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ENERGY

Households in Germany to get some relief on electricity bills

There is some relief around the corner for German residents, with the green 'EEG' levy on electricity set to be slashed. However, it may make little difference to bills.

Published: 14 October 2021 17:10 CEST
Households in Germany to get some relief on electricity bills
A German electricity bill. Photo: picture alliance / dpa | Jens Kalaene

The cost of living in Germany is going up, but there is some tentative good news. According to German media reports on Thursday, the EEG levy, which private consumers have to pay as part of their electricity bills to finance renewable energies, is set to fall significantly next year. 

According to sources who spoke to DPA, the EEG (Germany’s Renewable Energy Act) levy will drop to 3.72 cents per kilowatt hour. The levy current stands at 6.5 cents. 

A billion-euro subsidy from the federal government will contribute to the reduction. Without this, the levy in 2022 would be around 4.66 cents per kilowatt hour, according to DPA.

The EEG levy, which promises fixed prices to wind and solar providers to try and stimulate growth in the sector, is a major component of electricity bills around Germany.

It’s part of the reason why people in Germany pays the highest prices on electricity in Europe.

READ ALSO: Why German electricity bills are hitting record highs

The operators of large electricity grids plan to announce the amount of the EEG levy for the coming year this Friday. However, it is only one component of the price of electricity for people in Germany. 

According to the comparison portal Verivox, the average electricity price for households in October 2021 will be 31.38 cents per kilowatt hour, higher than ever before. The reduction of the EEG levy to 3.72 cents would lower the current average electricity price by around 11 percent. For a three-person household with an annual consumption of 4000 kilowatt hours, the relief would be around €132.

“However, the reduction of the EEG levy does not mean that electricity prices for customers will automatically fall,” said Thorsten Storck, energy expert at Verivox. 

As The Local has been reporting, energy prices are spiking. 

READ ALSO: How households in Germany can tackle rising energy costs

The procurement costs of the electricity suppliers have risen significantly and there are also signs of increases in the grid utilisation fees.

“We therefore assume that electricity prices will remain at their current record level in the coming year, or at least not fall noticeably,” said Storck.

According to calculations by the comparison portal Check24, all private households in Germany together will be relieved of around €4.2 billion by the falling EEG levy.

In order to relieve the burden on customers, politicians have long been discussing the abolition or reduction of the EEG levy.

Why is the EEG going down?

There are several reasons for the falling EEG levy.

According to an analysis by the think tank Agora Energiewende, the high gas, coal and CO2 prices have led to a sharp rise in the exchange electricity price.

As a result, far less money is needed from the EEG account to compensate for the different costs of renewable energies. Renewable energies therefore achieve higher revenues on the market, and the necessary subsidy sinks.

Meanwhile, EEG plants from the early years, which still received comparatively high payments, have gradually reached the end of their 20-year subsidy period.

First put in place in 2000, and modified several times, the EEG has been credited with rapidly boosted Germany’s production of wind and solar energy.

But it’s come under criticism because private households have to foot the bill – not big industries.  

READ ALSO: Is Germany the green leader it’s hyped up to be?

Vocabulary

Levy – (die) Umlage

Green electricity – (der) Ökostrom

Federal subsidies – (die) Bundeszuschüsse

Electricity bill (die) Stromrechnung

We’re aiming to help our readers improve their German by translating vocabulary from some of our news stories. Did you find this article useful? Let us know.

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PROPERTY

Why buying property in Austria remains unaffordable for most

Buying a home in Austria is a dream for many international residents, but it remains out of reach for the average earner.

Published: 7 May 2024 12:30 CEST
Why buying property in Austria remains unaffordable for most

Many people living in Austria dream of one day owning a home, but despite recent drops in property prices and interest rates, this dream is still out of reach for many average earners. 

In Austria, it is recommended to not spend more than 40 percent of a monthly income on debt repayment.

But new analysis by tariff comparison portal durchblicker.at reveals that even a double-income household would need to spend around 60 percent of their income to afford a 90m² new-build apartment in Vienna.

While the government has created initiatives to improve the affordability, with attractive housing packages, fee reductions and eliminations of certain fees, such as the “Grundbucheintragsgebühr” (land register entry fee) and “Pfandrechtseintragungsgebühr” (mortgage registration fee) for properties up to a certain value, their impact has been limited.

Furthermore, the governments initiatives often overlook the specific needs of lower-income households and may benefit those who are already financially stable, leaving the average earner still struggling to afford a home, according to Der Standard.

READ ALSO: ‘Haushaltsversicherung’ – How does Austria’s home insurance work?

High prices, rates and strict lending criteria

One of the biggest barriers to owning a home in Austria is simply the sky-high property prices. Over the years, property prices have increased, making it more difficult for people with an average income to afford a place of their own. Even with recent minor dips in prices, they still remain high.

Another factor making owning a home challenging is the increase in interest rates in recent years. As a result, both existing variable-rate loans and newly obtained fixed-rate loans have become more expensive. Analysts expect the European Central Bank to cut interest rates by around 0.5 percent in the near future, but according to durchblicker’s calculations, this would initially only create a little relief for loan takers, where instead of around 60 percent, 55 percent of monthly household net income would be needed for debt repayment.

Another issue preventing many from realising their dream to buy a home is the difficulty in obtaining a mortgage. Since July 2022, stricter rules have applied in Austria for the granting of property loans. Loan applicants must have a deposit worth at least 20 percent of the value of their property to be granted a loan, according to the financial online platform Finanz.at. This means that even applicants with higher incomes may struggle to get their dream financed. 

Furthermore, many loan takers with variable-rate loans, especially those recently obtained, are facing significant challenges. The variable interest rates have increased significantly since the initiation of these loans, resulting in higher monthly repayments, reported Der Standard.

Few people can afford their own home in Austria, especially in Vienna. Photo by Christian Lendl on Unsplash

Experts suggests fixed rate loans and cooperative housing models

Andreas Ederer, Head of Banking at durchblicker.at, recommends loan takers with variable-rate loans to change to fixed-rate loans. He suggests that fixed-rate loans have become more attractive as they are currently cheaper than variable-rate loans, reported Kurier. 

Unlike fixed-rate loans, which have a steady interest rate throughout the loan term, variable-rate loans can change over time in response to shifts in market conditions or the economy.

Experts also suggest alternative models for increasing affordability. One idea is to create more opportunities for cooperative ownership with mandatory purchase options. This could offer a more affordable option where costs such as maintenance and taxes are shared. According to Der Standard, cooperatives also often have access to loans with better terms.

READ NEXT: How can I move into affordable cooperative housing in Vienna?

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