How households in Germany can tackle rising energy costs
Gas prices are reaching record highs in Germany, but until recently, most of the burden has fallen on suppliers. We take a look at how soaring energy costs could affect consumers - and what you can do about it.
What's going on?
Wholesale gas prices have been soaring across Europe in recent months, and have reached a record high. According to the German Federal Office of Economics and Export Control, the import costs of natural gas rose 42 percent from January to July alone - and the upwards trajectory has continued ever since.
In Germany, around half of all households use gas to heat their homes, and combined with ongoing supply issues in the country, all signs seem to point to higher costs for consumers this autumn and winter.
Nevertheless, record wholesale prices don't always correlate directly with record bills. Though energy bills are rising for consumers, they haven't yet surpassed the previous record set in 2008.
READ ALSO: Why households in Germany are facing higher energy bills
How much are consumer prices currently rising?
According to price comparison portal Verifox, just a year ago, energy costs had levelled out at 5.44 cents per kilowatt hour - the lowest since 2005.
By September this year, prices had climbed to 6.49 cents, which is roughly what they were in August 2015. Then, in October, the price climbed again to 7.01 cents per kilowatt hour. For some households, this means that monthly bills have risen by 25 percent in the space of a year.
Speaking to Tagesschau, Leonora Holling from the Association of Energy Consumers predicted that consumer energy prices were on course to exceed their previous peak in 2008, when the price climbed to 8.09 cents per kilowatt hour.
Experts agree that the volatile prices are likely to be a temporary phenomenon, but nobody's quite sure how long it will go on for, and how much costs could rise before prices level out once again.
Don't prices depend on how much people are willing to pay?
That's right. When wholesale prices reach a certain level, they may start to exceed what energy suppliers are willing to pay, which would then cause prices to flatten or decrease again. Unfortunately, though, this doesn't necessarily mean they'll go back to the consumer-friendly lows of 2020.
Detlef Fischer of the Bavarian Energy and Water Industry Association explains that, back then, the drop in prices was due to reduced demand as industry shut down in the height of the pandemic. Now the economy is up and running again, demand for energy has risen, he told Tagesschau.
In addition, many companies are switching to gas as their primary energy source, which should keep demand at a consistently high level. Unfortunately, this also means that prices are likely to remain higher for consumers in the long term.
What's the government doing?
At the moment, not very much - though politicians are aware that the price rises will fall most heavily on the shoulders of low-income households.
On Wednesday, the issue of rising gas prices topped the EU Commission's agenda as member states debated whether a collective response to the crisis was required. "There is no question that we need to take policy measures," EU Energy Commissioner Kadri Simson told the EU parliament.
EU Energy Commissioner Kadri Simson speaks in the European Parliament. Photo: picture alliance/dpa/EU Council | Mario Salerno
For now, however, Brussels is leaving it down to each of the national governments to work out how to cushion the blow on consumers. In Germany, the Federation of Energy Consumers wants the government to take quick steps to intervene - potentially by pausing or reducing taxes and grid fees, as Spain is planning to do.
Regulators could also intervene to ensure that energy companies are remaining transparent about costs. However, with Germany being run by a caretaker government until the next one is formed, it could be a while before there's any meaningful action on the side of politicians.
READ ALSO: More trains and energy grants: What a Green election win could mean for Germany
What should I do if my bills go up?
In September 2021, comparison portal Verifox revealed that around 30 of Germany's regional suppliers had already announced prices increases of 12.6 percent - equating to an additional €188 annual costs for a single-family home. The price-comparison site predicts that most of the 700 or so German suppliers will follow suit on January 1st, 2022, making it highly likely that most people's monthly bills will go up in the new year.
Nevertheless, there are things you can do to try and limit the additional costs - for example by staying with your existing supplier but switching to a cheaper tariff.
READ ALSO:
- How to avoid a shock from your next German power bill
- Moving house in Germany: 7 things you need to know about setting up utility contracts
It's also worth noting that Germany's consumer rights law dictates that energy companies have to give you at least six weeks' notice before changing their prices. During this time, you're legally entitled to switch to a cheaper supplier - though it's highly likely that costs will have gone up across the board. For that reason, the Association of Energy Consumer and Consumer Advice Centre both advise consumers to be proactive and start hunting down cheaper tariffs right away.
What options are there for saving energy?
There are a few ways to do this for both property owners and tenants.
If you own a property, it makes sense to make your house or flat as energy-efficient as possible, which can be done by improving the insulation and picking out sturdy, heat-preserving doors and windows. If you already have good windows but they were installed a while back, it can be worth checking that the insulation is still working well and carrying out any maintenance that needs doing.
On a day-to-day basis, you should try to adjust your thermostat to ensure you're not using more energy than you need. With powerful modern boilers, it can sometimes be more energy efficient to leave them running at a low level throughout the day rather than firing them up for a short burst of high heat.
