Electricity price development: Is the e-car still worth it compared to the combustion engine?

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Contribution picture Development of electricity prices

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Whether for business or private use, if you are thinking about purchasing an e-car or a plug-in hybrid vehicle, a comparison between the electricity price development and the fuel price development is obvious and interesting. Of course, e-mobility is not just about the low cost, but it is definitely an attractive advantage. A cost comparison between e-car and combustion engine is always a snapshot in which the e-car currently looks very good. However, every prospective driver of an electric vehicle also wants to benefit from the lower costs per kilometer driven in the long term. Especially in times when energy prices are rising significantly, consumers are unsettled. We take a step-by-step approach to the complex topic of electricity price development, look at the most important influencing factors and provide an overview in comparison with fuel price development. 

What is the composition of electricity and electricity prices in Germany?

 

switch electricity price comparison total energy mix germany 2020

According to the 2020 data collection on the Federal Mix 2020 by the German Association of Energy and Water Industries (bdew), the total energy carrier mix in Germany consists of 48.9% renewables, 12.4% nuclear power, 24.0% coal, 13.3% natural gas and 1.3% other fossil fuels. In the category of renewable energies, a further differentiation is made. A total of 44.9 % is renewable energy, financed by the EEG levy, 4.1 % is other renewable energy or renewable energy with a certificate of origin, which was not financed by the EEG levy, and 0.001 % is tenant electricity (electricity generated by the tenant, e.g. via solar panels on the roof), financed by the EEG levy.

How does the average electricity price of 36.19 ct/kWh in Germany in 2022 actually break down and where does what part of the price paid go? Overall, just under 40% of the price is accounted for by taxes, levies and charges; 22.35% by network charges and metering; and 37.72% by electricity generation and sales. You can find the overview in detail in our overview chart.

 

Note: The average price at the beginning of 2023 will be significantly higher than that for 2022, due to upcoming price increases by their electricity provider for many customers.

Electricity price development infographic Electricity price for households

Who determines the electricity price? Who has influence?

There is an answer to the question of who determines the price of electricity that is as simple as it is unsatisfactory: supply and demand. While there are various influencing factors, they all end up affecting supply or demand. Weather has a major impact with both predictable and unpredictable changes. For example, energy demand is significantly higher in the winter than in the summer due to heating. However, predictable weather influences are already very well absorbed by electricity suppliers. Sudden changes in the weather and catastrophic events can also influence supply, as can political events. In particular, political control of levies and charges in the direction of more climate protection is very likely. Force majeure is also quite topical. This includes events such as the pandemic, which no one expected. The price of electricity is therefore not determined by a specific body, but is rather based on a complex multifactorial interplay.

Electricity price development: Why has the electricity price increased?

Many people are keeping a critical eye on the development of electricity prices. What factors have an influence on the price of electricity is one thing, but asked specifically: Why has the price of electricity in Germany risen?


What are the influencing factors?

The latest electricity price development in Germany is primarily due to the long cold winter of 20/21, the pandemic and the Russian war of aggression against Ukraine, which caused the gas price to rise. In addition, the supply volumes in the gas market (from Russia) remain below the average of previous years, which prevented sufficient filling of the historically low gas storage levels.


The Russian War of Aggression against Ukraine

The price increases for both electricity and gasoline are understandably unsettling for many consumers. Until the war against Ukraine, Russia was a major supplier of oil and gas. Electricity was not sourced directly from Russia, however, in Germany we generate about 13% of our electricity from gas, much of which came from Russia in the past. Due to the absence of this gas, electricity prices on the stock exchanges fluctuate greatly, but one can speak of an average electricity price that is twice as high as before the outbreak of war. However, the issue must be viewed in a differentiated manner. On the one hand, it is clear that the price increases on the electricity exchange have not yet reached most consumers. To a large extent, this is also due to the stable long-term contracts of the electricity providers.

 

Measures taken by the federal government

In the wake of the loss of Russian gas imports, the German government took several measures to ensure security of supply. These included drastically accelerated storage of natural gas in gas storage facilities and support measures for the major gas import companies that lost gas supplies from Russia. Specifically, these were the gas storage levy, balancing levy, and gas procurement levy. The gas procurement surcharge was abolished again on 01.10.22, but the balancing surcharge and the gas storage surcharge are still included in the gas price.

 

Recreation after Corona

The pandemic and the accompanying lockdowns have hurt the economy. Fortunately, the worst is probably behind us and the economy is slowly but surely recovering. Of course, this is also accompanied by increased global demand for energy and raw materials. More demand means higher prices.

 

Fluctuations due to weather conditions

In 2021, a large number of French and German nuclear power plants were shut down. In addition, weather conditions meant that less electricity could be generated from renewables. The result was a greater focus on electricity from gas, which in turn increased demand for and ultimately the price of gas.

 

Development of theCO2 levy

The level of theCO2 levy is based on trading in emission allowances, the EUA (European Union Allowance). The market price has risen significantly in recent years, and since it is an important instrument for controllingCO2 emissions and thus for combating climate change, a significant easing is not likely here.

 

Development of the EEG levy

The reduction in the EEG surcharge introduced at the beginning of 2022 was intended to act as a kind of "stabilizer" for household electricity prices in the wake of rising exchange electricity prices. It therefore seems only logical that the EEG levy was lowered to €0 from 01.07.22, and completely eliminated from 01.01.23, in order to relieve the burden on both citizens and entrepreneurs.

