collapse. The price of electricity no longer works as a vehicle for financing all the costs related to energy transition. We need another, wider, and ultimately fairer basis. At the moment, every customer, rich or poor, pays the same surcharge. That is tantamount to a uniform, flat-rate tax.

Restructuring the energy industry, from a social dimension, is comparable to aligning living conditions in the former East and West Germany. It would be logical now to finance the change to renewable energy through a percentage deduction of taxable income – to lower the burden of the cost of electricity. The Cologne Institute for Economic Research, among others, has called for such a solution. The revenues could flow into a fund to finance the development of renewable energies.

Lowering energy-related taxes, as recently suggested by Sigmar Gabriel, vice chancellor and minister for economic affairs and energy, would be another step in shrinking Germany’s fixed pool of costs in energy transition. Otherwise, it will become an obstacle to the changeover itself.

 

To contact the author: gastautor@handelsblatt.com.

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