24 Jan 2020, 14:00

What German households pay for power

Power prices in Germany are among the highest in Europe, not least due to the costs arising from the launch of renewable energy sources – but many customers continue to support the country's energy transition regardless. While wholesale electricity prices on average have been in decline in recent years, surcharges, taxes, and grid fees raise the bill for Germany's private households and small businesses. However, market observers say that power costs are often not even high enough for customers to look for cheaper alternatives. [UPDATES lates 2019 BDEW figures; 2020 renewables surcharge]

Power price components

The average power price for households and small businesses in Germany stood at 30.43 cents per kilowatt hour (ct/kWh) in 2019, according to the economy and energy ministry (BMWi). With 53 percent, politically determined components, such as taxes, levies, and surcharges, accounted for more than half of the price in that year, an analysis by the German Association of Energy and Water Industries (BDEW) found.

Nearly one quarter of the 2019 price (7.39 cents) resulted from regulated grid fees, which include metering and associated services. Another 7.06 cents were set by the market, meaning the costs accruing from power supply and distribution that also make up the wholesale power price and include the supplier’s margin.

Commercial customers are exempt from certain components of the power price and some levies vary according to the consumer's location. While the state directly or indirectly sets more than half of the price, it receives revenues from the two taxes and the concession levy only. The other levies go to grid operators, renewable power producers, and conventional power generators.

The renewable energy surcharge (EEG-Umlage) pays the state-guaranteed price for renewable energy to producers. It rose slightly to 6.75 ct/kWh in 2020. [For further background on the renewable surcharge, read the CLEW Factsheets Defining features of Germany’s Renewable Energy Act and Green Energy Account]

Graph shows composition of household power price in Germany 2018 and 2019. Data: BDEW 2019, Graph: CLEW 2019.

2019 price composition

Total price: 30.43 ct/kWh*

Supplier’s cost (23%)

The profit margin and supplier’s cost of purchasing power on the wholesale market - 7.06 ct/kWh.

Grid charges (24%)

Charges for the use of the power grid, set by the Federal Network Agency (BNetzA) - 7.39 ct/kWh.

Renewable energy surcharge (21%)

Finances the feed-in tariffs for renewable power and the market premium paid to larger producers - 6.41 ct/kWh.

Sales (value-added) tax (16 %)

The sales tax is 19 percent on the pre-tax price of electricity. It makes up 16 percent of the price after tax - 4.86 ct/kWh.

Electricity tax (7 %)

A tax on the consumption of power, also known as ’ecological tax‘ in Germany - 2.05 ct/kWh.

Concession levy (5%)

A levy on the use of public space for power transmission lines that the utility passes on to the consumer - 1.66 ct/kWh, depending on the size of the affected area.

Offshore liability levy (1.3%)

Grid operators must pay damages if they fail to connect offshore wind farms in a timely manner in order to sell the power they produce. Operators can pass these costs on to consumers through this levy - 0.42 ct/kWh.

Surcharge for combined heat and power plants (0.1%)

Operators of combined heat and power (CHP) plants receive a guaranteed price on the electricity they sell. The difference between the guaranteed price and the actual price they receive on the market is financed through this surcharge - 0.03 ct/kWh.

Levy for industry rebate on grid fees (1%)

Large power consumers are partially or totally exempt from grid charges. These costs are distributed among consumers via this levy, amounting to 0.31 ct/kWh.

[*Difference to 100% due to rounding. Source: BDEW 2019]

Graph shows composition of household power price in Germany 2006 - 2019. Data: BDEW 2019, Graph: CLEW 2019.

Private customers pay one third of country's electricity bill but consume less than a quarter

In 2019, the monthly electricity bill for an average German household consisting of three people with a combined annual consumption of 3,500 kWh was 88.7 euros, the BDEW says. This is about 78 percent higher in nominal terms than the level of 1998, but the increase falls to 33 percent in real terms, meaning if adjusted for inflation.

While the nominal price of supply, distribution, and grid fees grew by 11 percent since the reference year, that of taxes, levies, and surcharges grew by 293 percent. This is partly due to the substantial increase in the renewable energy surcharge, up from 0.08 ct/kWh in 1998 to 6.4 ct/kWh in 2019.

The renewables surcharge now accounts for one fifth of a household's electricity bill. It corresponds to the difference between the wholesale price and the higher, fixed price for green energy, which is guaranteed by law to renewable power producers for 20 years. Grid operators pass on the difference to consumers. Unlike high-volume commercial customers, households are required to pay the full amount of levies and taxes.

