01 Apr 2019, 10:00

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 the costs are often not even high enough for customers to look for alternatives. [UPDATE adds graphs including 2019 data]

Power price components

Politically determined components of the power price have slightly fallen in 2018 but still account for more than half of what Germany’s households and small businesses pay with their power bill. Taxes, levies, and surcharges accounted for nearly 53 percent of a total household power price of 30.22 eurocents per kilowatt hour (ct/kWh), figures by utility and energy industry association BDEW show. Almost a quarter of the 2019 price (24.4 percent) results from regulated grid fees, which include metering and associated services. Over a fifth (22.8 percent) is set by the market, meaning the costs accruing from power supply and distribution that make up the wholesale power price and include the supplier’s margin.

Commercial customers are exempt from certain components of the power price. 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.

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

Supplier’s cost (22.8 %)

The profit margin and supplier’s cost of purchasing power on the wholesale market - 6.88 ct/kWh.

Grid charges (24.4 %)

Charges for the use of the power grid, set by the Federal Network Agency (BNetzA) - 7.09 ct/kWh.

Renewable energy surcharge (21.2 %)

The renewable energy surcharge (EEG-Umlage) pays the state-guaranteed price for renewable energy to producers. It fell to 6.4 ct/kWh in 2019. [For further background on the renewable surcharge, read the CLEW Factsheets Defining features of Germany’s Renewable Energy Act and Green Energy Account]

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 - 4.9 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 (5.6 %)

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 (1.4 %)

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. At the beginning of 2018, it amounted to 0.416 ct/kWh.

Surcharge for combined heat and power plants (0.9 %)

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 - 0.28 ct/kWh.

Levy for industry rebate on grid fees (1.0%)

Large power consumers are partially or totally exempt from grid charges. These costs are distributed among consumers via this levy, amounting to 0.3 ct/kWh.

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

Lower wholesale prices not passed on to consumers

In 2019, the monthly electricity bill for an average German household consisting of three people with a combined annual consumption of 3,500 kWh is 88.1 euros, the BDEW says. This is about 77 percent higher in nominal terms than the level of 1998, but the increase falls to 33 percent if adjusted for inflation. While the share of supply, distribution, and grid fees in the price fell by 17 percent since the reference year if inflation is taken into account, that of taxes, levies, and surcharges grew by 196 percent. This is partly due to a substantial increase in the renewable energy surcharge, up from 0.08 ct/kWh in 1998 to 6.4 ct/kWh in 2018.

The renewables surcharge now accounts for just over 21 percent 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 all levies and taxes. According to the BDEW, in 2019 households will be liable to pay 8.2 billion euros out of the total 22.7 billion euros renewables surcharge. 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 constantly rising for years, the EEG surcharge decreased for a first time in 2015 and again in early 2018. In 2019, it dropped for a third time to 6.4 ct/kWh. However, household power prices for did not fall accordingly. 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 is due to higher electricity acquisition costs for retailers on the wholesale market. 

The price comparison website Verivox says that many providers decided against reducing their costs despite the lower renewables surcharge and grid fees and instead announced to increase them by more than 4 percent on average, equal to about 55 euros higher costs per month for an average household with a consumption of 4,000 kWh per year. The website, which uses a different way of calculating power prices than the BDEW, says they have reached their highest level ever in early 2019.

Even though wholesale power prices in Germany have on average declined in recent years before picking up again in 2018, providers were reluctant to pass these price reductions on to customers. “Power providers would use any argument to justify price increases or to prevent lower prices,” says Udo Sieverding of the consumer association of North Rhine-Westphalia (NRW).

Sieverding also argues 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, price comparison website, a survey by the Federal Association for Information Technology (Bitkom) found. The price differences between these can be substantial, sometimes reaching 20-30 percent.

High nominal prices acceptable for many Germans

Although in early 2019 they paid the highest nominal power prices of all customers in Europe, a stable majority of Germans continue support the Energiewende and 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 part of their 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 a 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, asthe 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 figure corresponds to 6.4 percent of total household expenditures. Petrol and other fuels accounted for the biggest share, followed by heating. Energy 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.

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