Source: statista.com

The exact size of the electricity price increase is currently still being calculated. The price of electricity on the stock exchange is just one of many factors that ultimately add up to the price of electricity. In addition, the German government is currently negotiating various measures to protect end consumers from excessive price increases. It remains to be seen how the issue will develop.

What has been the development of electricity prices in Germany since 1998?

Since 1998, the average electricity price for households has increased significantly. It is very easy to see that it made a big jump between 2012 and 2014, then remained quite stable until 2018 and rose again somewhat in the last three years. Despite the elimination of the EEG surcharge, the electricity price is again at its peak in the second half of 2022. It is important to note that many long-term contracts are included here. New customers do not benefit from this price stability. According to Handelsblatt, the comparison portal Verivox quotes an average price of 48.16 ct/kWh for new customers as of November 22. This is almost 30% higher than the average price for all electricity customers in 2022. Fortunately, such high prices do not apply to all providers. For example, new customers in the basic supply at DREWAG will only pay a consumption price of 32.56 ct/kWh from 01.01.2023.

Electricity price development: Is the e-car still worth it compared to the combustion engine?

Electricity price development: What is the forecast until 2025?

It's sobering, but it's hard to make a real forecast at the moment. The market is very volatile and a lot of time will pass before 2025. As we have already noted, the development of electricity prices depends on several factors and is therefore even more difficult to estimate. For private consumers, the use of the EEG levy by the state as a kind of "stabilizer" for household electricity prices is definitely good and reassuring news, because it means that they are at least partially protected from the high fluctuations on the electricity exchange. However, this measure is initially planned for 2022; to what extent it will help by 2025 is very difficult to estimate. The average electricity price paid by private households is at its peak at the end of 2022, despite the abolition of the EEG surcharge. Customers can achieve price stabilization by using long-term oriented tariffs with reputable energy suppliers and avoid being exposed to short-term fluctuations. In principle, the use of energy contributes to climate change, which means that higher pricing here is fair to the cause and has a controlling effect, i.e. it makes perfect political sense.

Savings opportunities for entrepreneurs

Companies in particular have some savings opportunities that are becoming increasingly important as electricity prices rise. Intelligent energy products are geared entirely to their needs, i.e. they can be individually configured. Together with the companies, a complete energy solution is developed and implemented.

 

In general, an energy efficiency analysis is recommended. Here, potential savings are identified and implemented. Depending on the sector and size, between 5 and 20 % of energy can be saved in almost every company.

 

Let us recall the composition of the electricity price. It quickly becomes apparent that electricity procurement on the electricity exchange accounts for only a quarter of energy costs. There are various ways for industrial customers to be relieved. The best way to find out what you can do is to talk to your local energy provider.

Electricity price: country comparison in the EU

According to the figures for 2020 from Statista, Germany is the top performer in terms of electricity prices for households in the EU-27 countries. No country in the EU has more expensive electricity. This is probably due to the high levies, but it also means that Germany should be able to react flexibly to rising electricity exchange prices. If your company operates other locations in other EU countries, you should definitely look into local electricity prices. In a cost comparison between e-cars and internal combustion engines, e-cars perform well despite high German electricity prices; this is, of course, even better in an EU country with significantly lower electricity prices.

Comparison with petrol price development

In the case of gasoline price development, we see similarities to electricity price development. Here, too, it is a market price determined by supply and demand. However, the monopoly of OPEC+, an association of oil-exporting countries, has a significant influence on supply. Likewise, levies and tax measures are significant parts of the final price. Just like the price of electricity, the price of gasoline is difficult to predict. Over the last twenty years, both prices have more than doubled, so the trend is in the same direction. So, with reservations, we can give the all-clear for end consumers interested in an e-car: It is unlikely in the foreseeable future that the price of electricity will rise significantly, while the price of gasoline will stagnate or fall permanently. The monetary advantage of an e-car compared to a combustion engine will therefore in all likelihood remain. It is also important to note that the tax advantage of e-cars compared to combustion engines will continue to exist, thus providing you with additional benefits.

Interesting: At an average gasoline price of 194.3 cents in 2022 and an assumed consumption of 13.70 kWh/100km for the e-car and 5.10 l/100km for the combustion engine, electricity would have to cost 74.07 ct/kWh for an e-car and a combustion engine to travel the same distance for 20€.

Electricity price development Conclusion: Driving electrically is still worthwhile!

If you are interested in buying an e-car, a discussion on the topic of electricity price development compared to gasoline price development is obvious. There are various factors that influence the respective price. However, what you end up paying is largely determined by supply and demand and by levies and charges. Both prices behave similarly and have risen significantly over the last two decades. The energy crisis is also not going unnoticed by the topic of mobility. Regardless of whether you drive an electric car or a gasoline-powered vehicle, you will travel significantly less far for the same money than you did a few years ago. For entrepreneurs, it is particularly advisable to consider one or more of the savings options mentioned and arrange a personal consultation. As a private consumer, you will probably still be able to maintain the monetary advantage of an e-car per kilometer driven compared to a combustion engine, as we showed in our example calculation "range per 20€". You will also benefit from various tax saving opportunities with an e-car. Nevertheless, it is still worthwhile to keep a close eye on price developments.

 

If you have any questions on this topic, please contact us at frag@umschalten.de!

A contribution by Eric Wegner

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