A new energy package announced by the German federal government is expected to bring significant savings to households and businesses, according to a recent study by the Institute of the German Economy (IW). The plans, which aim to reduce the electricity tax and eliminate surcharges, are projected to save a four-person family around 220 euros per year, with a typical household consumption of 4,000 kilowatt-hours (kWh) annually.
The study, conducted by IW economists Andreas Fischer and Thilo Schaefer, assumes a reduction of 5.5 cents per kWh in electricity prices. The government’s plans, outlined in the coalition agreement, also aim to reduce the electricity tax to the European minimum and cut surcharges. Small and medium-sized enterprises are expected to benefit from the plans, with savings of 4.6 cents per kWh, while large industrial companies would see a reduction of around 4.2 cents per kWh.
In addition to the reduced electricity tax and surcharges, the government plans to lower network charges, which would further reduce electricity prices. However, the extent of these reductions remains unclear, according to the study’s authors. The design of the announced industrial electricity price for energy-intensive companies is also still unclear.
While the government’s energy package is seen as a step in the right direction by the IW, the study’s authors caution that it is not a long-term solution, as the costs are ultimately shifted from consumers to the federal budget, ultimately paid for by taxpayers.
“The German energy system must become much more efficient” said Thilo Schaefer, the study’s author and energy economist. “We need more renewable energy, storage and flexible power plants, but the expansion pace must also match the development of demand. If the interplay is efficient and we can avoid expensive solutions like undersea cables where possible, electricity prices will decline sustainably in the long run.