Wind power and photovoltaic make electricity cheaper in Germany

The new year began with stormy weather. Wind turbines were running at full speed and the sun was shining in many places. As a result, electricity production from wind and photovoltaics (PV) in Germany accounted for 125% of demand, according to the Fraunhofer Institute for Solar Energy Systems. The oversupply drove down the price of electricity on the exchanges, where prices are determined based on supply and demand, and for some hours electricity was even available for free.
In 2024, an average of 59% of Germany’s electricity was generated from renewable sources. But during the winter darkness, this production is far from sufficient. December 12, 2024 marked a low point, when only 18% of Germany’s electricity needs were covered by renewable energies. The rest had to be generated by coal and gas-fired power plants and by electricity imports from neighbouring EU countries.
The EU has a common electricity market. This means that in times of high wind and sun, Germany can export power, while in times of low wind and sun, it has to import more and more power. Most of the electricity Germany purchased in 2024 came from France, which covers 70% of its energy needs with nuclear power, available all year round.

Imports and exports are based on current prices on the European Energy Exchange. In addition, consumers have to pay national taxes and fees. In Germany, around 30% of the electricity price is made up of grid fees. These are the costs of expanding the electricity grid. Taxes and fees account for about another third.
Electricity prices for households and businesses

Households and businesses have hardly noticed the price fluctuations, as they often have long-term electricity contracts. They pay their electricity supplier a fixed price for a certain period of time, as agreed in a contract.

However, since the beginning of 2025, suppliers have also had to offer dynamic tariffs at current prices. In this way, consumers who use large amounts of electricity, for example to charge electric cars or run heat pumps, have had a financial incentive to schedule their energy consumption for times when supply is high and therefore prices are low.
In 2024, electricity generation from lignite continued to decline by 8% in Germany, while that from brown coal decreased by more than 27%. Since 2015, the share of electricity generated from coal has been almost halved, significantly reducing CO2 emissions.

2024 was also the first year in which Germany was able to do without its own nuclear power production. The last three nuclear power plants, which were shut down in 2023, accounted for a solid 6% of electricity production.

But is the lack of wind and solar power to blame for the price increase? Or have energy companies perhaps deliberately tried to increase the price of electricity by not connecting all their coal and gas-fired power plants to the grid in order to reduce supply? This is the question now being asked by the German Federal Antitrust Office. It is part of the Federal Ministry of Economics and is responsible for ensuring fair competition on the market. If it uncovers illegal price manipulation, it can impose fines.

The economy and electricity prices

Nowhere in Europe is electricity more expensive than in Germany. According to the Federal Statistical Office, a family of three to four had to pay just under 40 cents per kilowatt hour in 2024. In Hungary and Bulgaria, on the other hand, where electricity is subsidized by the state, consumers only had to pay 10 cents per kilowatt hour.

Germany also has subsidies, but only for industrial companies. However, energy-intensive companies have been complaining that energy costs are still far too high for them to be competitive.

While the industry was still paying around 12 cents per kilowatt hour in 2021, the price peaked at more than 50 cents in 2022 following Russia’s invasion of Ukraine. On July 1, 2022, taxes and levies were significantly reduced for companies.

Today, industrial businesses pay around 17 cents. However, this is significantly higher than what companies pay in other major competitor countries. In 2023, for example, companies in the German automotive industry paid over twice as much for electricity as their competitors in China and almost three times as much as comparable companies in the US. Significantly reducing electricity prices remains one of the most pressing economic imperatives.

The center-right bloc of Christian Democratic Union (CDU) and Christian Social Union (CSU), with Friedrich Merz at the head of their ticket for chancellor, have stated in their election platform that they want to halve grid fees and further reduce the electricity tax for energy-intensive companies. However, it is unclear how this is to be financed.

What remains clear is that the continued expansion of renewable energies, electricity grids, and storage facilities will remain costly for many years to come. Only once the infrastructure is in place will the financial benefits of wind and solar energy be felt.

Sabine Kinkartz, dw.com