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Energiewende Germany solar panels & flag via Shutterstock

Published on September 3rd, 2013 | by Dr. Karl-Friedrich Lenz

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Renewable Reducing Electricity Prices In Germany



I just mailed my absentee ballot from Japan for the next German election. Living in Japan, I needed to fill out some forms and send them in to my last place of residence in Germany, but I thought this election is important enough to jump through those hoops.

Of course I voted for the Green Party.

One of the topics in this election season is the price of electricity. There is a lot of confusion around. Many people don’t understand that the renewable revolution caused by the German feed-in tariff model has lowered prices.

This is also a season to discuss the surcharge, which will be fixed for next year on October 15. Spiegel has an article on the topic, and Craig Morris has discussed that article here.

Morris links to an interesting study done by Brainpool (PDF) for the German Green Party, which looks at the next surcharge decision in some detail.

We learn (page 1) that German wholesale electricity prices are down from 5.115 cents estimated in 2012 to around 3.9 cents. Let’s just note that renewable energy has reduced wholesale prices  by 1.2 cents per kWh. Multiply that by the 482 TWh they expect Germany to consume next year (page 21) , and we see that renewable energy will reduce wholesale prices by EUR 5.784 billion next year.

Of course these lower prices will lead to a higher surcharge next year, since the surcharge is calculated by the difference between the feed-in tariff and the wholesale price. But that’s only a temporary effect. It will be gone after a decade or two.

In contrast, the lower prices from a higher renewable share are here to stay. Those solar panels are not going anywhere.

Even if renewable energy did not reduce prices, as it already does, it would add to Germany’s price stability as a hedge against higher fossil fuel prices in the future. But it does. Renewable energy reduces electricity prices in Germany. And this is still only the beginning. Over the next couple of decades, electricity will reach at least 80 percent renewable share (Article 1 of the Law on Priority for Renewable Energy).

Of course there is also that “global warming” problem we seem to have. The analysis above doesn’t even mention that phasing out fossil fuels will reduce the costs from global warming damages.

We also learn from the Brainpool study mentioned above (page 21) that the surcharges are expected to go up by 0.07 cents for another 4 GW of solar over the year. That’s a killer number (007) that should lay to rest forever the outdated idea that solar is expensive. And trying to slow down new solar in Germany right as costs have come down and we can finally reap the benefits from introducing it rock bottom prices is a very stupid idea. If it was the right thing to build the world’s biggest solar infrastructure back when prices were really high (and it was the right thing to do) then it doesn’t make any sense at all to stop now.

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About the Author

is a professor of German and European Law at Aoyama Gakuin University in Tokyo, blogging since 2003 at Lenz Blog. A free PDF file of his global warming science fiction novel "Great News" is available here.



  • Eisenhower303

    New York Times seems to think that these high prices from surcharges are a bad thing: http://www.nytimes.com/2013/09/19/world/europe/germanys-effort-at-clean-energy-proves-complex.html

    But apparently extremely high electricity prices are not a cause for concern for cleantechnica as long as they go away in 2 decades. You also forgot to report that carbon output increased over last year, since they’ve replaced nuclear power with coal.

  • Steve

    Phasing out nuclear power in a country without earthquakes or tsunamis was the dumbest thing ever. Germany is burning more fossil fuels to ensure the intermittent solar and wind generation doesn’t cause blackouts. Sometimes the sun is shining and the winds are blowing and there is oversupply in the system which you somehow have to get rid of. Sometimes there is undersupply and increasingly fossil fuel plants are being turned on to make up for the difference. Carbon emissions from Germany have increased in 2013. Whenever a nuclear power plant is decomissioned a coal powerplant is built in its place.

    The recent article in German newspapers of how the green revolution is causing the electricity bills in Germany to go higher and higher is only the beginning. It’s upsetting the economy, redistributing wealth from the disadvantaged to the more affluent. Germany should reverse it’s energy policy and go back to nuclear like France was before with zero carbon emissions and an impeccable safety record. Coal and renewables have killed far more than nuclear ever will.

