The burden of Germany’s energy transition
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Date
2015
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Abstract
Germany’s energy transition has been accompanied by a near doubling of power
prices for private households since the outset of the new millennium. Millions of poor
households and those that are close to the poverty threshold are likely to suffer from these
increases in electricity cost. Focusing on low-income households, this paper illustrates the
distributional implications of Germany’s energy transition by investigating their electricity
cost burden between 2006 and 2012, using panel data from the German Residential Energy
Consumption Survey (GRECS). Our estimates suggest that in 2012, on average, households at
poverty risk allocated 5.5% of their income to power and, hence, paid nearly as much for
covering their electricity consumption as for heating purposes. Given Germany’s ambitious
targets to expand the share of costly renewable technologies in electricity consumption to
50% in 2030, which has broad support among the electorate, it is to be expected that
households’ expenditure for power will increase in the upcoming years. As it is likely that
Germany continues its widely recognized energy policy, this raises the urgent question of how
to mitigate the regressive impact of further increasing electricity prices on poor households.
Direct cash transfers are suggested here as a non-distortionary instrument for easing the
burden of high prices, one that is directly targeted at those endangered by energy poverty.