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What’s the winter outlook for gas and electricity costs in Germany?

What’s the winter outlook for gas and electricity costs in Germany?

After months of skyrocketing energy prices in Germany last year, many are anticipating the winter with trepidation. Many Germans are wary of the upcoming winter after months of exorbitant energy prices last year. What assistance can households anticipate, and how likely are gas and electricity costs to increase once more?

In Germany, as October starts, households are considering when to heat their homes and the costs, due to surging gas and oil prices after Russia’s invasion of Ukraine in February 2022. Recent signs suggest rising energy costs this year, and the government’s energy price cap expires soon, leading to calls for more state support to help with higher energy expenses.

What’s going on with energy prices at the moment?

      • Energy prices spiked in 2022 and remained high in the first half of 2023.
      • In H1 2023, private customers paid 12.26 cents per kWh for natural gas and 42.29 cents per kWh for electricity.
      • Gas prices rose by 31.3%, and electricity prices increased by 21% compared to H2 2022.
      • Despite a 4.5% inflation rate in September, electricity prices kept rising.
      • In August, electricity prices surged by 16%, with most new contracts settling around 30.4 cents per kWh.
      • The average electricity price, including existing customers, is about 39 cents per kWh.
      • Rising electricity prices are linked to increased gas prices, which influence Germany’s electricity production.
      • Gas prices rose from €25 to €45 per MWh in August but remain below record highs.
      • In September 2022, a kWh of gas cost 21.75 cents, compared to 12.18 cents in September 2023.

Are they likely to rise this winter? 

      • While predicting the future is uncertain, ongoing fossil fuel shortages may result in significant winter price increases.
      • The head of the International Energy Agency (IEA), Fatih Birol, recently cautioned about potential factors that could lead to a substantial rise in household energy costs.
      • Birol suggested that if the Chinese economy remains robust and purchases large quantities of liquefied natural gas while facing a cold winter, it could exert upward pressure on natural gas prices.
      • Should this scenario unfold, consumers might once again face the need to conserve energy, such as delaying the use of heating or reducing hot water consumption.
      • In Germany, consumers can anticipate some protection against price increases due to the government’s ongoing cap on gas and electricity prices.
      • This protection is provided through the ‘Energiepreisbremse,’ or energy price break, which sets caps for small businesses and private households.
      • Gas prices are limited to 12 cents per kilowatt-hour, while electricity prices are capped at 40 cents per kilowatt-hour.
      • It’s essential for households to practice energy conservation because this cap applies to 80 per cent of their usual annual energy consumption.
      • Beyond this threshold, consumers will pay prevailing market rates for energy.

When will the energy price caps come to an end?

      • Despite hints of an extension by Economics Minister Robert Habeck, gas and electricity price caps are still set to end this year.
      • Habeck proposed extending caps until Easter to guard against rising costs.
      • Finance Minister Christian Lindner supported the extension but suggested an earlier VAT increase on natural gas.
      • The price cap issue now appears to be sidelined, leaving consumers exposed to market forces in January and February, the peak heating season.

Could there be more relief for households?

      • Government eases household burdens, impact on energy companies uncertain.
      • From October 1st, two levies on household gas prices were eliminated for suppliers: balancing energy and conversion levies.
      • Balancing energy levy counters cost fluctuations, conversion levy covers gas-type conversion expenses.
      • Previous charges: 0.57 cents per kWh (balancing energy) and 0.038 cents per kWh (conversion levy).
      • Charges are now zero cents for one year, potentially saving €121.60 annually (20,000 kWh usage).
      • Minister Steffi Lemke urges quick price cuts, especially for low-income households.
      • Uncertainty if consumers will see immediate reductions, timing at suppliers’ discretion.

In conclusion, the hope for relief from rising gas and electricity costs in Germany depends on government actions and gas companies’ responses, leaving uncertainty about immediate consumer impact during the upcoming winter.

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