Is the Energy Transformation Making Electricity Unaffordable?


Is the Energy Transformation Making Electricity Unaffordable?

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When the discussion about rising electricity costs began a few years ago, there was hardly any question of who was to blame: the subsidisation of solar and wind power. But in reality this only explains part of the additional cost. And this argument ignores the fact that the energy transformation saves tremendous costs in other areas.

The Claim:

Over the past few years, consumer prices for electricity rised significantly. This is due to the additional cost of subsidising solar and wind power.

The Facts:

It is true that electricity is becoming more expensive. From 2000 to 2015, the cost for private households rose from an average of 14 cents to 29 cents per kilowatt-hour. It is also true, however, that the subsidisation of renewable energy only explains part of this increase. In 2015 it made up 6.17 cents per kilowatt-hour. If you look at the 2014 price of electricity without the EEG reallocation charge (with which solar and wind power are subsidised), at nearly 23 cents it is still far above the price households paid in 2000. The EEG reallocation has about 21 percent impact on the costs of electricity. The rest of the increase can be attributed to taxes, duties, and the price increases many electricity producers have imposed.

It is also true that the cost of the reallocation is not evenly spread among all consumers. Originally, only those branches of business who need very large amounts of electricity for their production were to be exempt from paying the EEG reallocation charge. In 2015, 2180 companies benefited from this exemption – among them companies whose economic success is not dependent on the price of electricity. The result is that private households and businesses not exempt from the charge must pay more.

When looking at the cost of the energy transformation as a whole, the greater societal costs that are and will be prevented also need to be taken into consideration. For example, transforming our energy system averts the cost of damages from exhaust emissions of coal-fired power plants or of permanently disposing of nuclear waste. According to the German Renewable Energy Federation environmental damages worth 12.3 billion euros per year will be avoided by 2020.

This is why the energy transformation is worthwhile in the long term, and for individual consumers as well as business. In the medium term, the generation of green electricity will become cheaper, while electricity from coal- and gas-fired power plants will automatically become more expensive. This is due to the increasing scarcity of fossil fuels and the increasing expense and risk involved in sourcing them. The energy transformation costs more in the short term, but less in the long term. Because unlike oil, gas, or coal, sun and wind are energy providers who won’t demand payback later.