German surcharge to rise again

A surcharge on German electricity bills to finance the renewables build-up will reportedly rise by 19.5% next year.

The DPA news agency, citing industry sources, says the surcharge will increase from €0.0527 per kilowatt hour to €0.063.

The new level is scheduled to be confirmed officially by transmission system operators on October 15, but the leak has rekindled a fierce debate about energy prices.

Green Party Member of Parliament Oliver Krischer says the surcharge has risen almost five-fold in the four years of Chancellor Angela Merkel’s centre-right government.

He stresses that only a tenth of the increase derives from the construction of new solar or wind plants, while much of the rise comes due to exemptions for heavy industries, as well as a malfunctioning of the national electricity pricing system.

“We need a functioning emission trade and an intelligent further development of the renewable energy act [EEG],” Krischer says. His party insists on a reduction of industry exemptions from the surcharge, while rejecting a complete change of the renewables support system within the EEG that some in Merkel’s Christian Democratic Union (CDU) have suggested.

The Greens, the CDU and Merkel's Bavarian ally, the Christian Social Union (CSU), will meet for preliminary coalition talks in Berlin this week, when energy policy is likely to be a key point.

The federal election in September brought Merkel’s CDU/CSU a staggering 41.5% of the vote, but the chancellor will still need either the opposition Greens or the Social Democrats to help her form a new government after losing her current coalition partner, the Free Democrats, which didn’t win any parliamentary seats.

Rising energy costs are not just an issue for politics, however.

Germany’s international competitiveness is threatened by energy prices that are rising at the same time as they are falling in North America, research shows.

The IHS study, The Challenge to Germany’s Global Competitiveness in a New Energy World, examines the links among Germany’s energy costs, competitiveness and economic performance.

It concludes that rising energy prices make German products less competitive and may force firms to relocate abroad.

“Rising electricity costs present a challenge similar to one Germany faced a decade ago from a rigid labour market,” says Ralf Wiegert, director of IHS Economics.

The study examines two potential paths forward for the German economy:

  • A high-price scenario that models a rapid development of renewables and the removal of exemptions from the renewables surcharge and tax discounts for energy-intensive industries; and
  • A “competitive energy scenario” with a more moderate pace of renewables development and an increased role for thermal power, especially natural gas. Industrial exemptions are maintained in this scenario.

The study concludes that Germany’s 2030 gross domestic product would be 6.2% higher in the competitive scenario compared with the high-price scenario, while personal income is projected to be 6.3% higher. Key German industries such as chemicals or motor vehicles would benefit from the competitive scenario as their supply costs decrease, IHS says.

Under the competitive scenario, the country would still be able to meet its 2020 target of a 35% share for renewables in electricity production, but the proportion of renewables would only grow further to 40% by 2030.

That is lower than the current target of 50%, which the Greens want to see increased sharply.