Germany slashes electricity levy as energy prices surge

The German government will drastically lower a levy on electricity consumption from 2022 to help ease the burden on consumers as Europe battles soaring energy prices, grid operators announced Friday.

An electricity meter shows energy consumption in a German household.
An electricity meter shows energy consumption in a German household. Photo: picture alliance/dpa | Hauke-Christian Dittrich

The Renewable Energy Act (EEG) surcharge, used to fund the expansion of solar and wind plants, will fall by more than 40 percent to 3.723 cents per kilowatt hour from January 1st, according to a statement by German grid operators 50Herz Transmission, Amprion, TenneT TSO and TransnetBW.

It is the largest reduction yet since the green levy was introduced in 2000 to help Europe’s top economy transition away from fossil fuels towards cleaner energy sources.

The Local reported on Thursday that the EEG levy slapped on private households was set to fall – but that it may have little impact on energy bills due to rising prices.

Economy Minister Peter Altmaier said recently that the EEG surcharge should be phased out completely over the next few years “to keep power affordable”.

The shortfall will be offset by higher government subsidies, partly thanks to a tax on carbon emissions introduced at the start of 2021.

Germans already have the highest electricity bills in the European Union and as winter approaches, pressure is growing for the government to help mitigate a looming energy price crisis.

READ ALSO: Why German electricity bills are hitting record highs

Gas prices have surged in Europe in recent months as demand has soared with economies emerging from their Covid-induced restrictions. Stocks were also left low after a long, cold winter.

Wholesale natural gas prices, the lead indicator for overall energy prices in Europe, have more than tripled this year. Oil and coal prices have also jumped, fuelling fears over spiking inflation and rocketing energy bills.

EU leaders will discuss the energy issue at a summit next week.

The European Commission has proposed that member states temporarily reduce taxes and levies to help lower energy bills for households and businesses.

In France, the government has pledged to block any further price increases for gas and electricity until April.

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

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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.