Energy poverty increasingly affecting Germany’s middle class – analysis

The escalating energy crisis in Europe threatens to push German middle class households into “energy poverty,” economic research institute IW has found in an analysis. Energy poverty arises once the share of energy bills of an individual’s net income exceeds ten percent, which affected about 25 percent of all citizens as of May 2022. In the year before, less than 15 percent of all citizens fit into the category. The average citizen threatened by this scenario will have to pay about 2,500 euros on household energy consumption (heating, warm water, electricity) this year, the institute said. While poorer households generally suffer more in case of rising costs for basic services such as energy, “energy poverty increasingly also effects the middle class”, IW economist Maximilian Stockhausen said. 

Citizens from the “lower middle class”, which is defined by having a net household income between 60 and 80 percent of the median income, were now twice as likely to become “energy poor” than they were one year ago, with the share now at over 40 percent, the researcher said. With a share of 65 percent, households already defined as poor (less than 60 percent median income) were most affected by growing energy poverty, the IW found. “Many households might require support” to pay their power, gas and fuel bills, the institute said, adding that social security payments should be adapted to cover excessive energy costs, and possibly expanded to households still ranging above the poverty line.

Prices for nearly all forms of energy rose rapidly in the second half of 2021 due to a variety of factors, including catch-up effects after the coronavirus pandemic. This trend accelerated due to Russia's invasion, which triggered a rush to fossil fuels in anticipation of trading restrictions and fuelled general inflation rates. Germany's government coalition spent about 30 billion euros to ease cost pressure on citizens since taking office at the end of last year, chancellor Olaf Scholz recently said in an interview with public broadcaste ARD, adding that no new relief packages were planned as of now but could be introduced if necessary.