Clean Power

Published on September 3rd, 2012 | by Zachary Shahan


German Electricity Prices Rise as Utilities Increase Their Profit Margin from 1.1% to 8.2%

September 3rd, 2012 by  

Update: one of our awesome readers shared a link to a wikipedia page with a graph on this topic. So, I’m adding it into this post and I’ve posted about it here.

The green line above is the price of electricity on the German electricity exchange. The red line is the average price of electricity for households. The other lines are for commercial clients and special customers (notably, their prices have also risen).

In my opinion, this is a stunner that should be making headlines around Germany and in energy publications: while everyone shouts and hollers the dubious and all-too-familiar “renewable energy is bringing German electricity costs up” chant, German utilities are raking in almost 8 times more in profit margin than they were in 2007!

Yep, just as solar boomed, driving down the wholesale cost of electricity on many a day (or even turning it negative), and wind boomed, driving down the wholesale price of electricity on many a night, utility companies’ profits boomed!

In fact, as the article below by Craig Morris and Denny Gille of Renewables International notes, wholesale electricity prices in Germany have decreased in the past several years, and are lower than ever in 2012. So, it’s not renewables driving up the price of electricity, it’s utility companies and their growing profits! Not that anyone at the top of the utility industry or their puppet politicians (or global warming and clean energy deniers) will admit that. But this finally explains some things.

Here’s Craig and Denny’s piece in full, reposted from Renewables International:

by Denny Gille & Craig Morris

In the debate about the cost of renewable electricity in Germany, the renewables sector and the governmental authorities are taking a closer look at the matter – and coming up with much different findings.

In November, Germany’s four transit grid operators (the country has around 900 distributor grid operators) will once again determine the surcharge passed on to retail consumers to cover the cost of renewable electricity. The “EEG surcharge” (EEG is the German abbreviation for the Renewable Energy Act) is essentially the result of the cost of all feed-in tariffs minus the price of electricity on the power exchange; media reports estimate that this surcharge could rise by nearly 50 percent next year to more than five cents per kilowatt-hour. For large power firms like RWE and Vattenfall, the reason is obvious: the energy transition is not a free lunch, as they repeatedly tell German media. Vattenfall estimates that consumers face an additional 150 billion euros in costs by 2020.

Admittedly, the retail power rate in Germany (which is not set by the government, but rather by the market; any household in Germany can switch to any power provider) has risen by around 20 percent since 2007. But an analysis by Germany’s Network Agency, which regulates gas networks and power grids, also recently found that the profits of power firms rose during that time from a profit margin of 1.1 to 8.2 percent. The Agency says that the net rate for power could have even dropped since 2009 had power firms passed on the lower cost of wholesale power to consumers; but unfortunately, only the factors that increased prices were passed on.

In 2012, prices on the power exchange are even lower. The main reason is the large share of renewable power, which is largely offsetting more expensive conventional plants only switched on to cover peak demand. Power providers benefit from these lower prices and could pass them on to consumers.

But there is no sign that this will happen. Instead, politicians such as Economic Minister Philipp Rösler want to put an end to renewables to keep prices in check. As he puts it on his party’s website, “Tens of billions in subsidies are going to renewables, and every power customer has to pay the bill. We have to put an end to this.” Rösler and his colleague, Environmental Minister Peter Altmaier, therefore plan to reform the EEG this fall.

From 1970 to 2012, 54 billion euros in subsidies went to renewable energy according to a study recently published by Green Budget Germany (“Was Strom wirklich kostet“). But during the same timeframe, the study found that 430 billion euros in subsidies was devoted to coal and nuclear power. Rösler’s FDP was in power for 21 of those 42 years of subsidies.

What’s more, that 430 billion euros of subsidies for conventional power is equivalent to 10.2 cents per kilowatt-hour; the current 3.59 cents paid for renewable power pales in comparison. Indeed, the EEG surcharge would even be an estimated 0.6 cents cheaper if so many industry firms were not largely exempt from the surcharge; two weeks ago, the Greens discovered that the number of firms that do not pay the full EEG surcharge increased by 250 percent in the first half of 2012 alone. Instead of putting an end to this practice – after all, industry firms are already directly benefiting from lower wholesale prices – the exemptions are to be expanded even further. The Network Agency says it is “concerned” about the trend.

