EEG surcharge will fall in 2021

Here's some good news for consumers: the renewable energy surcharge (EEG surcharge) every consumer in Germany pays to help fund green electricity will fall to 6.5 ct/kWh as of January 2021. This is the first time a federal grant is making this possible.

solar panels with wind turbine in the background©

The EEG surcharge has long been at the centre of the German debate on electricity prices. This renewable energy surcharge is used to finance a reliable, planned and cost-efficient expansion of renewables, particularly of cost-efficient technologies such as onshore wind power and PV. The surcharged is collected from electricity users via their electricity bills. As part of the stimulus package (in German only) to alleviate the impact of the coronavirus pandemic, the Coalition Committee agreed to top up the revenue from the German carbon pricing scheme with a federal grant, so that the EEG surcharge can be lowered from the current 6.756 ct/kWh to 6.5 ct/kWh in 2021. Without this grant, the surcharge would have risen to 9.65 ct/kWh, mostly as a result of the pandemic, causing a rise in electricity prices.

The federal grant ensures that the balance of the EEG account will be positive again in 2021. The decline in demand for electricity during the pandemic and the fall in prices at the electricity exchange had resulted in a negative balance exceeding €4 billion as of late September 2020. The grant worth €10.8 billion for 2021 is financed from the stimulus package and from revenue from the new national carbon pricing scheme.

EEG surcharge to be lowered to 6 cents per kilowatt-hour in 2022

When announcing the 2021 EEG surcharge in October 2020, Minister Altmaier said: 'For me, this is not only about a short-term adjustment. In fact, we are introducing a paradigm shift. In addition to the financing from the stimulus package, the EEG surcharges in the years to come will also be lowered using the revenue from the new national carbon pricing scheme. Higher revenue from this source will mean a greater burden is taken off electricity prices. This is what the Federal Government agreed in Germany’s 2030 Climate Action Programme. As a next step, we will be lowering the surcharge to 6 ct/kWh in 2022. In my capacity as Federal Minister for Economic Affairs and Energy it is my primary objective to reconcile the mitigation of climate change with business and the economy. The gradual lowering of the EEG surcharge is an important feature of this approach.'

EEG surcharge had been stable since 2014

Between 2010 and 2014, the renewable energy surcharge rose by 4.2 cents per kilowatt hour (ct/kWh) overall. In the 2014-2020 period, the surcharge remained stable, even as the share of renewable energy eligible for funding continued to rise. This proves that the fundamental reforms undertaken in recent years have made it possible to put an end to the spiralling increase and to stabilise both the surcharge and, with it, electricity prices as well.

Competitive auctions have brought down the cost for new wind power and PV installations. At the same time, these auctions are to ensure that the expansion of renewables continues at a dynamic pace, but better in step with the expansion of the grids.

Who pays for the EEG surcharge?

Almost half of the EEG surcharge is financed by businesses, and just over one-third is funded by private households. Most of the rest is paid by public institutions. At present, the surcharge amounts to more than a fifth of private households’ electricity bills. Railway companies and electricity-intensive companies facing international competition can apply for a partial exemption from the EEG surcharge. In 2020, the number of these applications for partial exemption from the EEG surcharge was 2,201 (2019: 2,261). The vast bulk of all companies (96% in the industrial sector) pay the surcharge in full.

The stabilisation of the EEG surcharge is also reflected in private households’ electricity bills. Between 2014 and 2020, these bills increased by approx. 1.4% per year on average (taking into account the temporary VAT reduction this figure even drops to an annual 1% on average), which is in line with the overall rate of inflation in the same period (calculations based on data from the German Association of Energy and Water Industries (BDEW) and Destatis). Consumers wishing to benefit from lower electricity prices should compare prices on a regular basis.