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Germany to spend billions on subsidy to cut electric bills

October 5, 2022

Economy Minister Robert Habeck said the funds would help cover costs for businesses and consumers. But the billions will not keep energy grid transmission companies from raising prices.

High-voltage transmission wires with a lone automobile on the German countryside and a coal-fired power plant in the background
Transmission systems operators are struggling to stabilize erratic energy grids across Europe Image: Stefan Ziese/Zoonar/picture alliance

German Economy Minister Robert Habeck on Wednesday announced that the federal government in Berlin would pay the country's four largest high-voltage energy transmission systems operators (TSOs) €12.8 billion ($12.8 billion) for grid usage fees in a bid to stabilize usage fees that otherwise would have tripled in coming months. 

Grid usage fees are invoiced in monthly electricity bills and constitute roughly 10% of customer costs and 33% of the cost to industrial companies.

"We are now making sure that these cost increases are absorbed, thereby preventing an additional burden for industrial companies, small- and medium-sized businesses and consumers," said Habeck.

TSOs trying to stabilize energy grid

TSOs in Germany — Europe's largest energy market and energy transit country — are facing a myriad of challenges as climate change and the war in Ukraine bite; creating energy shortages that have triggered wildly fluctuating energy feeds from sources supposedly being phased out like nuclear and coal and newly constructed renewable sources.

After Habeck's announcement, the TSOs — German-based Amprion, 50Hertz and TransnetBW, as well as Netherlands-based TenneT — released a statement that they would be increasing their kilowatt-hour grid usage fee to €03.12 from €03.08 last year.

They said the rate increase was a result of efforts to stabilize energy transmission grids across Europe while faced with rising labor and equipment costs.

The TSOs were also clear that they saw Russia's invasion of Ukraine as the main price driver on Europe's energy markets.

Critics say TSOs have too much influence on pricing

Initial funding for the subsidy will be covered by Germany's Renewable Energy Act (EEG), which is in turn funded through the federal budget and carbon pricing. Further costs are to be covered by other means, including further energy bailout funds. 

Critics have called out TSOs for high prices in the past, long before Moscow's February 24 attack. Many observers say they are afforded too much influence when it comes to setting usage fee rates.

Schleswig-Holstein and Lower Saxony, sparsely populated states that feed an outsize amount of renewable energy into the grid, have also called for a reform of the entire fee system, saying it disadvantages energy-producing states compared to densely populated energy-consuming states.

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js/sms (dpa, Reuters)