    • Bob_Wallace

      “Phasing out nuclear power in a country without earthquakes or tsunamis was the dumbest thing ever.”

      The citizens of Germany clearly don’t agree with you. And they are doing just fine.

      • Eisenhower303

        Are they doing fine? http://www.nytimes.com/2013/09/19/world/europe/germanys-effort-at-clean-energy-proves-complex.html?pagewanted=all

        electricity is now more expensive and carbon output has increased. Way to go germany.

        • Bob_Wallace

          Germany is doing great. We should be doing as well.

          Those people who look for noise in a system and try to turn it into something important only mislead themselves.

        • Ivor O’Connor

          Eisenhower, you may want to get your information from a reliable source. Asking the NY Times for real information about renewable energy, or even references, is like asking a drug dealer if his drugs are ok. Up to you though.

        • Ivor O’Connor

          Let me help you point out the absurdities in the article you reference http://www.nytimes.com/2013/09/19/world/europe/germanys-effort-at-clean-energy-proves-complex.html?pagewanted=all

          Look at the picture closely. See that pack of cigarettes on his table. That cost him about $5. An average smoker smokes 1 pack a day. Moderate smoker 2 packs a day. Extreme smoker smokes more than 5 packs a day. (Had to look it up along with the prices.) So lets say he burns $5 a day on cigarettes.

          Now think about that 20 watts he is trying to save by living in the dark when he gets home after work. Say he spends 5 hours a night there every night. He has saved himself 100 watts. At current pricing that is a saving of $0.03 every night.

          Another way to look at this. A cigarette costs $5/20. Or $0.25 a cigarette. So if he so much as puffs 1/8 of one cigarette he has wasted the money he saved on electricity those 5 hours.

          This is a case of “Stupid does as Stupid will”. He should quit seeking attention and the NY Times should stop trying to pull heart strings where there are no heart strings to be pulled. In fact the NY Times should be held accountable for all the blatant lies found in that article. I didn’t read it thoroughly but every “truth” was in fact wrong that I came across.

  • Silvester van Koten

    Thanks for the reaction and the interesting links that were posted.

    Germans really pay slightly under 50% of their electricity bill in taxes: in the last half year of 2012 the tax was E0.14 out of E0.27 per KWh (see http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Electricity_and_natural_gas_price_statistics)

    Do I understand heinbloed that he would suggest that Germany and Denmark are presently economically blossoming precisely because their electricity is expensive? That is an interesting, though bold thought. The explanation that Germany and Denmark are countries that are rich enough to expend large sums of money on subsidies seems more likely to me. These countries have deep pockets. Other countries are not so fortunate. For example, Spain seems now to be backtracking on its energiewende, precisely because it has no spare money and the energiewende cost money. Moreover, I hear more and more stories of companies complaining about the high cost of electricity in Germany and there are some cases of companies transferring projects to countries with lower electricity prices (such as the US). I also hear of consumers starting to complain.

    Anyways, Germany produced 20% of its electricity from renewable resources in 2011, but solar only 1.5% (of total electricity). The largest “renewable source”, accounting for 14%(of total electricity), is biomass (waste, wood, but also imported wood pellets from places such as Ukraine). Solar seems thus not to be such an important contributor to electricity production.

    I think that global warming is a real danger and that something has to be done. But the public should not be fooled that this can be done without a high price.

    In addition, at present climate policy seems rather wasteful. For example, how many tons of carbon of reduction do you think these subsidies in wind and solar brought? The answer is zero. As Germany is under the Emission Trading Scheme (ETS), any wind or solar realized through subsidy just relaxes the constrained of the ETS and thus lowers the carbon price. The lower carbon price then stimulates dirty production (think lignite). A subsidy to wind or solar under the ETS thus implies also an (indirect) subsidy to the dirtiest methods of production such as lignite. As a result, subsidies are a pure waste. It would be better, instead of handing out subsidies for wind and solar, to strengthen the ETS and to extend its coverage (with transport and agriculture for example).

