Surcharges In Germany Should Be At Least 15.6 Cents

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Originally published on the Lenz Blog

Yesterday’s announcement of a 6.24 cent surcharge in Germany came with a lot of interesting reports attached.

One assumption behind this number is that the cost of the system for 2014 will be EUR 21.26 billion, see this report (page 8).

Last year’s GDP is estimated by Statistisches Bundesamt as EUR 2,645 billion. So the above amount is about 0.80 percent of GDP, not counting any growth since 2012.

This is much below the 2 percent of GDP a rich country like Germany that has profited over the whole 20th Century from burning fossil fuel should invest in renewable energy. Germany has a moral obligation to lead with the efforts of dealing with global warming.

To get to that minimum of 2 percent GDP, the investment in renewable energy would need to grow by a factor of 2.5, which means that the surcharge should be at least 15.6 cents in a parallel World where political leaders understood that we might have somewhat of an urgent problem with global warming.

This would of course not lead to an increase in the energy bills by the same factor, because at that higher prices there would be less energy consumed than the average of 3.500 kWh per year and household. And of course with that kind of money invested prices for renewable energy would fall even faster, making the transition to renewable energy cheaper when looking at the whole cost until 100 percent renewable is reached.

In the long run it would obviously save a lot of money. Right now, German citizens pay a whopping 3.5 percent of GDP for fossil fuel imports. The cost per capita is up to EUR 1,165 in 2012, as compared to 404 in 2002, when that number was 1.2 percent of 2012 GDP.

In other words: The costs of installing renewable energy have gone basically from zero to 0.8 percent of GDP. In the same decade, the cost of importing fossil fuel have gone up by 2.3 percent of GDP, or about three times of the investment in renewable energy.

That fossil fuel burnt in 2012 is gone. The solar panels installed in 2012 will produce domestic energy for centuries to come.

I for one think that investing in renewable is the better deal.

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Dr. Karl-Friedrich Lenz

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.

Dr. Karl-Friedrich Lenz has 67 posts and counting. See all posts by Dr. Karl-Friedrich Lenz

16 thoughts on “Surcharges In Germany Should Be At Least 15.6 Cents

  • “centuries to come”?

    • They clearly make panels to last in Germany 🙂

      • I always suspected they were keeping the best panels for themselves. But regardless of the minor decades/centuries confusion, some good points are made.

    • I think Karl means the knowledge and price decreases will payoff for centuries.

      • No, I actually mean that solar panels can produce energy for centuries. We will of course have to wait quite a long time to find out if that is true.

        At the degradation of 0.5 percent per year of the best solar panels now, they still deliver over 60 percent after the first century.

        I discussed this in some detail in this post at my blog in September 2012:

  • What a ridiculous piece of poor analysis. Of course fossil fuel costs went up dramatically, as Germany took elective step of closing their nukes, earthquakes in Germany being quite the menace.

    And cherry picking the year 2002 as a baseline, just before all commodity prices moved up significantly in value as emerging markets really kicked in.

    Analysis like this would get an F in an undergrad stats class.

    Moral obligation? What a compelling argument. How about Germany spend some money on defense spending after the US has carried Europe for the past 60+ years.

    • So you’re suggesting that when Germany announced that it would start closing nuclear plants the price of natural gas went up for all EU27 countries?

      How does that work?

      • Bob, where did I say the price of European nat gas went up when the Germans began to shut nukes? The author asserts that the amount of GDP dedicated to fossil fuel consumption has jumped, but without having any understanding of how much more nat gas Germany is importing in a post nuke world.

        • “Fossil fuel costs” normally would mean the price per unit of fossil fuel, not expenditure on fossil fuels.

          And while fossil fuel purchases might have gone up following Germany’s announced exit from nuclear generation their cost of electricity has dropped based on the falling price charged industrial users.

          It’s widely accepted that Germany’s cost of generating electricity has been dropping but that decreased cost is not being passed on to residential users.

          Some of that price stickiness seems to be a result of long term purchase agreements which have locked in high sales prices while generation costs have been dropping thanks to wind and solar on Germany’s grid.

          Wind and solar combined to reduce the amount spent for fossil fuels by 8 billion euros in 2012.

    • The Fukushima disaster occurred because the grid connection was lost and the back generator did not work. In Fukushima this happened to be caused by an earthquake and a tsunami. Since the German reactors are of the same type as the Japanese, and there are many other things that can cause the grid outage and back-up failure, Merkels decision is very understandable.

    • Closing nuke plants means more oil is imported how?

      “And cherry picking the year 2002 as a baseline, just before all
      commodity prices moved up significantly in value as emerging markets
      really kicked in.”

      Not all commodities increased in price, solar panels for instance have become much cheaper.

      Plus, how is acknowledging peak oil “cherry picking”?

      • Nuke power was by and large replaced with Russian nat gas fed to gas turbines. Where did you think the substituted electricity came from?

        Peak oil? Really? Look at what US production has done.

        • “Peak oil? Really? Look at what US production has done.”

          Stayed the same, but costing much more to produce thereby requiring a price of $70-$80 to make a profit?

  • i disagree with this analysis. the surcharge grows 18!!! % this year. and that on already very high electricity costs for households. this is a challenge for people making an average income, not to mention those millions who make far less then that.
    Now, on the other hand prices on the exchange in Leipzig are at the low levels of 2005. And thanks to Merkel, thousands of huge, medium and now even small corp. have been exempt from the surcharge. so these guys not just profit from record low electr. prices when they buy directly from the exchange, but also from not paying the surcharge.
    Keep in mind that those 0.8% are payed by the minority consumers of electricity. if those others would have to pay as well, that number would easily skyrocket. people are willing to pay a bit more for clean energy, but if this divide becomes too big, they might change their mind.

    although i have to say since 1/3 of germans voted for merkel they really have no reason whatsoever to complain about higher prices^^

    • Another problem in Germany is that the low prices in the market are not passed on to normal costumers. Partially because a large part of the electricity has been bought years in advance, but I suspect the electricity distributors also make a nice little extra profit.

      Regarding the industry exemptions, it look like they apply the general tactic of right wing politicians to deal with working government programs that they don’t like on ideological grounds. As soon as they are in power they start to de-fund and or change the programs until they don’t work properly any more. Then they say: Government is bad at doing this task, let’s cancel he program and let the market take over.

  • “Germany’s manager magazine, a journal not exactly friendly to renewables, reported last night that German retail power consumers “might not see much of an increase at all” next year. Indeed, some customers might even see prices go down.

    We already mentioned yesterday that EnBW, the fourth largest power provider in the country, does not plan to increase its retail prices at all for “most” of its customers.

    Last night, manager magazine added Lichblick (the largest green power provider, but still a relatively small fish), which expects prices to remain constant. Unfortunately, RWE and Vattenfall, two of the other three big utilities, did not wish to make any forecasts, and Eon (the other member of the Big Four) was apparently not contacted.

    The article also cites Energy Brainpool (about whom I have also already written), which estimates that lower power procurement costs currently range from 0.57 to 1.97 cents – compared to an increase in the renewables surcharge of 0.96 cents.

    Interestingly, new photovoltaics only makes up 0.08 cents of that increase.
    Other cost items, such as grid fees, could raise the retail rate, however, and too much offshore wind would also make things more expensive.”

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