Building of new offshore wind capacity will contribute to the slight increase in the EEG levy in 2020

Germany’s EEG surcharge will rise in 2020 and for a final time in 2021 before gradually declining as the first generation of subsidised renewable power plants emerge from their contracted 20-year support.

“Our calculations show that the EEG levy in 2021 will have reached around €0.07/kWh,” said Agora Energiewende director Patrick Graichen. Today the EEG surcharge is €0.0641/kWh.

“Subsequently, the cost-intensive first-generation plants will gradually come out of the EEG subsidy and the levy will gradually decline,” he added.

The German think tank forecasts a slight increase in the EEG surcharge for 2020, of €0.065-0.067/kWh, due in part to compensation paid to new offshore wind capacity.

By 2020 Germany’s offshore wind output is expected to grow from 6.4GW to 7.8GW.

Overall, the level of the EEG surcharge has remained relatively constant over the last few years.

If inflation is accounted for in 2020 the subsidy will be at its second-lowest level since 2014.

However, the think tank says German households can expect an increase in the price of electricity by about one cent per kilowatt hour in 2020, which is due to rising wholesale electricity prices as well as the rise in the EEG levy, plus other surcharges, such as network charges.

Agora attributes the rise in electricity prices to increased carbon pricing, making electricity generation from coal and gas more expensive on the wholesale market, which is also having a “dampening effect on the EEG surcharge.”

Current forward transactions of wholesale electricity prices show an increase in wholesale prices in 2020.

As a result of analysing forward transactions over the past two months, Agora's EEG forecast is based on a future price of €0.05/kWh.

Agora stated: “The increase is mainly attributable to the rising price of emission certificates that energy companies across Europe must buy for every tonne of carbon dioxide emitted.”

The carbon price is now €27/tonne, as a result of changes to the European Emissions Trading System.

The rising wholesale electricity price means renewable energy plant owners will achieve higher electricity market revenues in 2020, according to Agora, while production costs continue to fall.

Graichen said: “In the first half of the year, we were able to see very well how an increasing carbon price would lead to climate-damaging coal-fired power plants being forced out of the market.

“At the same time, the first unsubsidised solar projects are being built. Carbon prices at around €50/tonne will enable a largely self-sustaining energy turnaround, away from coal to renewable energy.”