    Then there is, of course, still the question if the suppliers of carbon are willing to stop selling their oil and gas. Just because EU starts to slowly buy less and less of the stuff doesn’t mean that the suppliers will not sell their oil and gas. Arguably, by slowly losing the EU as a customer, they have to lower the price of oil and gas, but especially producers in the middle-east have low enough extraction costs to considerably lower their prices in order to still push oil and gas on the other consumers that have not gone green. If that scenario unfolds, the EU, and especially Germany, will have brought huge financial sacrifices, without any reduction of emitted carbon.

    • Bob_Wallace

      Let’s look at a picture…

      See the 24.2 TWh produced with wind and the 19.4 TWh produced with solar?

      That’s 43.6 TWh of avoided fossil fuel production. Without wind and solar Germany would have burned 25% more fossil fuels.

      Will it cost something to switch from fossil fuels to renewables? Sure. But over time we’ll get that money back from both direct electricity cost savings and avoided health and environmental damage.
      —-

      Spain has pulled back their renewable subsidies. They simply don’t have the money. But the fact that they had invested in renewables before their economic crash meant that they were able to avoid fossil fuel purchases when money was the tightest.

    • Bob_Wallace

      Now let’s look at another picture…

      That’s what is happening to the cost of electricity in Germany.

      You’re hearing companies complain? If that’s the case then you’re hearing companies complain as their cost of electricity is dropping.

      What you are probably hearing is the fossil-fuel-friendly media posting crap.

      And it’s likely based on the fact that a couple companies that use a lot of natural gas are considering moving some of their production to the US in order to access our cheaper gas supply.

    • Bob_Wallace

      Now let’s look at some numbers…

      20020.0685

      20030.0697

      20040.0740

      20050.0780

      20060.0871

      20070.0946

      20080.0929

      20090.0975

      20100.0921

      20110.0900

      20120.0895
      http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&language=en&pcode=ten00114

      Those are the prices of electricity for industrial customers in Germany. See how they’ve been going down?

      And for 2012 the price of electricity for industrial customers in Germany were cheaper than in 16 of the EU 27 and cheaper than the EU 27 average.

    • heinbloed

      Don’t try to distract from the article, Silvester.

      The issue here is ‘reduced electricity prices’.

      Not ‘increased taxes’.

      Electricity price plus VAT are only part of the householders energy bill, there is also metering charge, distribution charge, RE-suport and some more.

      You’re asking:

      ” Do I understand heinbloed that he would suggest that Germany and Denmark
      are presently economically blossoming precisely because their
      electricity is expensive?”

      Partly correct, these states aren’t “currently blossoming”. High taxes mean high finacial means for states, keeping the state capeable to steer development.

      The higher the taxes the better the education.

      Adult illiteracy rate in the USA is around 20%, Germany, (or Europe) less than 10%. High taxing states in Europe like Scandinavia show much less.

      A better education system means a better distribtion of wealth, means money in the pockets of Joe Average.

      Electricity is traded at the EEX ( http://www.eex.com/en/ ), the prices for futures ( 2014-2018) are available there. They are dropping year after year, see

      http://www.eex.com/en/Market%20Data/Trading%20Data/Power/Phelix%20Futures%20|%20Derivatives#y

      Whilest the asking price for 2014 future derivates hit € 95.-/MWh in 2012

      http://www.eex.com/en/Market%20Data/Trading%20Data/Power/Phelix%20Futures%20|%20Derivatives/Phelix%20Futures%20Chart%20|%20Derivatives/futures-chart/F1BY/2014.01/2013-09-05/a/-/0/0/0/0/-

      the 2018 futures asking price never made it that high

      http://www.eex.com/en/Market%20Data/Trading%20Data/Power/Phelix%20Futures%20|%20Derivatives/Phelix%20Futures%20Chart%20|%20Derivatives/futures-chart/F1BY/2018.01/2013-09-05/a/-/0/0/0/0/-

      ——————–

      Switzerland liberalises now it’s electricity market, large consumers can soon buy their electricity at the EEX. So instead futures rising at the exchange with this new market situation they’re falling.

