The distribution of renewable energy policy cost amongst households in Germany – and the role of energy efficiency policies

We explore historical trends of household electricity prices and consumption in Germany and show that, whilst prices have risen, consumption has largely remained stable in the last 16 years, indicating that the average household was not able to compensate higher prices by reducing the amount of electricity consumed. Data from the German Income and Expenditure Survey (EVS) is applied to the EEG surcharge to show its effect on different household types. We show that those groups with the largest consumption of electricity often face the smallest relative burden due to the EEG surcharge, as they can compensate with their relatively large income. Groups with little discretionary income, such as low-income households, the unemployed and single parents face the highest relative burden, although the amounts they consume are not large in absolute terms. In light of our findings, we review the provisions relating to energy expenditures in the German social security system. We then go on to examine the main energy efficiency policies that are implemented and planned in Germany relating to buildings and electricity consumption/appliances. Results indicate that those policies do have the potential to reduce the burden imposed by the EEG surcharge. Furthermore, the combined effect of the EEG surcharge and those policies turns out to be nearly proportional. On the one hand, this shows that energy efficiency measures are not only relevant climate and energy policy instruments, but can also serve distributional goals. On the other hand, we highlight that the result regarding their positive distributional effects only holds if indeed these measures are taken up also by low-income households. Therefore, it is crucial to monitor the beneficiaries of energy efficiency measures in the evaluation of these policies and if necessary design more targeted approaches.