Germany Paying 50% More for Electricity

Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland) - Germany is paying up to 50% more than other European Union (E.U.) countries for domestic electricity thanks largely to the drive to switch over to renewable energy.

The renewables surcharge was brought in as part of the Renewable Energy Sources Act (EEG) in 2000, making consumers pay extra to offset the higher price of electricity created by renewable sources like wind and solar, compared to the regular price of electricity from traditional sources like nuclear and thermal-powered plants. However, with a massive push into renewables over the past decade, the surcharge has risen and driven the cost of electricity much higher in Germany versus the rest of Europe.

The government estimates that Germany's consumers are paying approximately €24 billion ($30.6 billion) in higher electricity bills annually because of the country's drive to install more renewable energy.

New data from the "Energiewende-Index", published by the management consultancy McKinsey, throws doubt on the German government's ambitious energy transition, or 'Energiewende'. The Index showed that average electricity prices in Germany have risen to €0.29.7 cent per kilowatt hour (ct/kWh), while the European Union (E.U.) average has dropped to €0.20.1 ct/KWh.

The current EEG legislation has helped shield parts of the industrial sector from the renewables surcharge but still, German businesses are paying up to 19% more for electricity than their European counterparts.

The Index has been tracking the country's progress since 2012 as it tries to shift away from traditional power sources to a greener energy future. Using 15 indicators to check progress every three months, McKinsey said that only six have a realistic chance of meeting their targets by 2020, while nine indicators have a 'clear need for adaptation' due to unrealistic targets.

At the start of this month, the new German coalition government recognised the problem by announcing that it is going to cut the generous renewable energy subsidies to rein in the cost of renewables to the state and the rising cost of electricity for businesses and consumers. Economy Minister, Sigmar Gabriel, said he wants to cut subsidies for a variety of renewable power sources from the current €0.17 ($0.23) per kilowatt hour (KWh) to €0.12 per KWh by 2015. There will also be a cap placed on the amount of new onshore wind and solar power of 2,500 megawatts (MW) per year. The country's young offshore wind sector will also be hit with a cap of 6,500 MW until 2020. For additional information, see February 4, 2014, article - Germany to Cut Renewable Energy Support.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. To contact an office in your area, visit the Industrial Info "Contact Us" page.