Germany Foresees Lower Electricity Prices Mid-Term Amidst Energy Reform

German Federal Minister for Economic Affairs, Katherina Reiche, anticipates a decrease in electricity prices in the medium term, though she cautioned that significant relief for consumers is unlikely before the 2030s. The CDU politician emphasized that the success of Germany's energy transition hinges on a holistic approach, integrating climate protection, supply security, affordability for citizens, economic competitiveness, and responsible fiscal management.

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Noticeable relief will only be seen in the 2030s.

Reiche defended recent government reforms to the Renewable Energy Sources Act (EEG) and a new network package, arguing they are crucial for making the energy transition more cost-efficient. She highlighted that rising energy prices place a burden on Germany's industrial base and household budgets. "Today, the federal government spends 17 billion euros on EEG funding, and the trend is rising," Reiche stated, noting that without reforms, this financial burden would continue to grow.

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The energy transition will only be permanently successful if climate protection, security of supply, affordability for citizens, the maintenance of competitiveness, and responsible use of taxpayer money come together.

The minister pointed to past funding decisions, particularly from 2014, as having long-lasting and costly consequences. "We are still bearing the consequences of very old funding decisions," she said, explaining that the EEG is being restructured to prioritize market mechanisms over prolonged subsidies. "My goal is more market and less permanent funding."

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Today, the federal government spends 17 billion euros on EEG funding, and the trend is rising.

Reforms include phasing out permanent subsidies for new solar installations under 25 kilowatts from 2027. Additionally, the principle of compensating for renewable energy that is produced but cannot be used due to grid congestion will be gradually abandoned. Reiche explained that grid fees have become a major driver of electricity prices, largely due to the extensive grid expansion required to accommodate renewable energy sources. The new approach aims to steer the expansion of wind and solar power more efficiently to reduce costs for consumers.

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My goal is more market and less permanent funding.