Energy is becoming more and more expensive – and the clear season has not really started yet. Politicians want to provide relief. But it is questionable whether this is the right way.
A look at the European electricity, oil and gas prices shows that it could either be an expensive or a cold winter. After the corona pandemic in 2020 resulted in low sales of coal, oil and gas, demand has picked up again this year – with consequences for consumers’ wallets.
Coal, which is mainly used for energy generation, is experiencing a price increase of 384 percent compared to the previous year – that is, an increase of between 162 and 212 dollars per ton. After Russia and Norway cut back their gas supplies, prices here also climb from 20 euros per megawatt hour to more than 65 euros.
The consequences of this price explosion have long been felt within Europe. In Great Britain, for example, the situation is so serious that industrial companies have had to stop production. Many European countries have already taken measures to ensure that consumer prices do not hit so hard. Households with low and middle incomes in particular have to spend a considerable part of their income on heating and electricity.
“Need relief”
The ideas that governments are pursuing are many. In France, for example, she has come up with a “price protection shield”. Gas and electricity prices are to be capped for consumers. This should apply until next spring. In Spain, the electricity price is to be linked to the prices in 2018. In addition, the country wants to pocket three billion euros through a special tax. The tax is aimed primarily at energy companies who benefit from the high electricity prices and reap “excessive profits,” as the government calls it. Italy wants to cushion the price shock with direct payments of 3 billion euros and the reduction in VAT for gas.
Even if the situation in Germany is nowhere near as serious as in Great Britain, the first companies have already called for help from the state. “We now need relief immediately,” said the head of the Swiss Steel Group, Frank Koch, to Spiegel. The rising cost of electricity is causing problems for the group. There is even a production strop in the room.
The energy crisis hits Germany in the middle of the upswing after the Corona year. It could cause long-term economic damage and loss of consumer confidence. That is why more and more people in this country are calling for politics. Still-Federal Minister of Economics Peter Altmaier once prophylactically took the not yet formed traffic light coalition into duty and announced that he would like to talk to the SPD, the Greens and the FDP about the issue.
“We can mitigate problems that particularly affect citizens, and ensure that things remain manageable,” said the CDU politician Bild-TV. The price increases were particularly noticeable in everyday life in three areas: driving a car, electricity and heating. He therefore wanted to propose to the parties that might soon form the government that the EEG surcharge be abolished as soon as the new government is in office.
Is the state intervening?
The minister is not the only politician with proposals to save consumers from an overly expensive winter. Green parliamentary deputy Oliver Krischer calls the current price increases “historically unique”. Like Altmeier, he sees politics as an obligation to support people – especially those with low incomes. One mechanism could be an increase in the minimum wage or an adjustment of the housing benefit. In this way you can put people “in a position to deal confidently with price increases that come and go in the various areas,” said Krischer. His proposal coincides with that of some social associations.
Direct intervention by the state in the energy market has now also become part of the debate. However, many experts take a critical view of the transfer of mechanisms like those in other countries to Germany. The market in this country functions differently than in other countries, and they could also endanger the European market and torpedo environmental protection, says Andreas Löschel, Professor of Environmental / Resource Economics and Sustainability at the Ruhr University in Bochum. “The high prices will normalize again, so we mustn’t neglect climate protection now,” he says. There are already ideas in other countries to cap CO2 pricing.
In addition, the market in Germany is structured differently. Energy companies stock up on resources over longer periods of time; the contracts they conclude with their customers are for a year or two. This means that energy price increases are not reflected in consumer prices as quickly. Löschel therefore speaks out against doing the same in other European countries. And: “If you put upper limits on prices, investments are no longer worthwhile,” he said. The company’s revenues should not be separated.
“Nearly Zero”
Thomas Engelke, Team Leader Energy and Building at the Federation of German Consumer Organizations, sees it similarly. He also demands that politicians should not simply leave citizens alone with the high prices. But he would like to see more long-term action – and one has to differentiate between electricity and gas prices.
It will be easier for a future government to influence the electricity price than the gas price, because there the variable components in the pricing are greater. Around half are taxes and other charges, and a quarter is the network fee. The remaining quarter is wholesale prices, which are rising and therefore driving up the price.
The Federation of German Consumer Organizations is therefore calling for exemptions for industry to be deleted, for exemptions from network charges to be eliminated and for the electricity tax to be reduced to the minimum prescribed by the EU. “That’s close to zero,” he says.
In addition, part of the money from the CO2 pricing, which is levied on fossil fuels, should be used to lower the EEG surcharge. “The VZBV demands that the money from the CO2 pricing be returned to private households in full in the form of climate checks,” says Engelke. This would mean that consumers would be less affected by the high energy prices.
The situation is different with gas and oil prices. To a much greater extent, they are linked to world market prices. “The government must speak to the supplier countries so that they increase deliveries,” says Engelke.
Relaxation in sight
The demand that Germany make itself less dependent on the countries that export energy is not new. The focus could be on processes for which fossil fuels are still used today. In the long term, it could be replaced by electricity – with electricity that is generated in Germany in a climate-neutral manner. “The VZBV therefore calls for a rapid expansion of onshore wind and solar systems,” says Engelke. They produce the cheapest electricity and could help to lower energy prices in the long term.
It is clear that this can only be a long-term strategy. This also means that those who still heat with oil or gas today should replace their systems with heat pumps in the long term. But for this, houses and apartments all over the country have to be renovated and made climate-friendly – a gigantic investment. “I think we will soon see a discussion about who bears the costs,” says Engelke. His association advocates a half division between tenants and landlords. In order to be able to shoulder the expensive energetic renovations, private households need the support of the state.
Andreas Löschel also pleads for prudent action in the current situation. “Price shocks are never good,” he says – but high energy prices are not in themselves the problem. They can also be a motivation to use less electricity, gas or oil. In the other European countries, the supply contracts that the energy companies make with their customers are much shorter-term. This means that price increases reach customers faster, but that they also react to them more flexibly. The long-term contracts ensured that the situation in Germany is now less tense. Basically, however, the aim is to reduce consumption – and high prices can help here.
It is also questionable how much politics can and must still intervene. Because it is becoming apparent that the situation is slowly calming down again. “On the futures markets, prices will fall again from spring. Then there will be a drop in demand, but the Nord Stream 2 should also go into operation at this point,” says Green Party politician Oliver Krischer. One thing is clear: demand will also fall again in spring. The winter was still expensive.