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EXPLAINED: Why German electricity bills are hitting record highs

Germany, which already has the most expensive electricity prices in Europe, has seen prices jump even further this year. What is behind this unwelcome news for consumers?

EXPLAINED: Why German electricity bills are hitting record highs
Financing renewables has driven up costs. Photo: dpa | David Young

According to the price comparison website Verivox, the price a consumer pays per kilowatt-hour of electricity jumped to 30.4 cents this month, marking a 5.7 percent increase since last year. This increase means that consumers have never paid so much for their electricity.

At the same time, it follows a trend seen since the start of the century. Since the year 2000, household electricity bills have on average doubled in price.

A three-person household in Germany now pays an average of €93 a month on their electricity bill, up from €41 twenty ears ago.

Statistik: Durchschnittliche Stromrechnung eines 3-Personen-Haushaltes in Deutschland in den Jahren 1998 bis 2021 (in Euro pro Monat) | Statista
Average electricity bill for a 3-person household (1998-2021). Mehr Statistiken finden Sie bei Statista

READ MORE: German consumers ‘pay the highest electricity prices in Europe’

Financing renewables

One of the main factors behind this growing burden on households is Germany’s public investment in renewable energies, which has been financed through a tariff called the EEG system. 

The system promises fixed prices to wind and solar providers to try and stimulate growth in the sector. But it has always been controversial because big industries have been exempt from paying it, meaning private households have had to pick up the tab.

 “The sharp rise in electricity prices over the past 20 years is primarily due to steadily increasing taxes, levies and surcharges,” says Thorsten Storck, energy expert at Verivox. “As long as the government does not readjust here, households will continue to pay high electricity costs in the future.”

The good news is that, with solar and wind now well established on the energy market, the main political parties have signalled an intent to end the EEG in the near future.

Back in July, Economics Minister Peter Altmaier of the centre-right CDU promised to abolish the EEG by 2025, saying that “it’s not about less climate protection, but more climate protection combined with more social fairness. Abolishing the EEG surcharge can be a first step in this direction.”

SPD Chancellor candidate Olaf Scholz has also pledged that “the price of electricity must fall.. …we want the EEG levy for renewables to stop making the price of electricity more expensive. A family would then save over €300 a year.”

Rising prices on energy exchanges

The most recent rise in the cost of electricity is not directly attributable to renewable subsidies though, experts say.

Instead higher prices on energy exchanges are driving up costs for consumers. At the Leipzig-based European Energy Exchange, where suppliers buy electricity from producers, the cost of a megawatt hour of electricity has gone up by 12 percent since the start of the year.

READ ALSO: Electricity bills in Germany – how to keep your costs down

There are at least three significant factors driving this price rise, der Spiegel reported earlier this week.

Firstly, power plants are having to pay increasingly expensive charges on their C02 emissions. Under the latest EU rules, each tonne of C02 emitted now costs an energy producer €54.

Secondly, renewables have had a bad year so far due to a lack of wind and sun. Low winds and overcast skies in Germany have meant that renewables have produced just 87 terawatt hours of electricity compared to 103 terawatt hours by the same point last year. With supply not able to keep up with demand, prices have gone up. 

Lastly, gas supplies in Europe’s gas storage facilities have reached historically low levels in recent months. This has led to a sharp increase in the cost of gas, which fuels a significant percentage of Germany’s power plants.

The drop in gas supplies is partly due to the long, cold spring of 2021 but it also has to do with a drop in supplies from Russia. Some observers suspect that Russian state gas company Gazprom has turned off the taps in order to pressure Europe into finishing the controversial Nord Stream 2 pipeline.

“The prices that power plant operators have to pay for pollution rights have recently risen significantly; by around 60 percent since the beginning of the year. In addition, higher fuel costs are weighing on wholesale prices. This increase is gradually being passed on to consumers,” says Thorsten Storck.

SEE ALSO: Germany set to finish controversial Russian pipeline despite US protest

We updated our article to change the first statistic from €30.40, as was originally published, to 30.40 cents.

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REVEALED: The most commonly asked questions about Germans and Germany

Ever wondered what the world is asking about Germany and the Germans? We looked at Google’s most searched results to find out – and help clear some of these queries up.

Hasan Salihamidzic, the sports director of FC Bayern, arrives with his wife at Oktoberfest in full traditional dress. Photo: picture alliance/dpa |

According to popular searches, Germany is the go-to place for good coffee and bread (although only if you like the hard kind) and the place to avoid if what you’re looking for is good food, good internet connection and low taxes. Of course, this is subjective; some people will travel long stretches to get a fresh, hot pretzel or a juicy Bratwurst, while others will take a hard pass.

When it comes to the question on the bad Internet – there is some truth to this. German is known for being behind other rich nations when it comes to connectivity. And from personal experience, the internet connection can seem a little medieval. The incoming German coalition government has, however, vowed to improve internet connectivity as part of their plans to modernise the country.

There are also frequent questions on learning the German language, and people pointing out that it is hard and complicated. This is probably due to the long compound words and its extensive grammar rules, however, as both English and German are Germanic languages with similar words in common, it’s not impossible to learn as an English-speaker.

Here’s a look at some of those questions…

Why is German called Deutsch? Whereas ‘German’ comes from the Latin, ‘Deutsch’ instead derives itself from the Indo-European root “þeudō”, meaning “people”. This slowly became “Deutsch” as we know it today. It can be a bit confusing to English-speakers, who are right to think it sounds a little more like “Dutch”, however the two languages do have the same roots which may explain it.

And why is Germany so boring? Again, probably a generalisation, especially given that Germany has a landmass of over 350,000 km² with areas ranging from high rise, industrial cities to traditional old town villages and even mountain ranges, so you’re sure to find a place that doesn’t bore you to tears.

Perhaps it is a question that comes from the stereotype that Germans are obsessed with strict about rules, organised and analytical. Or that they have no sense of humour – all of these things being not the most exciting traits. 

Either way, from my experience I can confirm that, even though there is truth to German society enjoying order and rules, the vast majority of people are not boring, and I’m sure if you come to Germany you’ll meet many interesting, funny and exciting people. 

READ ALSO: 12 mistakes foreigners make when moving to Germany

When it comes to the German weather, most people assume a cold and cloudy climate, however this isn’t entirely true. While the autumn and winter, especially in the north, comes with grey skies and sub-zero temperatures, Germany can have some beautiful summers, with temperatures frequently rising above 30C in some places.

Unsurprisingly, the power and wealth of the German nation is mentioned – Germany is the largest economy in Europe after all, with a GDP of 3.8 trillion dollars. This could be due to strong industry sectors in the country, including vehicle constructions (I was a little surprised to find no questions posed on German cars), chemical and electrical industry and engineering. There are also many strong economic cities in Germany, most notably Munich, Frankfurt am Main and Hamburg.

READ ALSO: Eight unique words and phrases that tell us something about Germany

Smart and tall?

Why are Germans so tall? They are indeed taller than many other nations, with the average German measuring a good 172.87cm (or 5 feet 8.06 inches), however this may be a question better posed to the Dutch, who make up the tallest people in the world.

Why are Germans so smart? While this is again a generalisation – as individuals have different levels of intelligence in all countries – this question may stem from Germany’s free higher education system or their seemingly efficient work ethic. Plus there does seem to be some scientific research behind this question, with a study done in 2006 finding that Germans had the highest IQ in Europe.

So, while many of the questions posed about Germany and Germans on Google stem from stereotypes, we can confirm that some aren’t entirely made up. If you’re looking to debunk some frequently asked questions about France and the French, check out this article by our sister site HERE.