Energy subsidies

The green energy allocation in Germany was introduced after the Renewable Energies Law (EEG) from 2000 stipulated that green energy is being fed into the power grid before traditional types of energy. Wind turbines, solar panels and other renewable energy infrastructure as well as power lines are still needed, which cost extra money that is not paid for by the operators but by the consumers through the renewable energy - or EEG - allocation.

It pays for a funding gap that exists to this day. Last year, for example, the overall costs in Germany added up to 19 billion euros. But based on the European Energy Exchange (EEX) Germany produced only 5 billion euros worth of electricity, the remaining 14 billion euros were paid for by the German consumers via the EEG allocation.

Controversial levy

In the coming years the allocation will rise further. With just over six cents per kilowatt hour it makes up a substantial chunk of consumers' electricity bills. Although recently, less green electricity was produced than in 2012. That's because a law that was changed in 2010, stipulates that energy companies are not obliged to accept green electricity. So the green energy goes to the EEX and is traded there for a low price.

But consumers do not benefit from this procedure. On the contrary, they have to make up for the shortfall via the EEG allocation. Customers have to pay the allocation even if the local energy supplier only delivers conventional coal-fueled electricity.

"We need that the EEG electricity is used by the local electricity suppliers," says Norbert Allnoch from the Institute of the Renewable Energy Industry. Many consumers do not know what kind of electricity they use. "The fatal error is that the electricity bill says renewable energy is being usedand it appears that the municipal power suppliers use green electricity - but they don't!"

Another criticism is that the rising allocation allows more and more companies - industrial electricity clients - to apply for an exemption from the allocation, as special regulations ensure that power-intensive companies are not charged excessively. On average, they pay 1.3 cents less per kilowatt-hour.

The Federal Network Agency criticizes that the those companies use about 18 percent of the overall electricity but only pay a marginal percentage of the EEG allocation due to the special regulations. So, small companies and private consumers end up paying the bill for the big companies, according to the agency.

Subsidies for coal and nuclear power

That is why the German public thinks green electricity is behind rising utility prices. However, while electricity from coal and nuclear power has been subsidized by the taxpayer for decades, green electricity has only been subsidized for a bit more than 10 years. Europe-wide, in 2011, nuclear power-generated electricity was subsidized to the tune of 35 billion euros, and coal and gas-generated electricity received no less than 26 billion euros.

In the same year renewable energies received 30 billion euros. At least these figures were mentioned in the draft of the European Commission. But the figures were removed, according to German daily Süddeutsche Zeitung. They were never confirmed the European Commission stated. But what is clear is that energy subsidies are not limited to green electricity.

"There are historical reasons for the subsidies. Nuclear generated electricity always had preferential tax treatment. The costs for the nuclear waste storage are mainly paid for by ordinary people," said Claudia Kemfert from the German Institute for Economic Research. And coal-generated electricity was subsidized for decades - to secure jobs. "Neither coal-generated electricity nor nuclear power fit into the concept of a sustainable energy policy, partly because coal-fired plants produce too many greenhouse gases," said Kemfert.

But in Europe there are other countries besides Germany which subsidize nuclear power - the UK wanted to impose a nuclear power allocation comparable to the German EEG allocation, according to Kemfert. Indeed subsidies are a country-specific issue but for Kemfert it is obvious that "in Europe subsidies for technologies from the past do not make sense." She says that "technologies of the future, renewable energies need to be brought to marketability and we should go about it in a clever way."

Experts are sure that, in the foreseeable future, the additional costs for subsidies will be paid for by the consumers. Therefore, in the coming years, October 15 will not be a happy day for German electricity customers.