Energy Poverty in Germany – Highlights of a Beginning Debate
Our latest guest article from Sören Becker, Kilian Kouschil and Matthias Naumann introduces the debate concerning energy poverty in Germany1, with a discussion of the risk factors that contribute to producing energy poverty.
The provision of infrastructure – until now a political instrument for the reduction of spatial and social disparities in Germany – is increasingly becoming an inequality-generating factor. Energy poverty, while illustrating the infrastructural dimension of poverty in Germany, raises the question of suitable political remedies.
Infrastructure in the grip of change
Infrastructure is a classical instrument of German regional and structural policy. The development of transport and communication networks is designed to connect places and regions while facilitating economic growth. The existence of a reliable energy and water supply system coupled with a well-functioning waste and wastewater management sector is a sine qua non for the settlement of people and the location of enterprises. This makes infrastructure provision an important service of public interest and a major contributor to the creation of equitable living conditions. Accordingly, Germany has made substantial investments in infrastructure improvement to balance disparities – for example between urbanised areas and structurally disadvantaged rural regions (Jochimsen and Hoegemann 1996).
However, this understanding of contemporary infrastructure provision and planning has been in crisis since the late 1970s (Graham and Marvin 2001). The public sector proved increasingly unable to finance the continuous upgrading of centralised and largely homogeneous networks. Moreover, infrastructure projects such as the construction of nuclear power stations or motorways came under criticism from consumers and environmentalists. This led to a change in the technical and political organisation of infrastructure. A salient feature of this process was the “unbundling” of what until then had been integrated infrastructure systems (ibid. 38ff.). Cases in point are the liberalisation of the German electricity market in 1998 and the separation of the German railway corporation into different entrepreneurial units in 1999. The British geographers Stephen Graham and Simon Marvin (2001) looked upon this trend as being accompanied by a general increase in social and spatial disparities which they termed splintering urbanism, i.e. the fragmentation of urban areas due to infrastructure systems no longer providing a universal service to all inhabitants, but rather relying on disparate approaches and forms of provision. Moreover, the change also affected the political priorities of infrastructure planning, which became increasingly biased in favour of commercial efficiency at the expense of social and structural policy concerns. In the process, infrastructure planning turned from an instrument of spatial and social cohesion into an indicator of social and spatial inequality.
Hence, poverty and infrastructure are closely intertwined. Low-income households have to forego services on account of high prices, are denied infrastructure facilities and have to content themselves with alternatives of markedly poorer quality. Cases in point are thinned-out local public transport systems, above-average sewage disposal rates and less efficient internet services in rural areas of Germany.
Lacking or restricted access to infrastructure is apt to aggravate existing social disadvantages. Citizens with no connection to telecommunications or transport networks find it harder to become politically involved or to make use of educational opportunities offered by the internet. This “cutting off from infrastructural networks” restricts citizens’ opportunities for participation in society (Kersten et al. 2012, p. 563). Thus, inferior infrastructure provision is not only a reflection of poverty. Rather, infrastructural disadvantages may also be the reason why people remain poor and have fewer opportunities than others. There are fears that existing inequalities may increase in the course of demographic change and the resultant depopulation and reduction of infrastructural options especially in rural areas (Naumann 2009).
The German energy sector is not only a reflection of the infrastructural shift that became a declared political goal as a result of the decisions on the turnaround in energy policy. Rather, the energy supply situation at the same time illustrates the infrastructure-related new social differences and disadvantages. This is also echoed by the current debate on energy poverty.
Energy poverty in Germany: are energy costs a “poverty trap”?
Energy poverty in Germany is a relatively new subject of investigation. This contrasts with other countries where it has been a subject of scientific surveys and political programmes for a number of years.
The energy poverty issue in Germany is closely related to the energy turnaround and the question of whether private consumers alone should have to bear the entire cost of the changeover to renewable energy sources (IASS 2013). According to a survey by the German Network Agency, German private consumers rank third in Europe in terms of electricity prices (German Network Agency 2013, p. 166). Average electricity prices for a three-person household have risen by almost 68 per cent over the last 15 years. There are large price differences between private and industrial consumers, with private households paying almost twice as much per kilowatt hour as businesses. Low-income households have to bear the brunt of the rise despite the fact that electricity consumption often increases in proportion to income growth (Kopatz et al. 2013, p. 60).