      The Swiss government complains about EEX-prices being to low (!) to allow for a profitable Swiss-made Energiewende !

      Swiss electricity prices at the EEX are about the highest in Europe, at par with the UK prices.

      Both had invested in atomic power and are confronted with falling international electricity prices.

      http://www.infosperber.ch/Artikel/Umwelt/StrompreisEnergiewende

      Shopping abroad means less taxes for the national state.

      France, with the highest atomic electricity part, doesn’t allow consumers to shop abroad, the state would collaps under the burden caused by the atomic power industry.

      France, with nearly 70% atomic electricity in the grid, is not competive anymore, the goverment (who owns the atomic power plants) is doing it’s outmost to keep competition from neighbours away from the national grid.

      http://www.power-eng.com/articles/2013/02/hollande-on-the-ropes-as-french-industry-faces-higher-power-pric.html

      http://www.rechargenews.com/wind/europe_africa/article1316552.ece

      Germany MUST increase prices at home to keep the ailing French neighbour alive:

      http://www.businessweek.com/news/2013-07-02/germany-to-work-with-france-on-resolving-diverging-power-prices

      They do so by increasing netcharges, explaining to the consumer that they are suporting the Energiewende by suplying far-off wind generators in the Northsea with cables, guaranteeing a profit to speculators.

      On the other hand the UK wants to increase household electricity prices to feed atomic speculators building French atomic power plants in the UK.

      A mad world.

      “Those who come to late will be punished by history ” said Gorbatchov.

      France is heading back for colonial wars in Mali, in Syria. They have no other choice but to rob and steal, like the USA.

      Incompetent regimes with low consumer electricity prices/low taxes dumping their ‘human surplus’ (the poor’s children) in the colonies.

      The energy of the poor (their labour!) being dumped abroad in the name of the idle class at home. The soldiers being equipped with arms payed with the small taxes their parents pay at home.

      Hurray.

      Instead of educating fewer children better they breed them en masse, family planning being counteracted activly by both colonial powers.

      France is leading the charts in Europe with their ‘human production’.

      Well, electricity costs less there in the USA, in France.Guns are cheap and the army has officers at underfinanced schools.

      ——-

      There is more in the Energiewende than nominal electricity prices.

      Which actually don’t matter to well educated people.

      They know how to make cheap electricity themself, for example with a plug-and-play module:

      https://www.minijoule.com/en/how-does-it-work/video/

  • Silvester van Koten

    Look at the total price including the taxes and levies to pay for the subsidies to wind and solar. Germany has the 2nd highest electricity prices in Europe! If anything, the total price of electricity will still keep growing.

    • Bob_Wallace

      Germany had high electricity prices long before renewables entered the scene.

      While the price of electricity has risen in Germany it would have risen even faster had renewables not been on the grid. Prices rose slower than the cost of fossil fuels. Solar saved the German grid 5 billion euros in 2012 and renewables helped the grid avoid purchasing 8 billion euros of fossil fuels.

      • Silvester van Koten

        Renewables are much more expensive than the other types of generation (gas, coal and even nuclear), that is why such high levels of subsidies must be given to them. A German consumer pays 50% of his bill to the generation cost of electricity, and the rest to taxes and levies to keep producers with renewables in the black numbers.

        The carbon price that corresponds to the levels of subsidies to wind and solar are around E44 and E537, respectively. Abatement of CO2 can thus be achieved ten to hundred times cheaper by not subsidising wind or solar, but instead buying up carbon certificates and not using them.

