Drastic Electricity Price Increases in Germany
July 21, 2012 • 5:09PM

About 40 utilities in Germany have already announced considerable price increases for household gas, electricity and heating oil for this autumn. The increases are justified by a change in the German law on renewables which aims to guarantee incomes for their producers. The high costs of producing energy from renewables reduces revenues, in many cases generates even losses—which the citizens, taxpayers and consumers, are expected to compensate for.

The average extra burden for a household of four will be above EU100 in 2013, and households' energy bill will thereby increase by almost 10%, against expenses in 2011. But that certainly is only the beginning: More and more leading politicians and industry managers are preparing the population for even more drastic price increases, because the total exit from nuclear power will, if it works at all, be compensated only by expensive investments into inefficient renewables, including at least 3,000 kilometers of new transmission lines which are required, because storage for power from wind and solar is minimal.

The average energy bill for private households may double by 2020. Already now, the energy bill becomes unaffordable for low-income households and small industrial firms (which unlike the big industry cannot benefit from considerable rebates to consumers of large volumes of energy). In the past 12 months, utilities have cut power to no less than 200,000 households, at least temporarily, for nonpayment, because the families could not afford the energy bill.

Generally, for the industry in Germany, which already pays the highest prices for power supplies in Europe, the situation is certain to worsen, with this renewables policy. The biggest utility in Germany, E.ON, is especially vulnerable, with about 40% of electricity produced being nuclear in origin. The company is at least part owner of 11 nuclear power plants, and six of these it operates alone. The entire revenue from the nuclear power sector, several billion euros annually, is continuously shrinking over the coming years and will disappear when the last nuclear power plant will be shut down in Germany, in 2021. Shifting to power generation from renewables would make a loss, if it were not heavily subsidized by the government which passes the energy prices on to the consumer. The net extra cost for renewables in Germany will be EU18-20 billion.

The nuclear exit also has consequences on planned investments in new coal and gas power plants: RWE, Germany's second-biggest utility, will shut down its nuclear power branch entirely, and it will no longer even build nuclear facilities outside of Germany, the company's new CEO Peter Terium announced mid-June. And Matthias Hartung, head of RWE Technology, the company's facility-construction branch, said in mid-July that not even conventional power plants are planned for the near future, because the government's priority funding of renewables makes coal and gas uncompetitive.

In another spectacular retreat from conventional power, Südweststrom, a conglomerate of about 40 utilities in southwest Germany, announced last week that it will scrap the planned construction of a new 1,800 megawatt coal power plant in northern Germany, because the investment will not pay off. The German government's obsession with renewables, unmatched anywhere else in Europe, is a pre-programmed disaster for the country.