Taxes and renewable energy surcharges raise the cost of wind power

Taxes and renewable energy surcharges raise the cost of wind power
European Member State market shares for total installed capacity (GW). Credit: EWEA, 2014.

On 22 April 2015, it is world Earth Day. The idea is to raise awareness of the need to rely on renewable energy. The EU requires its member states to provide a a 27% share of renewable energies by 2030—up from a 23.3% share of the overall electricity generated in Europe in 2012. Thus, wind power is on the rise. But its success depends on European countries' renewable energy policies, which have a knock on effect on raising electricity bills.

There are various reasons why some countries prioritise . "Of course, there needs to be wind," says Poul Erik Morthorst, head of the management engineering division at the Technical University of Denmark, in Roskilde. Moreover, "When it all began, there was strong local interest for wind power in some countries," particularly in Denmark, Spain or Germany, he adds.

Meanwhile, there was political will to financially support these activities. Germany and Spain have thus the largest installed wind energy capacity in Europe. This creates a divide in Europe between countries who have a wind power policy and those which don't.

In turn, a country's renewable energy policy has an impact on people's bill. As a result, consumers in Denmark, Germany and Spain pay the highest electricity prices in Europe.  In Denmark, "a large part of the retail prices is tax", says Morthorst. "Wind power has not yet reached grid parity everywhere. In these cases, it is still more costly than fossil fuel based power," says Barbara Breitschopf, expert for energy policy at the Fraunhofer Institute for Systems and Innovation Research in Karlsruhe, Germany.

Moreover, the surcharges added to consumers' bills to support subsidies provided to developers of green energy, increase the electricity price for final consumers, Breitschopf explains. Yet, when there is a lot of wind power this may measurably reduce the electricity price at the stock market. But in Germany, for example, "This price decreasing effect does by far not compensate the increase of electricity prices from the surcharge," she adds.

Taxes and renewable energy surcharges raise the cost of wind power
Source of data: Eurostat. The map shows difference of prices of electricity in different countries in 2014. From light to dark, the colours indicate prices from a minimum of 0.0552€/kWh to a maximum of 0.3042€/kWh (without taxes).

An expert agrees. "Customers do not feel the benefits of declining wholesale prices because they are wiped out by increasing taxes and policy support costs," says Giuseppe Lorubio, head of the unit retail customers at the union of the electricity industry in Europe Eurelectric, in Brussels, Belgium. He believes, as renewable support rises, policy support costs will likely exceed taxes in some countries soon and, therefore, calls for "market based and cost effective" support schemes.

While acknowledging that for should be "market compatible", Morthorst  stresses that such advantages including no local pollution, no CO2 emissions and the security of supply are usually "not calculated into the price". Overall, "The benefits of wind power are larger than the drawbacks," he concludes.

Taxes and renewable energy surcharges raise the cost of wind power
Credit: Sebastiano Pitruzzello

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Apr 22, 2015
I always sit back in awe that no one cares when the Government blows a billion dollars on building a gas plant and handing it over to a company to run, then pays for the power it produces.... but if even one dollar goes to help pay for renewable energy everyone screams and yells as if they were murdering someone.


Apr 22, 2015
Taxes and surcharges raise the cost of ALL power.

Apr 23, 2015
no CO2 emissions and the security of supply are usually "not calculated into the price".


That's because the construction and production of wind power does produce CO2 emissions. Just not directly, but due to the manufacture of steel and concrete, and all the work needed to set it up. Trucks and trains don't run on the holy spirit. It's actually higher than the CO2 output of things like nuclear power or hydroelectric power.

And the security of supply? How is there any security of supply in a form of energy that depends on the weather and large international grid-ties to balance out the variations?

You cut one major power line and Europe goes dark, like in 2006.

I always sit back in awe that no one cares when the Government blows a billion dollars on building a gas plant and handing it over to a company to run, then pays for the power it produces....


Wouldn't that be because they largely don't?

Or would you like to give a particular example

Apr 23, 2015
While at first glance high cost for electricity may seem like a bad thing it does have its benefits. When consumers buy appliances energy efficiency becomes one of the most important aspects. Sometimes still serviceable appliances are exchanged for more efficient ones because it makes economic sense. This way the energy- (and with it the carbon- ) footprint is reduced. (This is important because just having these products on the market means nothing - they must be the ones that the majority use to have an effect. Therefore it is vital to get them into people's homes as fast as possible)

In turn this forces producers to change their products to be more energy efficient if they want to be competitive. It's not like they can't do this - just that they didn't do it in the past because there was no profit in it.

Apr 23, 2015
but if even one dollar goes to help pay for renewable energy


It's not just a few dollars.

In a country like Germany the private energy sector hovers around 2-3% GDP while the public government renewable subsidies amount to about 8% of the GDP.

They're spending four times as much money on renewables, and produce about four times less energy with them. That's because the subsidies are way over-generous and nobody has any incentive to improve the cost-effectiveness of the renewable sources.

Apr 23, 2015
When consumers buy appliances energy efficiency becomes one of the most important aspects.


Ah. So that's why they had to ban incandecent lighbulbs instead of just waiting for people to get the message in their utility bills.

Or is it rather because the energy-saving measures often lead to reduced utility, like washing machines doing a worse job washing at 30 C instead of 60 C, or bad light quality out of more expensive CFL or LED bulbs etc. etc. and the people don't actually want them, choosing not to buy them unless forced to.


Apr 27, 2015
"Energy star" washers and driers actually use more energy than 30 years older models. You have to spin twice and then dry for 2 hours to dry a load of clothes the same size. In some cases you can hang your clothes on a line and have them dry faster than the "energy efficient" appliance does the job, which may well be the government's intentions all along.

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