The new year started off with a bang. Wind turbines were spinning at full speed, and the sun was shining in many places. The result: energy from renewable sources in Germany reached 125 percent of demand. This oversupply led to the fact that electricity prices on the exchanges dropped dramatically, and for hours electricity even reached a zero price.
In 2024, an average of 59 percent of electricity consumption in Germany came from renewable sources. But precisely in winter, when it is dark due to the season, and often cloudy and there is no wind, this level cannot be achieved. It was at its lowest on December 12, 2024, when only 18 percent of Germany's electricity needs were covered by renewable sources. The rest had to be supplemented by thermal and gas power plants, and electricity was also imported from neighboring EU countries. The price per megawatt-hour on the European electricity exchange reached 936 euros, while it is usually between 60 and 100.
Prices for households and companies
Private households, but also companies with long-term electricity supply contracts, hardly notice the fluctuations in prices - they pay their supplier a fixed price, which is negotiated for a certain period.
But from the beginning of 2025, suppliers must also offer dynamic tariffs, in line with current exchange prices. In this way, customers who consume larger quantities, for example to charge electric vehicles or to use heat pumps, should have a financial incentive to charge when prices are lower due to greater supply. But in winter, that's difficult.
The risks of dynamic electricity tariffs
But are the surges in electricity prices simply due to too little wind or solar energy entering the grid? This issue is also being investigated by the Federal Cartel Office, which is tasked with ensuring fair competition. And if the office finds that companies are influencing prices in an unauthorized way - for example, through agreements between themselves - it can impose fines.
The chairman of the Federal Cartel Office, Andreas Mund, announced that some sharp increases in electricity prices on the exchanges will be investigated. The suspicion: energy operators may not have connected all coal and gas power plants to the grid in order to deliberately raise prices due to a shortage of quantities.
But there is something else - this winter Germany had to deal with a reduced contingent of power plants for the first time, Mund points out, which is why price fluctuations were rather expected and can be called a "normal market result". But for the sake of security, pricing will be examined very carefully.
The consequences of the end of coal and nuclear power
The reduced contingent of power plants that Mund is talking about is primarily due to the reduced use of coal for electricity generation. In 2024, electricity production from brown coal fell by eight percent, with hard coal the decrease was more than 27 percent. Since 2015, the share of coal used to generate electricity has almost halved, and emissions have also been reduced.
In addition, 2024 was the first year in which Germany had to do without nuclear energy. The last three nuclear power plants, which were shut down in 2023, provided six percent of consumption.
The EU's internal electricity market
The EU also has an internal market for electricity - countries should benefit from the most favorable production conditions. Thus, during peak hours with more electricity and wind, Germany is an exporter, and during dark hours it is an importer. In 2024, the largest amount of electricity purchased was from France, which covers 70 percent of its needs with nuclear power plants, which are available all year round. In second and third place among the suppliers are Denmark and Sweden. These three countries supply much more electricity to Germany than vice versa.
Imports and exports are guided by the current prices of the European Electricity Board. But the price for consumers is also affected by the relevant national taxes and fees. In Germany, for example, 30 percent of the price of electricity is formed by the planned costs of expanding the electricity grid, and another third is for taxes and fees.
What are the prices for electricity in Europe
Nowhere in Europe is electricity as expensive as in Germany. According to official statistics, a household consisting of three or four people paid 40 cents per kilowatt hour in 2024. In Ireland and Denmark the price was 37 cents, in the Czech Republic, Belgium and Italy - 33. In Hungary and Bulgaria the price was 10 cents per kilowatt hour.
There are subsidies in Germany too, but only for industrial companies. But energy-intensive companies in particular complain that energy costs are still too high to be competitive.
How the war in Ukraine affected electricity prices
If in 2021 industry paid 12 cents per kilowatt-hour, after Russia's attack on Ukraine it has already reached levels of over 50 cents. After the reduction of taxes and fees for industry from July 1, 2022, the price is now 17 cents. But this is much more than companies in competing countries pay. For example, in 2023, automotive companies in Germany paid twice as much for electricity as their competitors in China and almost three times as much as similar companies in the United States.
One of the most insistent demands of the economy in Germany is to reduce electricity prices. Chancellor Olaf Scholz has asked the European Commission to allow member states to subsidize electricity prices, especially for energy-intensive businesses. The CDU/CSU and their candidate for chancellor Friedrich Merz have intentions to reduce electricity prices, but there is no clarity on how the measures will be financed. It is clear that expanding the renewable energy network in the coming years will be costly. The benefits of using wind and solar energy will only become financially noticeable when the infrastructure is built.
Author: Sabine Kinkarz