16.11.2012
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Energy transition

What does the Energiewende cost industry?

{UPDATE} Renewables International has repeatedly pointed out that green power is reducing the wholesale rate in Germany, mainly to the benefit of industry. But of course, the picture is a bit more complicated. A new series of charts produced by German utilities association BDEW provides a more differentiated view.

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BDEW

The Energiewende has lowered industry prices by 18 percent, reduced wholesale prices by around 15 percent, and industry is largely exempt from the renewable power surcharge anyway – this website has made all of these points before, and they are all correct in the context in which they were made. But today, we take a more critical, differentiated look at the impact of the Energiewende on industry based on a series of charts produced in October by the BDEW (PDF).

In the first chart, we see the trend for industry power prices in Germany from 1998 to 2012. This timeframe was chosen because it reflects the period since liberalization, which led to greatly reduced prices in the first two years. Since then, however, prices have continually risen aside from the economic downturn in 2009 as a result of the crisis. In addition, it must be kept in mind that Germany is a free market, so these prices represent averages of countless power purchase agreements and spot sales.

The blue area at the bottom represents the cost of power generation, transport, and sale, with the rest being one form of tax or levy; the green area represents the surcharge for renewables. As we see, the cost of conventional power without any taxes and levies practically doubled from 2000 to 2008 but has remained flat at a level some 20 percent lower over the past four years. From 2000-2008, however, green power only adds a single cent to a kilowatt-hour. Nonetheless, the price has remained above 14 cents per kilowatt-hour over the past two years – an all-time high – mainly because of the increase in these levies.

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BDEW

This increase in the cost of conventional power is the main reason why Germany sees its switch to renewables as an attempt to keep costs in check. Over the past four years, however, the general economic downturn in the EU (which many economists now believe is genrally in a recession, though Germany is not) means that industry demand for electricity is down, so prices are no longer being pushed up as much.

The second chart shows us the trend for industry prices at a volume of 70 to 150 gigawatt-hours per year. Here, we see that prices have indeed dropped for this market segment, roughly by seven percent in the first half of 2012, with most of that decrease coming from the lower price of conventional power, though levies (the purple area) did drop somewhat.

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BDEW

This section was updated to correct an error on Sunday, Nov 24: The third chart reveals that total industry power consumption adds up to 243.1 terawatt-hours, equivalent to more than 40 percent of total German power demand. Of that, roughly 47 percent pays all of the EEG surcharge to cover the cost of renewable power; 37 percent pays no more than 0.05277 cents per kilowatt-hour (instead of the 3.59 cents passed on to the rest of German power consumers). The green slice of the doughnut for 16 percent of this power represents electricity produced and consumed on-site; because it is directly consumed and never even enters the grid, there are no taxes or surcharges.

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BDEW

For all of these exempt firms, we would have to go back up to the charts above and remove most or all of the EEG surcharge to reveal the actual power price paid. In the case of chart 1, the overall price would drop from 14.02 cents down to 10.48 cents, which already puts us below the cost of power generation and transport alone in 2008. The total price in 2008 would then be closer to 12 cents, roughly 15 percent higher than today. In other words, power prices have fallen for firms that make up around 20 percent of power supply in Germany.

For smaller businesses, however, prices continued to increase, as chart 4 reveals. On the left, we have the retail rate; on the right, power prices for industry at a volume of 160 to 20,000 megawatt-hours per year. As this chart clearly shows, power prices are slightly lower than for large industry – but not without the exemption.

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BDEW

Finally, we have a chart breaking down who pays what has a total amount. Of the 20.4 billion euros that the BDEW expects Germany to have to pay for its feed-in tariffs next year, households will have to cover the biggest chunk at 7.2 billion, with industry and commerce covering 6.1 and 4.0 billion, respectively, equivalent to 10.3 billion in total.

As we see, it is not easy to say what the cost impact of the switch to renewables has been on German industry, but the BDEW figures clearly show one thing: the biggest winners are those exempt from the surcharge. (Craig Morris)

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