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Germany: Lies About Electricity Prices

We have to talk about prices one more time.

It’s all over the media that Germany’s transition to renewables is killing — or going to kill — Germany industry. How can Germany compete abroad when it pays so much for its energy? It’s all a consequence of the Energiewende!

This is a lot of rubbish. It’s that simple. The weekly Die Zeit summed it up in a lovely banner headline: “Lying About the Price of Electricity.”

The fact of the matter is that the influx of renewables is forcing down the cost of energy, particularly electricity in Germany. Because photovoltaic and wind power have no operational or extraction costs (and you don’t have to pay for carbon emissions) they are actually cheaper than fossil fuels — yes, cheaper, and will only become even cheaper as more renewable supply comes onto the market. In fact, on the wholesale market (where only firms can purchase energy) the price of electricity has never been so low.

The downward pressure of renewables is only part of the reason. In 2009 the Merkel administration exempted large industry from the taxes and surcharges that pay for investments in green technology, i.e. the solar modules, wind parks, etc. This was extremely generous as many of these firms don’t even need the tax breaks in order to compete on the export market (which was Merkel’s rationale for the measures, and in principle correct). Nor is there any incentive for these enterprises to cut back on energy use. On the contrary, if they were to cut back too much, they might lose their tax-exempt status! So why should they?

In the end, it is private consumers and small and medium-sized businesses who are stuck paying for the Energiewende. This is why there is such a huge discrepancy between what industry pays for electricity on the power exchange and what the average Joe (the Germans call him “Otto”) at home sees on his utilities bill.

And this price will go up in the near future: As more renewable energy enters the mix, the surcharge will go up as well. This is currently about 120 euros for a family of four; it could rise to about 155 euros. If industry were helping out, it wouldn’t be so much, nor would the increase be so painful. These exemptions thus must really be rethought, and extended only to truly needy industries.

As the Die Zeit article argues, there is a battle underway between the winners and the losers of the Energiewende — and the losers, namely the old fossil fuel giants, are putting up a fierce rear-guard action. After all, every new kilowatt of renewable energy that enters the market is a kilowatt their power plants don’t sell.

Paul’s own blog on Germany’s Energiewende is Going Renewable on the website of the German Council on Foreign Relations

Lead image: Transmission lines via Shutterstock