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04/12/2016

Germany plans first ever cut to green energy levy

Energy

Germany plans first ever cut to green energy levy

Germans currently pay around 30 cents per kWh for energy, about 6 cents of which makes up the green energy surcharge to support renewables. [Gunnar Ries}

Germany’s renewable energy surcharge is set to decrease for the first time in 2015, raising the prospect of lower energy prices for households. But the move attracted criticism from the Green Party, which pushed for deeper cuts. EurActiv Germany reports.

The energy surcharge Germany uses to finance the expansion of renewables is planned to decrease in the coming year from 6.24 euro cents per kWh of power to 6.17 cents.

The reduction was announced by operators of the German transmission network on Wednesday (15 October).

“The EEG surcharge for the year 2015 is slightly under that of the previous year,” said Jochen Homann, president of the Federal Network Agency.

“The main reason for this is that risks calculated last year, with regard to marketing energy from volatile renewable energy sources, did not materialise completely,” he said.

Production from wind and photovoltaic cells were not above average and broadly in line with expectations, Homann explained.

Containing energy prices

A recent amendment to Germany’s Renewable Energy Sources Act (EEG), tabled this year, aimed at preventing a rise in cost for household consumers.

But analysts do not see a correlation between reforms and the reduced surcharge. “Prognoses over reduced surcharge costs in 2015 already emerged early this year, months before reforms,” said Carsten Tschamber, managing director of Solar Clusters Baden-Württemberg, a member organisation bringing together decision-makers in the solar value chain.

Changes made to the EEG in early August cut down requirements for developing green energy and compensation for new plants.

A slight reduction in the surcharge, effective in January 2015, would have occurred at exactly the same rate, had this amendment not been passed, explained Tschamber. This opinion is shared by other energy analysts, from the Fraunhofer-Institut for Solar Energy Systems (ISE) in Freiburg or the Berlin think-tank Agora Energiewende, for example.

The EEG is a central instrument of support for developing wind, solar and biomass power generation. Under the EEG law, network operators are required to prioritise power generated from renewables and to compensate the power plant operators. In this way, the extra costs created by this system are transferred to energy users via the EEG surcharge.

For every kilowatt hour (kWh) taken from the power grid, consumers pay around 6 cents extra. Every year, the exact amount of next year’s EEG surcharge is determined on 15 October.

The average total price of energy for private households is currently around 30 cents per kWh. According to a study released in February, German household energy prices are 48% higher than the European average.

Room for reduction

There is now potential for a reduction in household energy prices, said Philipp Vohrer, managing director at the Agency for Renewable Energies.

“In 2015, an average three-person household could save around €30, if energy providers transfer the lower cost for the EEG surcharge and purchasing. In previous years, price hikes were often attributed to increases in the EEG surcharge. But at the same time, many energy providers did not transfer lower prices, which decreased due to feed in from renewables and cheaper CO2 prices, to household customers,” he said.

“For this reason, there has long been room for reduction to household prices. Next year, energy providers will also not be able to blame price increases on the EEG surcharge anymore,” Vohrer commented.

But Hans-Joachim Reck, primary managing director at the Association of Municipal Enterprises (VKU) warned against premature optimism. “As good as this development seems at first glance, especially for consumers, it is a one-off effect that can be traced back to the high 2014 surplus on the EEG’s accounts.”

In the short-term, the EEG reform will not have a considerable effect on the level of the surcharge and energy prices in general, Reck said.

Greens critical

Meanwhile, the Green Party is accusing Economic Affairs Minister Sigmar Gabriel of distributing “generous exemptions for energy-intensive industry”.

Oliver Krischer, deputy faction leader for the Greens in the Bundestag and Julia Verlinden, the Green Party’s spokesperson for energy policy, said the surcharge could have been much lower this year.

“But the centre-right alliance and the Social Democratic Party (SPD) purposefully let prices be set higher, to conceal a rising surcharge in the coming years because of the coalition’s endless industry exemptions.”

“As a result, the grand coalition still owes consumers a noticably lower burden, which they promised private households and SMEs,” Krischer said.

92% of Germans in favour of further expanding renewables

But despite higher costs, the German population still strongly supports renewable energy sources. 92% consider more intensive expansion of renewables either “important” or “extraordinarily important”.

These are the results of a representative survey conducted by the polling institute TNS Emnid on behalf of the Agency for Renewable Energies in October 2014. The survey included more than 1,000 respondents throughout Germany and its results are comparable to previous years.

“Apparently, the politically-inflated cost debate has not taken hold among citizens,” said Vohrer. “The citizens primarily associate benefits with renewables, such as climate protection or generationally sound concepts.”

75% of those surveyed responded that renewable energies contribute to a safer future for next generations. More than two-thirds said they see climate protection as a benefitting particularly from generation through solar, wind, etc..

In addition, the opinion that renewables may help reduce dependence on energy imports was shared by 62% of respondents.

“Falling costs ranked very low in the expectations among those surveyed,” Vohrer pointed out, “Nevertheless, an overwhelming majority of Germans supported the expansion of renewables.”

Background

As most renewable energies are still more expensive than fossil fuels, a variety of support schemes have been put in place to accelerate their uptake and meet the EU's goal of sourcing 20% of its energy from renewables by 2020.

The European Commission warned last year that EU energy prices will continue to rise unless governments take steps to reduce green subsidies.

>> Read our LinksDossier: Supporting renewable energies: The 'transition' schemes