Deutschland : November 15, 2010

Driven by rising levies and taxes for renewable energy initiatives, electricity prices in Germany have risen by 2.1 percent in the first half of this year according to figures published by the German Association of Energy and Water Industries (BDEW).  The industry body estimates that as more power from renewable energy projects (i.e., solar, wind, hydro, etc.) is sold into the grid, these levies and taxes are also rising – by up to 70 percent for the next year.

Under the country’s Renewable Energy Law the government guarantees subsidies for non-fossil energy sources.  Along with these subsidies, the cost of providing renewable energy is also rising in order to modernize the grid.  Naturally, all of these costs for subsidies and grid improvements are passed along to the consumer.

Since the electricity market was liberalized in 1998, taxes and levies on electricity prices have increased by seven-fold.  The BDEW also believes that despite recent government cuts, the renewable energy industry is still overly subsidized particularly in the area of solar power.  Advocates of the country’s renewable industry maintain that while cleaner energy is more costly it currently accounts for only 0.2 percent of household expenses.  “There’s no denying it – changing the way our energy is supplied is expensive,” said Joerg Mayer director of the Renewable Energy Agency.  He also added that investing in renewable energy would pay off in the long run.

The opposition Green Party blames a lack of competition as the reason for higher electricity prices.  They argue the government’s recent decision to keep the country’s nuclear reactors on-line for a longer period of time makes it harder for renewable energy companies to compete and cements the position of Germany’s four largest utility companies – RWE, E.On, Vattenfall and EnBW.