Of course, one of the easiest tricks for saving energy is to close the doors and only heat the space you need. Experts have calculated that every degree of wasted heat equates to six percent higher costs on your energy bill.
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What's going on?
Wholesale gas prices have been soaring across Europe in recent months, and have reached a record high. According to the German Federal Office of Economics and Export Control, the import costs of natural gas rose 42 percent from January to July alone - and the upwards trajectory has continued ever since.
In Germany, around half of all households use gas to heat their homes, and combined with ongoing supply issues in the country, all signs seem to point to higher costs for consumers this autumn and winter.
Nevertheless, record wholesale prices don't always correlate directly with record bills. Though energy bills are rising for consumers, they haven't yet surpassed the previous record set in 2008.
READ ALSO: Why households in Germany are facing higher energy bills
How much are consumer prices currently rising?
According to price comparison portal Verifox, just a year ago, energy costs had levelled out at 5.44 cents per kilowatt hour - the lowest since 2005.
By September this year, prices had climbed to 6.49 cents, which is roughly what they were in August 2015. Then, in October, the price climbed again to 7.01 cents per kilowatt hour. For some households, this means that monthly bills have risen by 25 percent in the space of a year.
Speaking to Tagesschau, Leonora Holling from the Association of Energy Consumers predicted that consumer energy prices were on course to exceed their previous peak in 2008, when the price climbed to 8.09 cents per kilowatt hour.
Experts agree that the volatile prices are likely to be a temporary phenomenon, but nobody's quite sure how long it will go on for, and how much costs could rise before prices level out once again.
Don't prices depend on how much people are willing to pay?
That's right. When wholesale prices reach a certain level, they may start to exceed what energy suppliers are willing to pay, which would then cause prices to flatten or decrease again. Unfortunately, though, this doesn't necessarily mean they'll go back to the consumer-friendly lows of 2020.
Detlef Fischer of the Bavarian Energy and Water Industry Association explains that, back then, the drop in prices was due to reduced demand as industry shut down in the height of the pandemic. Now the economy is up and running again, demand for energy has risen, he told Tagesschau.
In addition, many companies are switching to gas as their primary energy source, which should keep demand at a consistently high level. Unfortunately, this also means that prices are likely to remain higher for consumers in the long term.
What's the government doing?
At the moment, not very much - though politicians are aware that the price rises will fall most heavily on the shoulders of low-income households.
On Wednesday, the issue of rising gas prices topped the EU Commission's agenda as member states debated whether a collective response to the crisis was required. "There is no question that we need to take policy measures," EU Energy Commissioner Kadri Simson told the EU parliament.
EU Energy Commissioner Kadri Simson speaks in the European Parliament. Photo: picture alliance/dpa/EU Council | Mario Salerno
For now, however, Brussels is leaving it down to each of the national governments to work out how to cushion the blow on consumers. In Germany, the Federation of Energy Consumers wants the government to take quick steps to intervene - potentially by pausing or reducing taxes and grid fees, as Spain is planning to do.
Regulators could also intervene to ensure that energy companies are remaining transparent about costs. However, with Germany being run by a caretaker government until the next one is formed, it could be a while before there's any meaningful action on the side of politicians.
READ ALSO: More trains and energy grants: What a Green election win could mean for Germany
What should I do if my bills go up?
In September 2021, comparison portal Verifox revealed that around 30 of Germany's regional suppliers had already announced prices increases of 12.6 percent - equating to an additional €188 annual costs for a single-family home. The price-comparison site predicts that most of the 700 or so German suppliers will follow suit on January 1st, 2022, making it highly likely that most people's monthly bills will go up in the new year.
Nevertheless, there are things you can do to try and limit the additional costs - for example by staying with your existing supplier but switching to a cheaper tariff.
READ ALSO:
- How to avoid a shock from your next German power bill
- Moving house in Germany: 7 things you need to know about setting up utility contracts
It's also worth noting that Germany's consumer rights law dictates that energy companies have to give you at least six weeks' notice before changing their prices. During this time, you're legally entitled to switch to a cheaper supplier - though it's highly likely that costs will have gone up across the board. For that reason, the Association of Energy Consumer and Consumer Advice Centre both advise consumers to be proactive and start hunting down cheaper tariffs right away.
What options are there for saving energy?
There are a few ways to do this for both property owners and tenants.
If you own a property, it makes sense to make your house or flat as energy-efficient as possible, which can be done by improving the insulation and picking out sturdy, heat-preserving doors and windows. If you already have good windows but they were installed a while back, it can be worth checking that the insulation is still working well and carrying out any maintenance that needs doing.
On a day-to-day basis, you should try to adjust your thermostat to ensure you're not using more energy than you need. With powerful modern boilers, it can sometimes be more energy efficient to leave them running at a low level throughout the day rather than firing them up for a short burst of high heat.
Of course, one of the easiest tricks for saving energy is to close the doors and only heat the space you need. Experts have calculated that every degree of wasted heat equates to six percent higher costs on your energy bill.
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