According to the BDEW, households were liable to pay 8.2 billion euros out of the total 22.7 billion euros renewables surcharge in 2019. This means private customers foot more than a third of the country's power bill - while they account for less then a quarter of consumption, as figures by the German Environment Agency (UBA) show

After rising constantly since its introduction in the year 2000, the EEG surcharge decreased for a first time in 2015 and again in early 2018. In 2019, it dropped for a third time. However, household power prices did not mirror the renewable surcharge's fluctuation. In early 2019, the average power price even was 2.5 percent higher than at the same time one year before, which according to the BDEW was due to higher electricity acquisition costs for retailers on the wholesale market. The energy industry association said a planned reduction of the EEG surcharge by 0.25 ct/kWh in 2021 in the context of Germany's climate package would be offset by rising wholesale power prices.

Consumers reluctant to change provider despite high potential savings

The price comparison website Verivox says private customers paid the highest prices ever in early 2020, as the government's price reduction would only take effect in 2021. According to the website, which uses a different way of calculating power prices than the BDEW, prices were 4.1 percent higher than in early 2019, adding that prices were likely to rise further over the course of the year.

Even though wholesale power prices in Germany have on average declined in recent years before picking up again in 2018 and the renewables surcharge was lowered in 2019, providers were reluctant to pass these reductions on to customers. According to consumer association Verbraucherzentrale of federal state North Rhine-Westphalia (NRW), power providers would use "any argument" to justify price increases or to prevent lower prices.

The Verbraucherzentrale says that customers could save money by routinely comparing prices and changing their contracts accordingly. German customers can choose from at least 20 different providers that cover the entire country, and from more than 50 providers that cater to 85 percent of all households, according to the BDEW.

However, there also seems to exist a certain inertia among German consumers. More than half of them stick to their long-term suppliers and existing contracts, even though cheaper options are available, a survey by the Federal Association for Information Technology (Bitkom) found. The price differences between these can be substantial, sometimes reaching 20-30 percent.

Comparison website Verivox says people in eastern Germany are especially reluctant to change their power provider, even though power prices there on average are 1.2 percent higher due to differences in grid fees. Households in western Germany changed their provider at a rate slightly above the national average, whereas eastern customers stayed far below it.

Real power prices range in European mid-table

Although in early 2019 they paid the highest nominal power prices of all customers in Europe, a stable majority of Germans continued support the Energiewende and said they consider it generally beneficial for the economy. A possible explanation for this insouciant attitude would be that for many people the financial impact of rising power prices on customers' budgets is not substantial, since it constitutes only a relatively small fraction of their total income.

When counted in real terms, the country actually ranks in the middle field compared to fellow EU states. In Bulgaria, for example, power prices are only one third of those in Germany. But power outages are not only much more common, Bulgarians also on average earn only one ninth of what people earn in Germany, newspaper Tageszeitung (taz) reported

In 2015, only 2.3 percent of the households’ disposable income were spent on electricity, similar to mid-1980s levels. In 1998, the respective figure was 1.78 percent, as the liberalisation of energy markets led to a temporary price drop.

Surprisingly, many people in Germany do not even know how much they actually spend on electricity at all. In a 2017 survey conducted by Bitkom, 92 percent of respondents said power consumption was an important consideration when buying new household appliances. At the same time, almost half (49 percent) of respondents said that they did not know their annual power consumption, and 37 percent had no idea how much they paid for it.

Total household energy costs down

The German economy ministry (BMWi) says that energy costs, which include heating, electricity, and petrol, stood at 232 euros per month for the average German household in 2017, down from 262 euros in 2013. The latest available figure corresponds to 6.4 percent of total household expenditures. Petrol and other fuels accounted for the biggest share, followed by heating. Electricity costs ranked third.

Apart from switching providers, efficient use is another way people can save money on their power bills. In Germany, industries as well as private consumers have adopted savings strategies, like buying energy-efficient appliances or switching to low-energy light bulbs. Over the past 20 years, German households have reduced their energy consumption by 10 percent, while the respective rate in the United States increased by 20 percent. In 2014, an average German household used less than a third of the power of its US equivalent, and also less than an average household in other major industrialised countries in Europe, such as France, Britain, or Spain.

All texts created by the Clean Energy Wire are available under a “Creative Commons Attribution 4.0 International Licence (CC BY 4.0)” . They can be copied, shared and made publicly accessible by users so long as they give appropriate credit, provide a link to the license, and indicate if changes were made.


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