Germany Puts A Stop To Landmark Renewables Levy On Consumer Power Prices

Starting 1 July 2022, people will not have to pay from their own pockets directly via power bills for renewable energy generation in Germany, but from a state fund. This levy, that often accounted for one fifth of the consumer power price and 3.7 cents per kilowatt-hour, was paid for by households and businesses through their power bills.

This, in turn, funded the “green energy account,” from which feed-in tariffs to wind, solar and biogas installations were paid. In a landmark transition, they will now be paid from energy and climate fund of the state. The source of revenue for this fund is emissions trading.

As a result of this major shift, an average German family will now be able to save nearly 200 euros annually. In order to make sure that consumers reap the benefits from this price relief, the law stipulates electricity suppliers to lower prices in a transparent fashion as of July. This was mandated by the federal economy and climate ministry at the time when the federal parliament passed the new legislation in April this year.

The Sore Spots

The renewables surcharge discernible in people’s power bills had ruffled a few feathers since it continued to witness a surge due to substantial feed-in tariffs that led to a boom in new renewable installations. The figure touched up to 6,9 ct/kWh five years ago.

The fact that multiple industrial consumers were partially exempt from the levy on renewables further invited disapproval.

Stemming The Surcharge

The government has been keen to curb household power prices- among the highest in Europe. Thus, it has been mulling an abolishment of surcharge. January this year witnessed a drastic reduction in the surcharge, which was reduced to half.

The coalition government in 2021 had said that an end was going to be put to the levy towards the end of this year.  This move, it said, would make e-cars and fossil fuel alternatives more viable and attractive once the power costs come down.

Transitioning To Green Energy

The country has been proactively working towards the transition to cleaner energy.

Germany’s Renewable Energy Act 2021 has been instrumental in paving the way for a revolution in renewable energy. As per the Act, 80 per cent of its electricity needs must be met through renewable energy by 2030 and 100 per cent in the five years that follow. Germany is also pushing for subsidies  to operators who feed electricity into the grid.

In 2020, the country also showed marked progress with regards to expansion in solar energy. In a milestone, it reached an eight-year high after adding PV capacity of almost 5 GW. The country witnessed as many as 184,000 new solar power installations in 2019.

It is worth noting that Germany which has been spearheading a large number of subsidy schemes in the past is now phasing them out in favour of investments in new green investments. It is currently eyeing $216 bn worth investment in green energy to reduce reliance on Russia for its energy needs.