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How does a renewables-based energy system impact the consumers?

Germany began developing renewables when they were still relatively expensive, creating costs that were borne by the consumers over the past decade through a levy on electricity. However, renewables are no longer a major cost driver. Under normal circumstances, they can reduce the bills of end consumers by minimising exposure to highly volatile fossil fuel prices.

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Historically expensive, renewables development is no longer a major cost driver in German electricity bills

Following years of increases, electricity prices for German households were relatively stable between 2013 and 2021 - until the current fossil energy crisis. Still, German consumers paid about 0,32 €/kWh in 2021, one of the highest electricity rates in Europe. The higher rates were the result of historic costs for the development of renewables in the early 2010s, when they were still expensive.

In the context of the global energy crisis, household prices have seen a sharp increase in 2022 for customers with new energy supply contracts. This increase is due to the high cost of fossil fuels, notably gas. In fact, countries with more renewables in their power mix have been less impacted by the fossil fuels driven price rise.

The development of renewables can be accelerated while keeping the bills of consumers relatively stable

In the years to come, the deployment of renewables will no longer contribute to an increase in electricity bills. Because of their low operating costs, renewables reduce the price of electricity during sunny and windy periods. They also minimise the impact of fossil fuel price fluctuations on consumer bills. As such, renewables protect consumers from global energy crunches characterised by fluctuating and rising fossil fuel prices, such as those experienced since the end of 2021.

Historically, renewable energy projects were funded by the renewable energy levy (EEG surcharge). However, the high energy prices in early 2022 caused the EEG account to accumulate a surplus, as revenues from the marketing of renewable electricity were higher than the subsidies paid. In March 2022, the governing coalition adopted a law that abolished the renewable energy levy to relieve consumers and businesses regardless of the EEG account balance. Since July 2022, the levy is replaced by a financing mechanism through the state budget through which the loss of revenue for transmission system operators will be compensated with around 6.6 billion euros by the Energy and Climate Fund (EKF).

The overall cost paid by the German economy to support renewables is expected to reach a plateau by the mid-2020s. After that, it will decline, while the renewable energy share in gross power consumption will increase.