Components of the power price
More than half of the power price for households and small businesses in Germany consists of components determined by the state. These include charges for using power grids (about a fifth of the overall price), levies for other services and for financing investment in renewable energy (about a third) and two kinds of taxes (about a quarter). The power price and the supplier’s margin (about a quarter) are set by market arrangements. Commercial customers are exempt from some components of the power price. Some levies differ according to the consumer's location.
While the state directly and indirectly sets more than half of the price, it only receives revenues from the two taxes and the concession levy. The other levies go to grid operators, renewable power producers and some conventional power generators.
In November 2016, household prices were on average comprised of:
Cost of power for supplier (22.1 %)
The profit margin and supplier’s cost of purchasing wholesale power on the market, some 6.26 cents/kilowatt hour (kWh).
Grid charges (24%)
Charges for the use of the power grid, set by the federal grid regulator, some 7.01 cents/kWh.
Renewable energy surcharge (22.1 %)
The renewable energy surcharge pays the state-guaranteed price for renewable energy to producers and rose to 6.354 cents/kWh in 2016. In 2017, it will rise to 6.88 cents/kWh. [For further background on the renewable surcharge, read the CLEW Factsheet on Defining features of Germany’s Renewable Energy Act and the Green Energy Account]
Sales tax (value-added tax) (16 %)
The sales tax is 19 percent on the pretax price of electricity and makes up 16 percent of the after-tax price, some 4.6 cents/kWh.
Electricity tax (7.1 %)
A tax on the use of power, in Germany also called “ecological tax,” some 2.05 cents/kWh.
Concession levy (5.8 %)
A levy on the use of public space for power lines that the utility passes on to the consumer, some 1.66 cents/kWh, depending on the size of the locality.
Levy for offshore liabilities (0.1 %)
Grid operators must pay damages if they fail connect offshore wind farms in a timely manner so they can sell the power they produce. For the first time ever, this levy was negative in 2015. Operators can pass these costs on to consumers through this levy. In 2016 they amount to 0.04 cents/kWh.
Surcharge for combined heat and power plants (1.5 %)
Operators of combined heat and power (CHP) plants receive a guaranteed price on the electricity they sell. The difference between the guarantee and the price they receive on the market is financed through this surcharge, some 0.445 cents/kWh.
Levy for industry rebate on grid fees (1.3%)
Large power consumers are partially or totally exempt from grid charges. These costs are distributed amongst consumers via this levy, amounting to around 0.378 cent/kWh. In 2017, this levy will rise to 0.388 cent/kWh.
Prices remain stable after first drop in years
The power price for a family of three with an annual consumption of 3,500 kWh are 68 percent above 1998 levels. That is partly due to the surcharge for renewable energy, which rose more than tenfold in the period, increasing its share in the power price from 1 percent to 22 percent. The surcharge is the difference between the wholesale price and the higher, fixed price for green energy, guaranteed by law to renewable power producers. Grid operators pass on the difference to consumers. In contrast to commercial customers, households are required to pay all levies and taxes.
But in 2015, consumer prices have eased for the first time in years, helped by a decline in the renewable energy surcharge. This edged down for the first time since its introduction in 2000, to 6.17 cents per kWh from 6.24 cents in 2014. But in 2016, it rose again to 6.354 cents. Consumer prices too have since been brought back to previous levels, according to price comparison website Check24.
Even as wholesale prices dropped in recent years, electricity providers were slow to pass these price cuts on to retail customers. In 2015, some companies had begun to do so. Verivox said in late December of that year, that an average household using 4,000 kilowatts a year had to pay about 1 percent less than in 2014. The gap between the more expensive basic providers, usually local utilities, and cheaper providers had widened further in 2015. The site urged consumers to switch power suppliers in order to cut bills.
Verivox said 140 providers had announced price hikes of on average 2.8 percent for 1 January 2016, while 49 suppliers wanted to cut prices by on average 2.2 percent. Earlier in December 2015, Check24 said around 6.7 million German households will be affected by rising power prices in early 2016. 148 out of a total of 900 basic providers have announced a price rise of 2.8 percent on average, according to the website.
Despite being certain to see further price hikes, a stable majority of Germans support the Energiewende and consider it generally beneficial for the economy. A possible explanation would be that electricity consumed only 2.3 percent of households’ disposable income in 2015, up from 1.78 percent in 1998 and back to mid-1980s levels, before the liberalisation of the power market in 1998 lowered prices.
Nevertheless, household power prices have been among the highest in Europe for at least five years in nominal terms. One way of reducing electricity bills is to negotiate new contracts or switch providers. The increased competition, in turn, also compels providers to cut prices.
However, researchers have noted a certain inertia among consumers. Many stick to their long-term suppliers and old contracts even though cheaper options are available, although data for 2015 showed more and more consumers were switching from basic providers, which are usually local utilities, to alternative power companies. There are enormous price differences between these, sometimes as much as 20-30 percent.
But a survey by German Energy Agency (dena) showed that only about one third of German households know the exact amount they pay for electricity. One third said they knew more or less how much their bill was, while nearly 30 percent answered that they had no idea.
Germans respond by saving energy
Monthly energy costs, which include heating, electricity and petrol, amounted to almost 280 euros in 2014 for an average German 3-person household, according to the Renewable Energies Agency (AEE). Petrol had the biggest share, followed by heating. Costs for power amounted to 85 euros. The EEG-surcharge came to 18 euros (6.5 percent of the total energy costs) of such a household (See Figure 3).
Costs for heating and petrol decreased in 2014 compared to 2013, thanks to the falling oil price. Power bills remained stable, the AEE showed in its latest charts published in Feburary 2015 (See Figure 4).
Trademark German efficiency is also one way Germans cope with their energy bills. Like industry, German consumers have turned to savings strategies, like buying energy efficient appliances or switching to low-energy light bulbs. Over 20 years, German households reduced their power usage by 10 percent, while consumption in the United States increased by 20 percent. A German household in 2014 used less than a third of the power of an equivalent household in the US, and also less than other major industrial countries in Europe such as France, Britain and Spain. (See Figure 5).
*Like the Clean Energy Wire, Agora Energiewende is a project funded by Stiftung Mercator and the European Climate Foundation.