German power bills to stay high amid lower green surcharge

Photo: EPA Peter Altmaier

Germany is Europe's champion of high electricity prices. Some attribute that to the green surcharge, others say it is a sign of highly developed economy, but the common Germans are not happy at all with these conclusions. Furthermore, the unrest may shortly explode.

Locked down in quarantine, the German households are about to be ripped off again by high bills in 2021. The Covid-19 restrictions and the stay-at-home appeals lead to a substantial rise in electricity consumption. Then why do the utility companies stay on the sidelines, just watching? And why again are the prices staying at those heights?

There is an answer to that and it may not be acceptable to all. The green surcharge has fallen, effective from 1 January 2021, but the few hundred energy suppliers did not take that reduction in account and the costs remained unchanged. There is a new reduction envisaged to come in effect in 2022, but that also doesn't make the probability of lower end-consumer prices any better.

The surcharge on German power customers' bills to support the expansion of renewable energy sources fell from 6.75 to 6.5 cents per kilowatt hour (kWh) in 2021, the country's transmission grid operators have said. The government had promised the cut in the context of its coronavirus recovery programme. It is financed with state subsidies to ease the burden of power costs for customers. “Without these subsidies, we would have seen a higher surcharge and thus also higher power prices,” Economy Minister Peter Altmaier said, quoted by Reuters, at the end of 2020. Without the government intervention, the surcharge would have risen to 9.65 cent, according to utility association BDEW.

Altmaier added that the first direct government support of about €11 billion for reducing the surcharge would amount to a “paradigm change” in renewables financing, which from 2021 onwards would also be financed with proceeds from Germany's new carbon pricing system in the heating and transport sectors, decided in the government's Climate Action Programme 2030. “If these proceeds rise, there will be a further reduction of power prices,” Altmaier said. In 2022, the surcharge will fall to 6 cents/kWh, he added

However, the lowered surcharge is unlikely to translate into significantly lower power costs for households compared to current prices, an analysis conducted by the price comparison website Verivox has found. The cap on the surcharge would reduce the average consumer price by 1%, meaning that a typical household with an annual consumption of 4,000 kWh will pay about €12 less for electricity. While the cap would be a “welcome check” on power prices, the surcharge only accounts for about a quarter of the total power price, said Verivox's Thorsten Stock. An expected increase in grid costs, which accounts for another quarter of power prices, could easily offset the lower surcharge, he added. But this is not the end of the bad news for the Germans. In 2021 they will pay even more as higher gas prices will check in. Higher costs for gas infrastructure and the new CO2 price in the heating sector are set to increase gas costs for German households. In 2021 there will be at least 2% increase in gas grid fees, amounting to €8 more per average household in a family home (with a use of 20,000 kWh) per year. The new CO2 price of €25 per tonne will cause extra costs of €108 per year for an average household. Only falling prices at the wholesale market - which have decreased by almost one-third since January 2020 - could alleviate the larger burden of heating costs.

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