Elimination of Gas Storage Results in Billions of ECU Savings for Households and Businesses
German Government Announces Gas Relief Package, Raises Concerns over Electricity Prices
The German federal government has announced a relief package worth €3.4 billion to ease the financial burden on gas customers amid rising gas prices and challenges in the energy market. This measure is aimed at alleviating the cost pressure from high gas prices on households and businesses, particularly during the ongoing energy transition and security concerns.
However, this gas relief package is expected to have an impact on electricity prices and electricity taxes for all consumers. To fund the support for gas-fired power plants acting as backup capacity, the government plans to introduce a new surcharge on all electricity customers. This surcharge, through a capacity mechanism, will finance plant operators to maintain reserve gas power capacity, ensuring grid stability. As a result, electricity prices are likely to increase for all consumers, as the levy spreads the cost among electricity users across the country.
The government has shown intentions to lower the electricity tax for all consumers as part of its coalition agreement to help reduce electricity bills. However, this tax reduction has not yet been fully implemented or included in the 2025 budgets, so its effect on electricity prices is currently uncertain and might not offset the additional costs from the gas backup financing.
The relief for gas customers will be achieved by the federal government financing the gas storage surcharge. This relief aims to reduce energy prices and, in addition, the government has also announced a reduction in network charges, a component of the electricity price. The exemption from costs of the gas storage surcharge will apply to both companies and consumers.
Criticism of this move comes from the Greens, who argue that it subsidizes fossil energies from the state budget. Representatives of the government factions in the Bundestag continue to advocate for a general reduction in the electricity tax for all consumers. SPD faction energy policy spokeswoman Nina Scheer reiterated the coalition agreement's provision for an immediate reduction in the electricity tax for everyone to the European minimum level. Union faction deputy Sepp Müller called for a general reduction in the electricity tax for all consumers, suggesting a potential 1% savings in the federal budget could be realized.
For a four-person household, the relief from the gas storage surcharge could be around €30 to €60 per year, depending on consumption. The cabinet is expected to decide on a change to the Energy Industry Act today, involving the federal government financing gas storage costs from the Climate and Transformation Fund (KTF) by the end of 2025.
In summary, while the relief for gas customers helps directly by reducing their immediate costs, it indirectly increases electricity costs for all consumers due to the financing of gas backup power plants through an electricity surcharge. The planned electricity tax reduction for all consumers could help lower electricity prices, but its impact remains limited or forthcoming due to budget constraints and prioritizing industry to secure jobs. This policy reflects a balance between providing targeted support to gas users and ensuring power supply stability by funding necessary gas power plants, but it comes with trade-offs affecting electricity prices broadly.
[1] Source: Bundesregierung, SPD, Bündnis 90/Die Grünen, FDP, and Union. [5] Source: Bundesministerium für Wirtschaft und Klimaschutz.
- Given the financial relief for gas customers and the upcoming surcharge on electricity to fund gas-fired power plants, there is a likelihood that the overall cost of electricity will increase for both businesses and general consumers.
- Despite the German Government's plans to lower the electricity tax for all consumers, its potential impact on electricity prices remains uncertain due to budget constraints and prioritizing industry to secure jobs, which might not fully offset the additional costs from the gas backup financing.
