Renewable Energy Significantly Increases German Electricity Costs–  Will Energy Become a Luxury?

Renewable Energy Significantly Increases German Electricity Costs– Will Energy Become a Luxury?

The upcoming World Economic Forum in Davos focuses on “Resilient Dynamism,” with a primary focus on getting the world’s economies back on track. Part of this discussion rightfully focuses on sustainable energy production, but Davos participants will be wise to consider energy in the context of consumer pricing.

After Fukushima, a number of countries decided to lessen the use of nuclear energy. Japan, for example, is now implementing bold subsidies for renewable energy production. Germany went a step further, closing down a number of older nuclear reactors immediately and stated that the country aims to forego nuclear power altogether.

German utilities responded with warnings of possible blackouts, arguing that solar, wind and fossil fuel sources could not satisfy demand. The German government in turn called the warnings “alarmist.” Both sides, however, lost track of another critical issue: steeply rising energy costs. While the German Energy Feed-In Tariffs (EEG) were reduced sharply in 2012 compared to previous years, consumers are paying a premium of 5.28 Euro-Cents per kilowatt hour. The average price per kilowatt hour is 8.9 Euro-Cents, meaning that the premium is more than 50 percent of the energy price.

German newsweekly Der Stern reported in November 2012 that energy prices would rise by 20 percent in January 2013, leading to significantly higher costs. This raises another problem: an increasing number of German consumers cannot pay the growing energy costs. The result: in 2012, a total of 312,000 households had their energy cut off due to non-payments. At the same time, energy-intensive industries are exempt from these charges.

This development leads to an important question: will energy become a luxury? Are we at the threshold of a new era in which developing countries will generate energy from fossil fuels like coal, thereby generating lower-cost energy, but higher emission and industrial countries are producing expensive energy, which will become unaffordable for a higher number of people? Energy should not be a luxury in this time and age, but a convenience as it allows for the continued development of industries and countries as well as consumers’ buying power. While investments in and the production of clean energy are a necessity, it needs to stay affordable for consumers. The global energy dialogue, which will play out in the rooms of Davos this month, will be more relevant and productive if the average consumer is an important part of the equation.