All over the republic, private households and companies have received mail from their energy suppliers in recent months: In view of the record prices for gas and electricity, price increases have been announced for 2022, in some cases sensitive. The comparison portal Verivox puts the upcoming additional costs for millions of households at an average of 305 euros per year, because since July the gas suppliers have already increased their prices by an average of 21 percent or announced increases.
And that’s not all: According to Verivox, the basic fee, the second component of the electricity price, has also increased for many suppliers. This costs numerous households an additional 150 euros per year. There are several reasons for the increase in gas prices – such as the economic recovery in many countries after the corona lockdowns and the growing demand for energy, especially in Asia. In addition, our gas storage facilities are comparatively underfilled after the previous cold winter, and Russia is currently supplying less gas than usual at this time of the year.
So supply is scarce, while demand is rising at the same time. In the case of electricity, on the other hand, the price level has more than doubled this year because the last power plant still required forms the price in the daily auction trading on the spot market. In the expensive hours, i.e. during the day, these are often gas-fired power plants, which, due to the rising gas price, make higher offers on the electricity exchange and thus drive the electricity price up further.
In contrast to 2020 – when the electricity price lowering effect of renewable energies led to rising differential costs and a higher EEG surcharge – the surcharge fell this year. It closes the gap between the proceeds from the sale of EEG electricity on the exchange and the legally guaranteed remuneration for the producers. That means: the higher the achievable price for renewable energies (market value) on the stock exchange, the smaller the difference to the guaranteed remuneration.
Top jobs of the day
Find the best jobs now and
be notified by email.
However, the lower EEG surcharge could by far not compensate for the increase in the electricity price in 2021. Only some suppliers succeeded in using a long-term procurement strategy to fully or partially offset price fluctuations in electricity. Some even passed the lower EEG surcharge on to consumers – and thus sent an important signal to document the price-reducing effect of renewable energies.
Traffic light coalition wants to abolish EEG surcharge
Even if gas prices are forecast to continue to be high in 2022, the current phenomena will not be permanent. In the case of electricity, the necessary expansion of renewable energies is likely to cut stock market prices massively because the electricity production costs are lower. Because renewables have no fuel costs, they are cheaper than fossil or nuclear electricity and they are displacing them from the market.
In addition, the internalization of external costs, for example through CO2 pricing, makes fossil power plants more and more expensive. This increases the market value of renewable energies and, because of the existing electricity market system, the EEG surcharge. The traffic light coalition now wants to abolish this billions in the bill by January 1, 2023 – and thus pass on the electricity price-lowering effect of renewables to end consumers. However, the cost of the levy will continue to exist and will only be redistributed.
In addition, the current feed-in priority of renewables is often undermined by conventional power plants, because the latter continue to run even when their output is not needed at all due to the high feed-in from renewable energies. As long as the temporal flexibility of conventional power plants is not expanded, the amount of “regulated” renewable electricity will continue to increase. Thanks to this feed-in management, around six billion terawatt hours of renewable electricity were not used in 2020 alone, which corresponds to the annual consumption of up to 1.5 million households. Another misregulation
In order to align the electricity system to the needs of renewables, however, apart from the massive expansion of renewable energies, which the traffic light coalition has now also decided, a rapid market ramp-up of technologies that combine the sectors of electricity, heating, mobility and industry is necessary. These are heat pumps, electrolysers for green hydrogen and power-to-heat systems, i.e. the generation of heat using electrical energy. The very high share of state price components must also be reduced.
Reduce Germany’s dependence on energy imports
The core of such a reform would be a reorganization of taxes and surcharges based on the supply of inexpensive green electricity. In addition to the opportunity to significantly increase the market value of renewable energies, this would also offer the opportunity to increase regional added value, reduce Germany’s dependence on energy imports and achieve climate targets.
An electricity system that is 100 percent based on renewable energies can provide incentives for flexibly controllable measures in the network – such as load management, sector coupling and the use of non-weather-dependent renewable energies such as bioenergy, hydropower and geothermal energy – that is still called the base load today. Wind and photovoltaics take over the main part.
On the way there, a significant reduction in electricity from fossil fuel power plants is essential as quickly as possible. Natural gas can only be a transitional energy, if at all. With flexible control, the existing biogas plant park is already in a position to contribute to security of supply with secure power in the double-digit gigawatt range.
In order for the overdue change in the energy system to succeed at permanently affordable electricity prices, renewables must be able to exploit their full potential in Germany. Socio-politically, this is only possible if the energy turnaround becomes a comprehensive participation project for citizens and the possibilities of EU law for renewable energy communities are implemented here. This is also provided for in the traffic light coalition agreement.
Transition must be cushioned socially
With a view to gas prices, in addition to the set of instruments decided by the EU Commission to relieve private households when prices rise, it will also be important to expand the variety of renewable heating technologies and use their cost-cutting potential. These include heat pumps, wood heating systems and systems for using biogas, solar and geothermal energy. In addition, the transition to a low-carbon energy supply must be socially cushioned by German legislators, for example through the direct reimbursement of costs that arise from CO2 pricing.
Even if corporations like Gazprom, but also persistent forces in Germany, don’t like to hear this: We have to become more independent of expensive fossil gas as quickly as possible. We need a heating transition as a modernization project for Germany as a business location. The next federal government should get to work immediately to create the right regulatory framework for this.
The author: Simone Peter is President of the German Renewable Energy Association. From 2013 to 2018 she was federal chairwoman of the Bündnis 90 / Die Grünen party.
More: Rising energy prices are becoming a growth risk.