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ENERGY

Households in Germany to get some relief on electricity bills

There is some relief around the corner for German residents, with the green 'EEG' levy on electricity set to be slashed. However, it may make little difference to bills.

Households in Germany to get some relief on electricity bills
A German electricity bill. Photo: picture alliance / dpa | Jens Kalaene

The cost of living in Germany is going up, but there is some tentative good news. According to German media reports on Thursday, the EEG levy, which private consumers have to pay as part of their electricity bills to finance renewable energies, is set to fall significantly next year. 

According to sources who spoke to DPA, the EEG (Germany’s Renewable Energy Act) levy will drop to 3.72 cents per kilowatt hour. The levy current stands at 6.5 cents. 

A billion-euro subsidy from the federal government will contribute to the reduction. Without this, the levy in 2022 would be around 4.66 cents per kilowatt hour, according to DPA.

The EEG levy, which promises fixed prices to wind and solar providers to try and stimulate growth in the sector, is a major component of electricity bills around Germany.

It’s part of the reason why people in Germany pays the highest prices on electricity in Europe.

READ ALSO: Why German electricity bills are hitting record highs

The operators of large electricity grids plan to announce the amount of the EEG levy for the coming year this Friday. However, it is only one component of the price of electricity for people in Germany. 

According to the comparison portal Verivox, the average electricity price for households in October 2021 will be 31.38 cents per kilowatt hour, higher than ever before. The reduction of the EEG levy to 3.72 cents would lower the current average electricity price by around 11 percent. For a three-person household with an annual consumption of 4000 kilowatt hours, the relief would be around €132.

“However, the reduction of the EEG levy does not mean that electricity prices for customers will automatically fall,” said Thorsten Storck, energy expert at Verivox. 

As The Local has been reporting, energy prices are spiking. 

READ ALSO: How households in Germany can tackle rising energy costs

The procurement costs of the electricity suppliers have risen significantly and there are also signs of increases in the grid utilisation fees.

“We therefore assume that electricity prices will remain at their current record level in the coming year, or at least not fall noticeably,” said Storck.

According to calculations by the comparison portal Check24, all private households in Germany together will be relieved of around €4.2 billion by the falling EEG levy.

In order to relieve the burden on customers, politicians have long been discussing the abolition or reduction of the EEG levy.

Why is the EEG going down?

There are several reasons for the falling EEG levy.

According to an analysis by the think tank Agora Energiewende, the high gas, coal and CO2 prices have led to a sharp rise in the exchange electricity price.

As a result, far less money is needed from the EEG account to compensate for the different costs of renewable energies. Renewable energies therefore achieve higher revenues on the market, and the necessary subsidy sinks.

Meanwhile, EEG plants from the early years, which still received comparatively high payments, have gradually reached the end of their 20-year subsidy period.

First put in place in 2000, and modified several times, the EEG has been credited with rapidly boosted Germany’s production of wind and solar energy.

But it’s come under criticism because private households have to foot the bill – not big industries.  

READ ALSO: Is Germany the green leader it’s hyped up to be?

Vocabulary

Levy – (die) Umlage

Green electricity – (der) Ökostrom

Federal subsidies – (die) Bundeszuschüsse

Electricity bill (die) Stromrechnung

We’re aiming to help our readers improve their German by translating vocabulary from some of our news stories. Did you find this article useful? Let us know.

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MONEY

Where in Germany do people have the highest disposable income?

An economic study has shown huge regional differences in income throughout Germany. So which parts of the country have the most to spend each month, and which are feeling the squeeze?

Where in Germany do people have the highest disposable income?

A study by the Economic and Social Sciences Institute (WSI) of the Hans-Böckler foundation reveals stark regional differences in disposable income in Germany. In some cases, households had as much as double the spending money of those in other parts of the country. 

Here’s where people have the most – and least – disposable income each month.

What is disposable income?

The WSI calculated disposable income as the sum of income from wealth and employment, minus social contributions, income taxes, property taxes and other direct benefits or taxes.

What’s left is the income which private households can either spend on consumer goods or save.

The study, which was based on the most recent available national accounts data for 2019, looked at the disposable income of all of the 401 counties, districts and cities across Germany.

Which regions have the highest and lowest disposable incomes?

The study found that the regions with the highest disposable incomes were in the southern states.

Heilbronn in Baden-Württemberg had the highest disposable income of all 401 German counties and independent cities – with an average per capita disposable income of €42,275. The district of Starnberg in Bayern followed in second place with €38,509.

READ ALSO: REVEALED: How much do employees really earn across Germany’s states?

By comparison, per capita incomes in the cities of Gelsenkirchen and Duisburg in North Rhine-Westphalia were less than half as high, at €17,015 and €17,741 respectively. These regions had the lowest disposable income in the country. 

The study also found that, more than thirty years since German reunification, the eastern regions continue to lag behind those in the west in terms of wages.

According to the WSI, the Potsdam-Mittelmark district is the only district in the former east where the disposable per capita income of €24,127 exceeds the national average of €23,706.

Do regional price differences balance things out?

The study also showed that regionally different price levels contribute to a certain levelling out of disposable incomes, as regions with high incomes also tend to have higher rents and other living costs.

“People then have more money in their wallets, but they cannot afford more to the same extent,” WSI scientist Toralf Pusch explained.

READ ALSO: EXPLAINED: When will Germany raise the minimum wage?

Therefore, incomes in the eastern states, adjusted for purchasing power, are generally somewhat higher than the per capita amounts would suggest.

That could explain why, even after price adjustment, the cities of Gelsenkirchen and Duisburg in western Germany continue to be at the very bottom of the list.

Saxon-Anhalt’s Halle an der Saale, on the other hand, which has an average disposable income of only €18,527, benefits from the lower prices in the east.

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