In 2013, the cost of electricity for private households averaged 28.8 cents per kilowatt hour (BDEW 2013), which translates into an expenditure of roughly 84 euro per month based on an annual average electricity consumption of 3,500 kilowatt hours per household. Approximately one quarter of this amount was attributable to the German Renewable Energy Act (EEG) surcharge and electricity tax combined while more than 20 per cent was accounted for by the network charge and 27 per cent by generation, distribution and profits (Schiffer and Gansler 2014, p. 8f.). This means that in 2011 roughly one quarter of German households was afflicted by energy poverty as they actually spent more than 10 per cent of their income on energy (Heindl 2013, p. 20). Given that electricity prices have further increased since 2011, this share is likely to have been topped2.
Apart from these relative indicators, another meaningful criterion for energy poverty is the number of supply stoppages (“power cuts”) ordered by utility companies (IASS 2013). Basic suppliers are entitled to interrupt their electricity or gas deliveries in the event of arrears in payment of more than 100 euro after a dunning notice followed by a repeated threat to terminate service. According to a survey of the German Network Agency (Bundesnetzagentur), in 2013 warnings of electricity supply termination were issued to 5.7 million private households in Germany while in regard to gas 1.1 million households were affected. The supply of electricity was actually interrupted to roughly 320,000 households while 39,000 were cut off from gas supply (Bundesnetzagentur 2013, pp. 134f. and 239f.). While no standard data is as yet available that would permit a spatially differentiated assessment of electricity or gas stoppages, energy poverty is presumed to occur in particular in big cities and structurally disadvantaged regions (IASS 2013, p. 6).
As a matter of fact, electricity prices between individual towns and regions vary significantly. Thus, basic suppliers’ rates in Eastern Germany are higher almost across the board. Likewise, above-average prices are paid by private consumers in Baden-Wuerttemberg, Rhineland-Palatinate and in the northern part of Schleswig-Holstein. While the bulk of electricity-related taxes and the renewable energy surcharge are governed by uniform rules applicable throughout Germany, there are regional differences depending on the electricity mix offered by the given operator and the applicable network charges (Schiffler and Gansler 2014, p. 8ff,) with particularly significant effects ensuing from the network charges which are levied by both the operators of supra-regional transmission systems and the regional local distribution grid operators for the feed-through of electricity and allocated to all consumers by way of network apportionment within the region. Given that the small number of large-scale users is often exempt from network charges, those hit hardest by the apportionment are medium-sized companies and private households. This accounts for the regional variations in network costs for all non-exempt users irrespective of which electricity provider they choose. In Eastern Germany above-average electricity prices overlap with high network charges.
Two reasons were identified by Schiffler and Gansler (2014) for the high network costs in Eastern Germany. One of them is the development of electricity generation from renewable energy sources. Network operating costs are increasing as a result of electricity feed-in variations and the required technical adjustment of supply networks. Another reason is the steady decline in the number of households in Eastern Germany, so that network costs in structurally disadvantaged regions have to be shouldered by ever fewer households. This leads to the conclusion that the turnaround in energy policy, demographic change and structural weakness in Eastern Germany have a mutually reinforcing negative effect.
Risk factors spawning energy poverty in big cities
By contrast, both electricity prices and network charges are on average lower in big cities than in peripheral rural areas. Transmission and maintenance costs are reduced on account of the higher population density of urban areas. This does not mean, however, that energy poverty is a rural phenomenon. As a matter of principle, the number of those afflicted by energy poverty grows in proportion to the density of low-income households, so that energy poverty tends to become a major issue in urban areas with an above-average proportion of such households. Particularly risk-prone in this regard are households with several children as well as the elderly, the sick and people in need of care, i.e. households that require more energy (Kopatz et al. 2013, p. 13).
However, high energy prices and low incomes are not the only reasons for energy poverty. Major other contributing factors are an energy inefficient building stock, obsolete and therefore uneconomical household appliances and thoughtless daily routines (ibid. p. 24). Moreover, energy poverty has self-reinforcing effects. It is especially low-income families that live in buildings with inadequate insulation, using less energy efficient household appliances. In addition, it is much harder for over-indebted households to change providers or cope with the additional costs associated with supply stoppages (ibid. p. 33ff.) An inadequate energy supply may also have negative health effects, which, in turn, may entail increased energy consumption.
