German Households Face Annual €30 Billion Cost For Green Energy Subsidies

  • Date: 05/12/13
  • Daniel Wetzel, Die Welt

Economists warn of rapidly rising energy costs caused by the Renewable Energy Act. Next year consumers will be burdened with costs of 30 billion euros. The state’s responsibility in this rise in the cost of electricity is growing and growing.

Without immediate reform of the Renewable Energy Act (EEG), electricity for German households could rise by another 13 percent the next four years. German industry would face even high rises, additional energy cost of 19 percent by 2018 in the worst case. This emerges from an unpublished study by the Institute of Economic Research (IW Köln).

“The electricity market in Germany is increasingly marked by state control,” states the paper written by IW energy experts Hubertus Bardt and Esther Chrischilles. “The increasing share of renewable energies in the electricity market, which are subsidised by the EEG, threatens a further increase of electricity produced far above the market price.”

The result of the IW study suggests the need for a critical review of the coalition agreement between the Christian Democratic Union (CDU) and the Social Democrats (SPD). The two parties have indeed agreed upon some cost-cutting measures while continuing to expand renewable energies. A profound reform of the promotion of green electricity will only be tackled after 2017 and initially only as a test according to the will of the government parties.

Energy transition will cost 30 billion per year

“The increasing state influence is also reflected in the composition of the prices,” the study by the Cologne Institute says. “The share of public levies, taxes and duties in the electricity price will rise from today’s 50 percent to the 60 percent mark by 2018 in the high-cost scenarios.”

In the coming year, the cost of the green energy transition to the consumers will add up to over 30 billion Euros. This means that taxies, levies and duties already make up 51.7 percent of electricity price. The subsidies for renewable energy, which are founded by the EEG levy, could rise from around 16.5 billion Euros today to 31 billion Euros by 2018 in the worst case scenario according to the study.

This would correspond to an EEG levy of 8.1 cents per kilowatt hour. This levy to subsidize green energy, which is to be paid by consumers, is already rising at the turn of 2013/14 from 5.3 to 6.24 cents per kilowatt hour. [....]

Meanwhile, the European Commission has announced state aid proceedings against the Federal Republic of Germany “before Christmas” because the current system of promotion of green electricity leads to distortions of competition in Europe and Germany.

The reform of the Renewable Energy Sources Act announced in the coalition agreement was “too timid”, told EU Energy Commissioner Guenther Oettinger the Handelsblatt. First, the coalition agreement is not sufficient “to stabilise electricity prices at a reasonable level,” Oettinger said. “And it also does not ensure that European competition law is complied with.”

In its current form the EEG leads to “blatant distortion of competition”. Therefore, the Commission will initiate a state aid procedure against the EEG before Christmas. “We cannot wait any longer because we have received complaints against the EEG, by the way primarily from Germany”, Oettinger said. Although he had “great respect” for coalition agreements. “But our state aid procedure will not be stopped by it.”

Full story (in German)

Translation Philipp Mueller