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Green energy surcharge rising

October 14, 2016

German consumers are facing higher electricity bills next year as rising costs for the country's shift to greener energy will drive a surcharge for renewables to an all-time high despite efforts to curb the trend.

Deutschland Windkraft Symbolbild
Image: picture-alliance/dpa/J. Büttner

German national grid operators 50Hertz, Amprion, Tennet and TransnetBW announced on Friday that the country's consumer surcharge to fund renewable electricity would rise by about 8 percent, from currently 6.35 eurocents per kilowatt-hour (ct/kWh) to 6.88 ct/kWh next year.

The increase is less than feared by experts, but sends the surcharge to its highest level since it was introduced 16 years ago, and costing consumers only 0.16 ct/kWh at the time.

According to industry calculations, the new surcharge will increase the electricity bill of a normal German household by about 22 euros ($24.2) per year - based on an annual consumption of 3,500 kWh - and boosting green costs to about 286 euros of such a household's total energy bill.

The surcharge is part of Germany's Renewable Energy Act (EEG), introduced in the year 2000 with the aim of promoting renewable forms of energy generation to a level of 60 percent by 2035. Each autumn, grid operators set the price of the surcharge for the coming year, using as a basis for their calculation the difference between the wholesale market price for power and the higher remuneration rate for renewable energies guaranteed by the state.

Renewable energy - The pioneer

Falling prices, rising costs

German wholesale electricity prices have been slumping sharply in recent years due to a strong build-up in renewables, leading to overcapacity in markets, especially when the sun shines and the wind blows strongly.

In the first half of 2016, the average power price at the exchange was at 2.5 ct/kWh, down from 3.2 ct/kWh in 2015. Because the surcharge makes up the difference between the wholesale electricity price and guaranteed feed-in payments, the renewables levy increases when the market price falls. This year, the green energy surcharge is expected to cost consumers about 23 billion euros.

Partial exemptions are given to more than 2,300 companies that are "electricity-cost intensive and trade incentive." They pay only about 2 percent of the surcharge although using 25 percent of Germany's power. As a result, residential and small commercial customers pick up the slack.

Moreover, when taking into account rising fees to make the German grid capable of handling massive amounts of renewable energy, consumers will on average have to pay 3 percent more for their electricity, according to price-comparison website Verivox.

Failing reform

The EEG surcharge is often used as a price tag for Germany's energy transition. Except for one year, 2015, it has been climbing every year since 2000. This has led to calls for reforming the Renewables Act.

As a result, the government introduced changes to the law this summer, limiting how much new renewable capacity can be built each year and introducing an auction-based system to largely replace feed-in tariffs for renewables.

But Germany's industry lobby says the reform seems unable to curb the trend toward rising green energy costs, which are expected to soar well above 7 ct/kWh over the next six years.

Ullrich Grillo, head of the Association of German Industry (BDI), criticized that the new rise in the surcharge was "four times higher than economic growth."

"The current subsidies system has spun out of control. Energy costs have become a problem for Germany as a business location," he said Friday.

uhe/sgb (dpa, Reuters)