German green power levy to rise in 2016 to new record

The decline in wholesale prices is one of the main reasons for the levy's rise. That's because the so-called renewables surcharge makes up the difference between wholesale prices and state-set feed-in tariffs, which renewables producers get for every kilowatt of power they feed into the grid.

In the last year, the average market price of power has fallen by around 9 percent, or 0.32 cents, to 3.25 cents per kilowatt-hour. If power providers pass on the lower wholesale power price to consumers, bills should only rise slightly or not at all, experts say.

"The decrease in wholesale prices and the rise in the surcharge cancel each other out,"said Patrick Graichen, Director of Agora Energiewende. "If power providers calculate this honestly, nothing will change for the consumer." Indeed, in recent years, power providers have been slow to pass on wholesale price drops to the consumer.

Price comparison website Verivox said significant regional increases in the power price were possible because some grid operators were planning higher grid fees for next year. The site urged consumers to switch power suppliers in order to save costs. "Consumers that have not changed supplier are giving away almost seven billion euros per year," said Verivox manager Jan Lengerke in a press release.

The idea behind the feed-in tariffs is to get people to invest in green power. Germany wants a 35 percent share of renewables in power consumption by 2020, as part of its energy transition, or Energiewende.

Germany aims to transform its energy system over the coming decades, phasing out nuclear power while cutting carbon emissions through a build-up of renewable energy and a reduction in energy consumption. The renewables surcharge has become a gauge for the cost of the Energiewende, though economists point out that it neither captures all related costs nor reflects cost savings and other benefits of the project, like new jobs in renewables-related sectors.

The EEG surcharge is based on an estimate of how much money green energy producers will receive in the coming year. New renewable energy facilities mean more green power coming onto the grid and more money paid out in feed-in tariffs.

While more green power is expected to come online next year,  fluctuating production from wind and solar facilities also affects the surcharge. Less wind or sun means renewables produce less electricity, which translates into lower expenses for the feed-in tariff.

These discrepancies have to be corrected the following year. For example, in 2012 and 2013, grid operators underestimated spending on renewables, which boosted the 2013 and 2014 surcharges. But in 2014, power users overpaid, which led to the first-ever decline this year. 

Energy expert Oliver Krischer from the opposition Green Party claimed there was no reason for a rise in next year's surcharge. He told Spiegel Online energy minister Sigmar Gabriel is "pushing the levy artificially high this year, so he can lower it next year just in time for the general election in 2017." If the levy is set too high, a surplus will build up on Germany's "green energy account",  making a decrease in the coming year more likely.

While the grid operators and their regulators, the Federal Network Agency, say the surcharge is decided solely on economic grounds, a certain room for manoeuvre exists, the Spiegel article says.

The grid operators said Thursday that a certain buffer is necessary on the green energy account to deal with fluctuating wind and solar power - nobody knows exactly how much power renewables will produce next year and what the price for this will be on the market. The account currently is 2.5 billion euros in surplus, so simply covering the 2015 costs of renewable power would mean a decrease of 0.7 cent in the 2016 surcharge, they said. But grid operators’ calculations take into account much more: a predicted increase in renewable power production of  15 Terawatts in 2016 from 2015, minus revenues from the sale of power on the exchange, which have dropped significantly due to fall in the prices, and the required liquidity buffer. Grid operators forecast this cost for renewable support will amount to 22.88 billion euros in 2016.

Apart from the drop in 2015, the levy has risen steadily since it started at 0.41 cents per kWh in 2000, and has enabled the build-up of renewable energy to comprise nearly 30 percent of Germany's power mix. In 2016 this share  will rise to 32-33 percent, according to think tank Agora Energiewende. This increase in green power in the system is another reason for the levy's rise. 

The German energy industry association BDEW said it was pleased that the surcharge was rising only modestly next year. "That the EEG surcharge will only rise slightly in 2016 is a good development for customers. But it's not possible to derive a prognosis for short-term power price developments just from the surcharge alone," said Hildegard Müller, head of the BDEW. "Many other factors are having a negative influence. In many regions, network fees are rising." 

Surveys show that households, for which the renewable energy surcharge accounts for around 20 per cent of electricity bills, are not bothered by the cost of developing renewables. A majority still favours the Energiewende.