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Analysis: Renewables support adds cost of three espressos

GERMANY: Germany's renewable energy levy hike in 2016 will cost householders the price of roughly three cups of espresso coffees. But with the levy hike set against expected falling wholesale electricity market prices in 2016, householders could be marginally better off.

A four-person household renewable levy will increase by €7.30 or about the price of three espressos (pic: Brain Legate)
A four-person household renewable levy will increase by €7.30 or about the price of three espressos (pic: Brain Legate)

The levy paid by consumers will increase 3% or €0.00184/kWh to €0.06354/kWh in 2016, compared with €0.06170/kWh in 2015, according to the country's high voltage transmission system operators (TSOs) 50Hertz, Amprion, TenneT and TransnetBW.

Under a mechanism developed on from rules that were originally set out in the renewable energy act of 2000, Germany's renewable energy law 2014 requires the TSOs to calculate and publish the renewable energy levy for the next calendar year on 15 October each year.

The calculations are based on expertise commissioned from consultancies P3 Energy & Storage GmbH, Fraunhofer-Institut fur System- und Innovationsforschung ISI, and Energy Brainpool GmbH & Co KG.

Amongst the renewables, onshore wind is expected to grow to 41.6GW by end-2015, compared with 37.8GW at end 2014, with an extra 2.7GW going into operation in 2016.

Offshore wind is due to reach 3.3GW at end-2015, compared with 1GW at end 2014, with another 663MW to be added in 2016, the transmission system operators predict.

A four-person household using 4,000kWh per year will pay a renewables levy of €254 in 2016, up €7.30 or about the price of three espressos, on €247 paid in 2015, to support the expansion of renewables generation.

The average wholesale market price of electricity is expected to fall by €0.0037/kWh to €0.0342/kW in 2016, from €0.0379/kWh in 2015, according to the federal economy ministry.

As this reduction is bigger than the increase in the renewables levy (€0.00184/kWh), household consumers should expect a small reduction in their electricity bills, assuming electricity suppliers pass on the wholesale market price reduction to their customers.

Cheaper tariffs

Consumers could also help themselves. For instance, if those who use 4,000kWh per year that have never switched from their high default electricity tariffs took advantage of the cheaper electricity products available, they could save around €200 a year, according to electricity price comparison portal Verivox. This would eliminate nearly 80% of their renewable energy levy payment in 2016.

"Despite reduced rates for privileged sectors of industry, the levy remains a serious competitive disadvantage for German companies, which in future will become even more dramatic," claimed president of Germany's industry federation (BDI), Ulrich Grillo.

Contrasting with the BDI view, and far from Germany sliding into depression, the federal economy ministry expects Germany's gross national product to rise 1.8% in 2016 from 1.7% in 2015 and 1.6% in 2014. A slight dip in growth to 1.4% is expected in 2017 followed by 1.6% growth in each of 2018, 2019 and 2020.

The renewables levy increase could have been avoided if reduced-levy privileges for industry had not been broadened to include additional sectors, thereby increasing the rate shouldered by ordinary customers, pointed out the opposition Greens Party.

It also highighted the very low prices for CO2 emissions certificates allowing coal and lignite generation to flood the market, resulting in very low wholesale prices.

Such low wholesale market prices benefit mainly industry while normal customers must make up the difference between the low market price and cost of renewables generation, the Greens Party complained.

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