Blame taxes, not renewable energy, for high power costs in Germany

A recent tweet from an obvious wind critic blamed the German wind industry for the country’s high cost of electric power, almost €0.30/kWh. In the Midwest, we pay about $0.125/kWh. How could the cost of power at the two locations be so different? The U.S. wind industry uses similar turbines and pays the same for the wind, exactly zero.

Funny story, though: On a recent trip to Europe to attend the unveiling of a 5-MW near-shore turbine, I asked three editors – one each from England, Sweden, and Norway – what they paid for power. No one knew or even ventured a figure. That is just a little surprising.

In any case, the question remains: What is the cost of power in the EU and what are its charges?

First, a little estimating. The EPEX Spot chart (above, for spot-market prices) shows power prices frequently ranging between €25 and €50, so let’s use €37 per MWh or €0.037/kWh as an average. The spike to €125/MWh is just poor planning on utilities’ part.  I have to assume the figures in the pie chart are from more recent power costs. An online translator says the €37 figure is about $40/MWh or $0.04/kwh.

Then let’s double it for transmission costs and add four cents more for profit. These seem conservative estimates to me. That gives about 12¢/kWh, about what we pay in Midwest.

The pie chart from BDEW for 2017 has more to say on the subject. Turning the 2017 data into a table gives:

The pie chart from BDEW for 2017 has more to say on the subject. Turning the 2017 data into a table gives:

The sum in the right column shows the full cost per kilowatt-hour: 29 € cents, considerably more than the 12 € ¢/kWh figure estimated above.

Why the difference? Assume the Acquisition and sales figure is the production cost and the Grid fee is for transmission. Everything below the Grid fee is a tax and it totals to:

15.826 € cents/kWh.

(What in the world is a concession fee, or a CHP surcharge?) Hence, taxes alone are (15.826 / 5.63 =) 2.8 times the cost of power.

For contrast, a recent electric bill from First Energy for my house lists power costs (residential service) at 5.39 ¢/kWh, a “Distribution-related component,” which sounds like transmission, is $41.58, and a total power use for February is 797 kWh.

From this, it is possible to calculate a cost for transmission:

$41.58 / 797 kWh = 5.217 ¢/kWh.

The difference (12.3 – (5.217 + 5.39)) = 1.693 ¢/kWh is profit and tax.

To summarize:

Even considering the slight currency difference from dollars to euros, it’s easy to see that taxes, not renewable energy, is why power costs so much in Germany and probably other locations in Europe. Don’t blame the wind industry.

  • Paul Dvorak

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