Who’s Paying and Why

Calculating the costs of Germany's variable energy pricing

21/06/2012 | by Paul Hockenos

Category: Renewables, Resources and Energy, Germany, Central Europe, Europe

It’s high time to say something about the raging debate over the high and rising electricity prices in Germany. Almost unanimously they’re being blamed on the Energiewende, and are being employed by opponents to stop or at least slow down the energy transition. It is not fair.

While it is true is that the costs of privileging renewable energy in the overall energy mix is reflected in electricity prices, these costs have been sinking for years as planned, and recently even faster because of the plummeting costs of photovoltaic technology. But while the price of clean energy has been steadily declining, the cost of coal has doubled since 2000 and gas has tripled in price, according to Germany’s Statistical Office. What’s made electricity prices shoot up everywhere in the world are the market prices of gas and coal.

Moreover, when it comes to helping carry the costs of the Energiewende, all consumers and businesses are not equal. It was one of the first moves of the present Merkel government to exempt big industry from those parts of the Renewable Energy Law (EEG) that tack the costs of renewable energy generation onto the bills of energy consumers. The logic of the free-market liberal party, whose idea it was, was that Germany’s industries couldn’t be competitive on the world market if they and only they had to pay these extra costs.

For one, compared to its fellow EU countries, electricity costs for energy-intensive industries in Germany are relatively low. A lot lower, for example, than in France. Thus it is not the case that Germany is disadvantaged but rather than it has an advantage, and that the exemptions make this head start even greater. (But then this is why those industries are among the last, die-hard supporters of the hapless liberal party. Duh…)

Secondly, a new Greenpeace study shows that the exemption applies to a host of sectors that aren’t energy intensive in the first place. While the study acknowledges that some branches of industry, like the aluminum sector, would be in a tough spot were it to incur the full brunt of these costs, others like paper and electric steel (Elektrostahl) manufacturing don’t suffer competitively at all. The study calculates that in total, Germany’s energy-intensive branches rake in over nine billion euros in subsidies and other perks.

Prognos Institute found that while the mechanical engineering sector paid 14.75 cents for a kilowatt of electricity in 2011, steel working paid only 7.31 cents. Small businesses paid 17.8 cents and private households dished out 25 cents per kilowatt. It’s numbers like this that have associations representing small and medium enterprises up in arms—and their venom isn’t directed at the Energiewende.

In other words, private consumers and smaller businesses are paying for big industry’s profits. This is why the price of electricity is so much more—about 1.2 billion euros a year more—for the consumer and small businesses.

One more factor (which I’m going to deal with more extensively at another point): The costs charged by the grid operators have also been climbing and, again, the heavy industries get off much easier than the average guy with a toaster.

“When energy suppliers raise prices, don’t blame it on renewable energies,” argues Philipp Vohrer of the Agency for Renewable Energy. “This is because of the increasing costs of procuring fossil fuels and above all because of the rising costs of using the grid.”

PAUL HOCKENOS is a Berlin-based journalist and author of Joschka Fischer and the Making of the Berlin Republic.

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