Renewables and the Cost of Electricity in the EU

Douglas Morris  Power and Mining Industries Sr. Manager

Douglas Morris
Power and Mining Industries Sr. Manager

Author: Douglas Morris

Germany has established itself as a leader in developing renewable power and has accelerated its efforts since the Fukushima nuclear accident in 2011.

To date, the share of renewable generation in Germany exceeds 25 percent.

To spur development, the country has in place a tariff system that provides incentive to build solar and wind. This system did just that, but it also raised the prices of German electricity to some of the highest in the world. Not only is the cost high, but the renewable surcharge per kilowatt hour grew considerably.

Source: Energy Innovation, Germany Revolutionizes Renewable Energy

Energy-intensive businesses were not exposed to this surcharge and had access to cheaper industrial power. The industrial cost per kilowatt hour is less than half that charged to consumers in Germany. This is all about to change.

Source: Canada National Energy Board, Electricity – Frequently Asked Questions (FAQs)

This week a Wall Street Journal article, EU Confirms Approval of Germany’s New Renewable Energy Law, discussed how the European Union approved the latest renewable power policy in Germany and a particular point caught my eye:

The German bill trims subsidies for new green power plants, which range from vast wind farms to small solar panels installed on private roofs. It also spreads the power-price surcharge that has funded these subsidies more equally among businesses. Many companies had previously been exempt because they operate in energy-hungry industries or decided to build their own power plants.

Last year, several German companies discussed moves to the United States to take advantage of cheaper shale gas, but perhaps this will create more incentive for other businesses to look elsewhere.

This is a positive move for consumers, but it will be interesting to see how a higher surcharge for business plays out in the future as latest regulation goes into effect on August 1st.

Added by Jim: You can connect and interact with other energy professionals in the Industrial Energy, Power and Alternative Energy tracks of the Emerson Exchange 365 community.

Posted Friday, July 25th, 2014 under Power.

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