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If Renewables Are So Cheap Why Is Germany’s Electricity So Expensive?

Renewable energy advocates like to say we should be a lot more like Germany when it comes to generating more electricity from wind and solar. This argument often goes like this: “Wind and solar are already less expensive than fossil fuels, and greedy corporations are the only reason we don’t have a clean energy revolution!!!”

My question for people making this argument is, “If renewables are so gosh-darn cheap, why does Germany now have the highest electricity prices in Europe?” In fact, the average cost of electricity is nearly 30 cents per kilowatt hour, almost three times higher in Germany than it is in the United States.

The website Clean Energy Wire puts it this way:

In 2018, the monthly energy bill for an average German household consisting of three people with a combined annual consumption of 3,500 kWh is 85.8 euros, the BDEW says. This is about 32 percent above the level of 1998 if adjusted for inflation, and 72 percent higher in nominal terms. While the share of supply, distribution, and grid fees in the price fell by 21 percent if inflation is taken into account, that of taxes, levies, and surcharges grew by 202 percent. This is partly due to a substantial increase in the renewable energy surcharge, up from 0.08 ct/kWh in 1998 to 6.79 ct/kWh in 2018.

The renewables surcharge now accounts for just over 23 percent of a household’s electricity bill. It corresponds to the difference between the wholesale price and the higher, fixed price for green energy, which is guaranteed by law to renewable power producers for 20 years. Grid operators pass on the difference to consumers.

There are legislators in Minnesota who think that Germany’s experience with wind and solar is a success. I would argue it is not.

Electricity is a vital component to modern society. It has become as important to our daily lives as food, water, air, and shelter. Indeed, electricity has become a prerequisite for obtaining these basic commodities in the modern world. Therefore, in order for the full benefits of electricity to be realized, it must be reliable and affordable for everyone. 

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