Rösler and Altmaier have both said they oppose restructuring who pays what for the EEG surcharge. They point out that 800,000 people are employed at energy-intensive companies. Apparently, they are not worried about the 350,000 jobs that depend on the EEG. (Denny Gille / Craig Morris)

Image: bullshit stamp via Shutterstock

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About the Author

is tryin' to help society help itself (and other species) with the power of the typed word. He spends most of his time here on CleanTechnica as its director and chief editor, but he's also the president of Important Media and the director/founder of EV Obsession, Solar Love, and Bikocity. Zach is recognized globally as a solar energy, electric car, and energy storage expert. Zach has long-term investments in TSLA, FSLR, SPWR, SEDG, & ABB — after years of covering solar and EVs, he simply has a lot of faith in these particular companies and feels like they are good cleantech companies to invest in.

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  • Parichag

    The question that should be asked of renewables in Germany is not the cost of electricity but what is the environmental impact. Renewables were sold to Germans as a way to reduce CO2. Unfortunately, the European experience is one of increased use of gas and coal power plants in order to make up for intermittentcy of wind and solar. In addition, they are using the hydro generated electricity from Sweden and nuclear from France.
    The great part of the German system is not necessarily the renewable experience but the value of multi-faceted grid tied system that can transfer power from one jurisdiction to another.
    The truth is also found in the fact that electricity companies are now going to build at least 23 new coal fired electricity plants because renewables cannot keep pace with the growth in the economy and it is faster and more reliable to build coal plants than more expensive renewables.

    • Bob_Wallace

      CO2 levels for the EU27 are dropping.

      Even if new coal plants are built Germany’s CO2 levels will not increase. Germany is pursuing a balanced approach to get nuclear out of their neighborhoods quickly. That will slow down their path to low CO2, but it will not stop them.

      Germany has done a damn good job of installing solar and is going strongly after wind. They’ve done the world a tremendous favor by heavily subsidizing solar and helping the price to plummet.

      The Germans view nuclear as a clear and present danger. They have had a reactor melt down in their vicinity and they’ve seen one of the most respected technological nations melt down a couple. I’m not going to criticize them for dealing with what they view as the immediate danger facing them.

      Germany will continue to lead with renewables. A very capable country able to do two things at once.

  • Captivation

    Prophets lead to profits. And where the people have no vision, …

  • Passing on cost increases but not cost saving, it is sweet to be a local monoply.

  • This article is so badly written that, in reading it, it is impossible to reach the conclusions give in the CleanTechnica summary.
    Nowhere in the body article by Gille & Morris does it say “that the wholesale electricity prices in Germany have decreased in the past several years, and are lower than ever in 2012”.
    If CleanTechnica wants to reach its audience, then it needs to employ journalists who can write.

    • Anne

      I don’t know what is so particularly ‘badly written’ about this article.
      But if the missing data about wholesale electricity price in Germany is the only quibble, I can direct you to this wikipedia page showing historical prices:

      The wholesale prices are in the first column. For 2009 it was 14.12 c/kWh, for 2012 14.05 c/kWh. QED.

    • Not sure what was hard to follow. From the original:

      “The Agency says that the net rate for power could have even dropped since 2009 had power firms passed on the lower cost of wholesale power to consumers…”

      “The main reason is the large share of renewable power, which is largely offsetting more expensive conventional plants only switched on to cover peak demand. Power providers benefit from these lower prices and could pass them on to consumers….”

      And from the link Anne posted (the green line is the price on the electricity exchange, the red line is electricity prices for households):

  • Bob_Wallace

    Sounds to me as if consumers in Germany have the ability to straighten out their problem.

    Start a national discussion about what is fair, how much people should be paid for their solar contribution, how much profit is fair for an utility company.

    Then give the utility companies a choice. Get your economics in line and we’ll move our individual business to you. Fail to shape up and we’ll wave goodbye. Perhaps we’ll even use all our fingers….

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