“If renewables are so gosh-darn cheap, why does Germany now have the highest electricity prices in Europe?” In fact, the average cost of electricity is nearly 30 cents per kilowatt hour, almost three times higher in Germany than it is in the United States.
The price of electricity in Germany is three times higher than in the USA. Criticism of Germany’s energy policy is being voiced, reports Blackout News.
Financial expert Jan Viebig criticises the fact that the phase-out of coal and nuclear energy is not well coordinated with the European Union. Energy policy has three main objectives: low prices, security of supply and environmental protection with regard to CO₂ emissions. German energy policy performs poorly in all three areas (focus: 03.11.23).
Germany has the highest electricity prices in Europe and the world
Energy prices in particular are high. There are differences in the prices of fuel, natural gas, heating oil and electricity, depending on contracts and volumes. But overall, prices in Germany are the highest in Europe and among the most expensive in the world. For example, average prices for corporate customers in Germany are 42 cents per kilowatt-hour, which is more than three times higher than in the US.
Germany’s dependence on foreign suppliers and the risks to security of supply
Germany fares slightly better here, although it is still dependent on foreign suppliers. Germany has coped well with the loss of Russian natural gas supplies, mainly through the use of liquefied natural gas (LNG). The Federal Network Agency says that security of supply is guaranteed. However, in the fall of 2022, the four grid operators had to undergo a stress test, during which Economy Minister Robert Habeck noted that under certain scenarios, such as very cold winters and large outages of nuclear power in France, there could be a threat of shortages that lasted for hours.
Failure of German energy policy: CO₂ emissions rise despite high subsidies
Despite the federal government’s efforts to reduce CO₂ emissions, they increased in 2021 and 2022. According to the Federal Environment Agency, the generation of one kilowatt hour of electricity caused an average of 434 grams of CO₂ in 2022. Due to its heavy dependence on fossil fuels, Germany has a worse carbon footprint in the electricity industry than most European countries. In short, German energy policy is currently receiving little praise and is poorly coordinated with its partners in the European Union.
Germany’s electricity market on the verge of collapse? Subsidies as a bailout or a risk?
The German energy market is highly regulated, and due to high electricity prices and decreasing security of supply, the exodus of energy-intensive industries could continue to increase. Industry associations, trade unions and, last but not least, the Federal Ministry for Economic Affairs and Energy are therefore considering limiting the price of electricity for companies with high energy consumption and compensating for the difference to the market price through subsidies.
However, flat-rate subsidies mean a departure from market-based principles in the energy market. Experts such as Veronika Grimm, a member of the German Council of Economic Experts, emphasise the importance of the price mechanism in order to promote energy savings or alternative energy sources in the right places.
Further subsidies could lead to necessary adjustments being postponed into the future. A capped industrial electricity price shifts the problems and burdens the state budget as well as taxpayers. It’s also unclear who should and shouldn’t benefit from government support. This could lead to political conflicts and market distortions.
European Energy Union: Joint solution or national unilateralism?
The idea of a European Energy Union is seen as sensible. It makes little sense for Germany to shut down its nuclear power plants while France is building new nuclear reactors in Flamanville on the English Channel and examining the possibility of small nuclear power plants, so-called Small Modular Reactors (SMR). France operates 56 nuclear power plants while investing in offshore wind farms and photovoltaics. As Germany increasingly relies on wind and solar energy, it must not be forgotten that conventional energy sources are needed when the wind is not blowing and the sun is not shining.
In Europe, we are a long way from the contractually agreed solidarity between Member States in energy policy. Mistakes in one country’s energy policy also affect other EU members. Deep integration of national energy markets is necessary to ensure security of supply, increase energy efficiency, reduce the carbon footprint and enable more competitive energy prices in Europe. Stronger European integration reduces the risks of national unilateralism, or even wrong decisions.