        (see: The Cost of Abating CO2 Emissions by Renewable Energy Incentives in Germany, 2013 by Claudio Marcantonini and A. Denny Ellerman)

        • Bob_Wallace

          You’re twisting the truth, Silvester.

          Wind is cheaper than new coal or new nuclear.

          Wind and solar are cheaper than even old coal if coal is charged its external costs.

          Fossil fuels and nuclear have received massively larger subsidies over the years than have renewables.

          As we’ve subsidized fossil fuels and nuclear the cost of the electricity they produce have continued to rise.

          As we’ve subsidized renewables the cost of the electricity they produce has fallen. Over the last 30 years the cost of wind produced electricity has dropped from 38c/kWh to 6c/kWh. That’s more than a 6x drop. The price of solar panels has dropped from over $50/W to just over 50c/W. That’s more than a 100x drop.

        • JamesWimberley

          ¨A German consumer pays 50% of his bill to the generation cost of
          electricity, and the rest to taxes and levies to keep producers with
          renewables in the black numbers.¨ This is complete rubbish, as the most cursory investigation would have showed you. The current EEG surcharge is 5.3c per kwh, out of a retail rate of 25c(euro) per kwh. That´s 20%, not half.

          This overstates the true cost of renewables, as the surcharge also pays for a rebate to energy-intensive industry.

          Apologise, or accept the label of troll.

        • heinbloed

          Atomic and fossile electricity is subsidised in Germany with € 0.102/kWh.

          http://www.iwr.de/news.php?id=24380

          That is without the costs for dumping( the eternal storage of atomic waste and the eternal costs of keeping the ex-coal mines from collapsing and consequently flooding the most important industrial zone – the Ruhrgebiet – by diverting the river Rhine .

          Look here for the German FITs of RE:

          http://www.renewablesinternational.net/two-strategic-lessons-from-distributed-pv/150/452/72521/

          Germanys industry is booming:

          http://www.dw.de/popups/mediaplayer/contentId_17059720_mediaId_17018192

          It is the locomotiv of the entire Eurozone:

          http://www.dw.de/eurozone-officially-exits-recession/a-17017955

          The most expensive electricity guarantees the finest suply:

          http://calhounpowerline.com/2013/01/05/us-reliability-a-look-at-the-facts/

          Denmark is still more expensive than Germany, with even better economical data….

          Energy costs are no problem for a modern industrial nation. Otherwise the third world countries would be leading the world economy.

          Economics aren’t your strong side, Silvester van Koten.

          The plain rubbish you have posted – an exposure problem?

          http://phys.org/news/2011-02-chernobyl-birds-smaller-brains.html

          Maybe in combination with of old age?

          http://www.ground-zero.biz/showthread.php?tid=21885

        • Steeple

          Silverster, be careful coming around here with any arguments criticizing the German Green movement, or you’ll be branded a troll. Egads!

          And don’t remind anyone here that Germany doesn’t have earthquakes and thus shutting down paid off Nuclear plants was a knuckleheaded thing to do. No, trust me. Don’t do that.

        • Ross

          Too bad the data used in that analysis was from 2006 – 2010.

    • StefanoR99

      What about the *massive* subsidies paid to Nuclear over the entire lifetime of the plant?

      The only reason why nuclear was embraced was for weapons production – electricity came as a nice bonus.

      Decommissioning worn out reactors takes decades, costs billions and will be paid for over and over by the taxpayer. Also writing off chunks of your country to store waste (or deal with fallout) has almost incalculable costs.

      You don’t feel the subsidy of nuclear because the government taxes you for it directly. If you saw it on your electricity bill (in the same way renewables are displayed) you and a lot of others would be singing a different tune.

      Bottom of the line with hydro, wind and solar with a bit of (pumped hydro thown in) + greater energy efficiency, we don’t need coal, gas or nuke at all.

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