Saturday, January 1, 2022

Germany: consumers hit by high gas and electricity prices; myth of cheap renewables

 As three nuclear power plants have been shut down on new year's eve consumers face skyrocketing prices for gas and elecricity. Consumers pay the price of the energy change in Germany, writes WELT:


Many consumers eager to shop are impatiently waiting for the bargain day called “Black Friday” in the coming week. According to an old tradition, on the last weekend in November you can buy new electricity guzzlers for the household particularly cheaply. But already this week, a completely different “Black Friday” on the energy market may not leave much of the shopping appetite of many shoppers.


Because energy suppliers who want to change their electricity and gas prices on January 1st must, according to the law, announce this six weeks in advance, that is: on the Friday of the week that ends. The announced price increases are likely to trigger a real energy price shock for many.


In the morning, the comparison portal Check24 reported that by then 439 basic suppliers wanted to increase their gas prices by an average of 24.6 percent. And, as I said, that's just the average. “Some suppliers are doubling their prices,” report the market observers. "For a model household with a consumption of 20,000 kilowatt hours, this means additional costs of an average of 369 euros per year."

"The cost of gas heating will also significantly increase household costs in the coming year," says Thorsten Storck, energy expert at the Verivox price portal. "The rising CO2 price, higher network charges and historically high wholesale prices are forcing most utilities to raise their prices."


"Many consumers are hit hard by the current development in energy prices," believes Thomas Engelke, an expert at the Federation of German Consumer Organizations (VZBV). The new government must act at short notice and support households with smaller budgets in particular, the consumer advocate demands: "Nobody should have to freeze in winter because they can no longer afford electricity and heating."


"With the rising energy costs, the need for people in poverty threatens to worsen", says Ulrich Schneider, General Manager of the Paritätischer Gesamtverband. Currently, almost 300,000 households are cut off electricity every year. "In view of the rapid price increases, there is a risk of a significant increase this winter," said the head of the social association. "In our society you have to call electricity locks barbaric, they should be forbidden."

From the point of view of consumer advocates, electricity and gas blocks for low-income households should be suspended, and housing benefits, Hartz IV and basic old-age security should be increased in line with the rise in energy prices.


The background to the high energy costs is, among other things, corona-related shortages on the world market. Within a year, the price of the kilowatt hour of natural gas on the wholesale market rose by 563 percent. That also makes electricity more expensive.


In addition, since the beginning of the year, the federal government has imposed a CO2 tax on natural gas consumption for reasons of climate protection, which is set to rise steadily over the next few years. The climate tax already contributes 24 euros to the price increase over the next year. How much the cost explosion will hit the wallet overall now only depends on how cold the winter will be and how long it lasts.


A similarly bleak picture emerges when it comes to electricity prices: 92 basic suppliers have so far announced increases of an average of nine percent. They hit around 1.6 million households. For a model household with a consumption of 5000 kilowatt hours, this means additional costs averaging 146 euros per year, according to the comparison portal.


Only 21 basic providers are reducing prices, on average by only 2.3 percent. Although the EEG surcharge for promoting green electricity falls from 6.5 to 3.7 cents, the bottom line for most consumers is that the bottom line is a significant increase.


Like a prayer wheel, consumer advocates and service providers always advise in this situation to do the obvious: By changing electricity and gas providers, you can often save hundreds of euros.

If you don't change, you risk additional costs of over 1000 euros per year, warns Switchup boss Meyer. You should leave the usually very expensive "basic tariff" of the local supplier as soon as possible. The change can be processed quite easily via price portals such as Verivox or Check24.


Professionals advise to be careful when comparing prices on the Internet, to use the option "switching bonus" with caution, because the tariff could prove to be relatively expensive in the long term. One should not be guided by alleged “customer recommendations” either. So-called “tariff watchdogs” such as Switchup or Wechselpilot are convenient as they regularly filter out the cheapest, reputable provider on behalf of the customer and always automatically organize the change of provider.


Many market observers anticipate that the high prices for natural gas will not last long. The market will fix it here. But the situation on the electricity market is different: "Germany will probably remain the world champion in electricity prices in the coming year," said Verivox expert Storck. "The EEG surcharge is falling significantly, but rising network charges and high procurement costs continue to put pressure on prices."


The procurement costs are rising because Germany's nuclear phase-out and the Europe-wide phase-out from coal-fired power generation mean a shortage of supply for years to come. Renewable energies are not yet available to the extent necessary to be able to replace the missing gigawatt hours.


The challenges for the new federal government are growing enormously. The repeatedly tightened climate protection promises can only be achieved if millions of consumers switch to electric cars as quickly as possible and to the electricity-powered heat pumps for heating their homes. But as long as Germany has the highest electricity prices in the world, such investments appear unattractive.


On the consumer side, mistrust is growing. For years, an extremely active green electricity lobby in the media has been spreading the narrative of the cheap energy transition - and has also cited scientists and institutes in the process.

"It turns out that in 2021 the electricity production costs of renewable energies will be at the level of the operating costs of conventional power plants, if not even lower," according to a study by the Fraunhofer Institute for Solar Energy Systems (ISE). Even if you add the cost of battery storage, solar power will be competitive in Germany as early as 2030. The International Energy Agency (IEA) also praises solar power as the “cheapest form of energy in history”.


In fact, the costs of generating electricity from wind and solar power have fallen to an average of five to six cents per kilowatt hour. And that is how much electricity from a new coal or gas power plant would cost. Measured against this, the energy turnaround would be an economic self-runner that would actually no longer need any subsidies in the form of the EEG surcharge. In fact, the first energy companies are building wind and solar parks without subsidies under the Renewable Energy Sources Act. “Is the energy transition going to be cheap now? Yes. Period, ”promised Patrick Graichen, head of the influential Agora Energiewende think tank, five years ago. "The harvest years of the energy transition are now in sight."


But even five years later, only further electricity price increases are in sight. Why does the supposedly so cheap green electricity not drop energy bills when it already has a share of almost 50 percent in Germany?


Renewable energies are probably still too little to fill the electricity gap that is currently tearing all the shutdowns of nuclear and coal-fired power plants. Above all, observers from the Green spectrum blame the grand coalition: They did not pursue the expansion of wind and solar power energetically enough, hence the lack of electricity and the high prices.


Probably too superficial a consideration. Because even a much higher solar expansion would only have led to production peaks above and beyond any demand in summer, but would have made the gap all the greater in winter. Even a much higher wind power production would not have been able to close gaps that lasted for days, some of which were seasonal, because storage facilities and grids to make so much green electricity usable have so far been missing and are still missing.


More to blame for the misery is that German energy policy in particular had implemented a fateful change in strategy. Unsettled by the demands of the Greens and environmental groups, it was believed that they could no longer trust the Renewable Energy Sources Act.

The combination of subsidized green electricity and priority feed should actually drive coal-fired power plants out of the market. But after Fukushima and the World Climate Congress in Paris, politicians operated alongside the EEG, the statutory coal phase-out parallel to the nuclear phase-out. Consequence: On the electricity market, more is switched off than switched on, the scarcity increases and with it the price. To this day, the expansion logic is overlaid by exit activism.


Interventions that also make the CO2 price for power plants introduced throughout Europe ineffective: No matter how expensive they are for coal-based electricity, the systems still remain on the grid, simply because there is no alternative on the market as long as gas is so expensive. The CO2 prices only increase prices, but no longer cause a switch to clean energy. Consumers are now paying the bill for the consequences of the shutdown ideology.

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