Moreover, big cities are threatened by the “eco-social paradox” of social inequalities being aggravated by the ecological renewal of neighbourhoods (Holm 2011, p. 51) The energetic rehabilitation of buildings often entails – apart from its energy saving effects both relative and absolute rent increases by which low-income households are hit hardest. “Energy-related and social problem areas” emerge in those urban quarters (Färber and Flecken 2011) where buildings requiring cost-intensive rehabilitation are inhabited by low-income families. A survey made in Berlin identifies such problem areas in the city’s districts Neukoelln, Friedrichshain-Kreuzberg and Mitte where inhabitants, while grappling with the high energy costs associated with the poor state of repair of residential buildings, are existentially threatened by an increase in housing costs entailed by pertinent rehabilitation measures (ibid.). It is this very interaction between different levels of income, individual energy requirements and the given state of repair of residential buildings that speaks for a spatially small-scale approach to the energy poverty issue supplementary to comparative studies on regions and towns.
Heightened public awareness about energy poverty raises the question of how the problem can be tackled. Suggestions range from the introduction of social tariffs through the allocation without charge of an annual minimum of 500 kilowatt hours per person (Pomrehn 2013, p. 14) to the placing of statutory ceilings on the energy consumption of new household appliances on the Japanese example. Other novel technical solutions being discussed relate to prepaid systems for the supply of electricity to guard against households running up debts, i.e. systems which could be coupled with smart metering systems to encourage efficient energy use. Looked upon as key answers in an effort to ease the burden on low-income households are, apart from electricity saving checks and consultancy services for such households, adjustments to ALG II payment (standard unemployment benefit II) and the socially compatible rehabilitation of buildings as a means of improving energy efficiency (Kopatz et al. 2013, p. 13). Furthermore, there are calls for the creation of a nationwide Energy Poverty Commission (IASS 2013, p. 21) and of a National Programme against Energy Poverty (Kopatz et al. 2013, p. 251ff.). What is required first and foremost, however, is the introduction of a mechanism for the nationwide and territorially differentiated collection of reliable data on energy poverty.
BDEW, Bundesverband der Energie- und Wasserwirtschaft (2013): BDEW-Strompreisanalyse. Berlin.
Bundesnetzagentur für Elektrizität, Gas, Telekommunikation, Post und Eisenbahnen (2013): Monitoringbericht 2013. Bonn.
Färber, M. and U. Flecken (2011): Die soziale Dimension der Energieeffizienz. Am Beispiel energetischer Sanierungen in Berlin. Planerin 5, pp. 39–41
Graham, S. and S. Marvin (2001): Splintering Urbanism. Networked Infrastructures, Technological Mobilities and the Urban Condition. London/New York.
Heindl, P. (2013): Measuring Fuel Poverty. General Considerations and Application to German Household Data. Mannheim: Center for European Economic Research (ZEW discussion papers, vol. 13-046).
Holm, A. (2011): Stadtumbau und Gentrifizierung. Ein ökosoziales Paradoxon. Politische Ökologie 124, pp. 45–52
IASS, Institute for Advanced Sustainability Studies (2013): Beiträge zur sozialen Bilanzierung der Energiewende. Potsdam.
Jochimsen, R. and G. Högemann (1996): Infrastrukturpolitik. In: H. W. Jenkins (ed.) Raumordnung und Raumordnungspolitik. Munich/Vienna, pp. 196–223
Kersten, J., Neu, C. and B. Vogel (2012): Die demografische Provokation der Infrastrukturen. Leviathan 40 (4), pp. 563–590
Kopatz, M. et al. (2013): Energiewende. Aber fair! Wie sich die Energiezukunft sozial tragfähig gestalten lässt. Munich.
Naumann, M. (2009): Neue Disparitäten durch Infrastruktur? Der Wandel der Wasserwirtschaft in ländlich-peripheren Räumen. Munich.
Pomrehn, W. (2013): Armutsrisiko Energiewende? Mythen, Lügen, Argumente. Berlin.
Schiffler, A. and J. Gansler (2014): Regionale Strompreisunterschiede in Deutschland. Kurzgutachten. Leipzig.
This contribution is an abridged and slightly amended version of the article “Armut und Infrastruktur. Das Beispiel Energiearmut” to be published in No. 10/14 of the journal “Geographische Rundschau” (www.geographischerundschau.de).
Note here that unlike the United Kingdom, in Germany there is no data available on the required expenditures for different types of housing and households. The nationwide data used by Heindl (2013) rest on the representative Socio-Economic Panel (SOEP) that covers actual expenditures for different types of consumption in different income classes and social groups. Using this ex-post data might blur a tendency to underpay or overpay when using less or more energy that would be technically required to keep an apartment or a house adequately warm.