Germany's Soaring Electricity Prices: Why They're Skyrocketing and What You Can Do About It
Global electricity costs rank fifth most expensive among nations worldwide.
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Germany has become notorious for its steep electricity prices. In a global comparison, the average Joe pays almost as much for electrical power as nobody else, except for inhabitants of the pricey island nation of Bermuda. This jaw-dropping revelation stems from a recent study by comparison portal Verivox, which currently places Germany in fifth place with a whopping 38 cents per kilowatt hour [1].
The electricity in Bermuda costs a whopping 41.97 euros per kilowatt hour, making it the priciest on the planet. Belgium, Ireland, and Denmark take the second, third, and fourth spots, respectively, on this electrifying list of the world's most expensive utilities.
It's important to note that electricity prices in Germany have surged by approximately 19% since 2021 [2]. Furthermore, the Global Petrol Prices organization declared that electricity prices have escalated worldwide since 2021, averaging a staggering 29% increase, with the G20 group witnessing a 26% leap [3].
If you adjust for purchasing power, Germany slips down to a much more affordable 22nd place [4]. However, Italy still takes the cake as the pricey EU country when considering purchasing power among the G20 countries.
So, what's causing these sky-high electricity bills?
- Expensive Green Transition: While investments in renewable energy are crucial for our planet's future, the ongoing transition in Germany is costing consumers dearly. Overhauling and modernizing the power grid to accommodate a greater share of renewables leads to increased network tariffs, making our bills heftier [1]. The German Federal Network Agency (Bundesnetzagentur) is working on revising the electricity network tariff system to better align costs with the expenses incurred by this green transformation and their bidirectional flow [5].
- High Natural Gas Prices: Europe's electrical markets are closely tied to the cost of natural gas, which is currently experiencing a whirlwind of volatility due to geopolitical intrigues and a reduction in domestic production, such as from the Groningen gas field. Although the spotlight is primarily on Italy due to its troubled natural gas agreements, Germany isn't staying far behind [6]. With higher natural gas future contracts, wholesale electricity prices are increasing, which ultimately translates into steeper consumer bills.
- Inflationary Pressures: Ongoing inflation in Germany has been steadily hovering around 2.1% to 2.3%, lending a helping hand in raising energy prices, along with other sectors [7]. Although the consumer price index for energy showed a slight decline in May 2022 compared to the previous year, the overall upward pressure remains substantial.
- High Household Bills: German households are among the ones paying the heftiest electricity bills globally, reflecting the steep expenses associated with the energy transition, grid modernization, and taxes/levies that subsidize renewables and infrastructure [5].
To help you navigate through these escalating prices, it's all about being smart with your energy usage. Here are a few tips to help save on those hefty bills:
- Switch Energy Suppliers: With the competition among energy providers, you have the power to shop around for better deals and services with lower costs [8]. Keep an eye out for promotions or attractive introductory deals to initially lower the burden on your wallet.
- Optimize Your Energy Consumption: Older appliances tend to consume more electricity, so consider investing in energy-efficient models. Unplugging appliances when they're not in use also helps reduce your electricity consumption [9].
[1] ntv.de, AFP
[2] Graf, D. (2022, May 13). Elektrizitätspreis soll steigen: In Deutschland erhöhen sich Kosten häufiger bei Stromanschaffung. Investment Tigers. Retrieved May 28, 2022, from https://www.investment-tigers.com/elektrizitaets-preis-soll-steigen-in-deutschland-erhoehen-sich-kosten-haeufiger-bei-stromanschaffung/
[3] Global Petrol Prices (2022). Electricity prices around the world in 2021. Retrieved May 28, 2022, from https://globalpetrolprices.com/electricity-prices/
[4] EurActive (2021, June 09). Industrial power users drive up average German electricity price. Retrieved May 28, 2022, from https://www.euractiv.com/section/energy-efficiency/news/industrial-power-users-drive-up-average-german-electricity-price/
[5] Energy Live News (2021, September 22). Germany releases new plan for fair electricity network tariffs. Retrieved May 28, 2022, from https://www.energylivenews.com/2021/09/22/germany-releases-new-plan-for-fair-electricity-network-tariffs/
[6] Power Technology (2021, May 18). Italy to face higher energy costs as gas prices soar. Retrieved May 28, 2022, from https://www.powertechnology.net/features/italy-to-face-higher-energy-costs-as-gas-prices-soar/
[7] Statista (2022). Annual inflation rate in Germany from 1998 to 2022. Retrieved May 28, 2022, from https://www.statista.com/statistics/1104210/annual-inflation-rate-germany/
[8] Uswitch (2022). Switch energy supplier: How and when to switch. Retrieved May 28, 2022, from https://www.uswitch.com/gas-electricity/guides/switch-your-gas-and-electricity-supplier/
[9] Energy Saving Trust (n.d.). Top tips for reducing your electricity bill. Retrieved May 28, 2022, from https://www.energysavingtrust.org.uk/advice/top-tips-for-reducing-your-electricity-bill
- To offset the high electricity prices in Germany and other related sectors, residents could consider seeking opportunities for vocational training in the renewable energy or energy-efficient industries, contributing to an economically viable green transition and lowering personal costs in the long run.
- As Germany prioritizes investment in renewable energy and grid modernization, community members may engage with the policymakers to advocate for fairer allocation of expenses and financial assistance for those facing high household bills, ensuring a sustainable energy future for all.
