Spending on the electricity system is rising faster than inflation

Between 2010 and 2024, spending on Germany’s electricity system increased in real terms by an average of 4.1% per year. On average across consumer groups, electricity has become more expensive than the general price level. Over the same period, the share of power system spending attributed to the electricity grid rose to 26%, and public spending has become increasingly significant.

In the analysis “Spending on the Electricity System in Germany – A Discussion of Historical Developments”, a team at the Institute of Energy Economics (EWI) at the University of Cologne examines how the components of system spending have evolved. The analysis differentiates between the overall level of spending, its use (generation/grid), and its allocation (private/public). The publication was commissioned by the Gesellschaft zur Förderung des Energiewirtschaftlichen Instituts an der Universität zu Köln e.V.

The share of spending on the electricity grid has increased

In 2024, total system spending amounted to 30 Cent₂₀₂₄ per kilowatt-hour (kWh) of electricity supplied through the general public supply, excluding self-consumption and direct imports from foreign utilities. Part of the increase in spending since 2010 is explained by the decline in electricity consumption by an average of 6.5 TWh per year. “Declining demand reduces capital utilisation and therefore raises economy-wide spending per unit of electricity consumed,” says Dr Philip Schnaars, Head of Research Area at EWI, who conducted the analysis together with Amir Ashour Novirdoust, Philipp Artur Kienscherf, Lisa Restel, and Philipp Theile.

Lower capital utilisation increases spending particularly in the electricity grid, because grid-related spending declines less with falling demand than spending on power generation does. Combined with rising investment in the transmission and distribution networks, this has raised the grid’s share of total spending from an average of 19% in 2010–2014 to 26% in 2020–2024.

Electricity system spending comprises several elements related to generation, retail, and networks, borne in part by private actors and in part by public actors. It is a political decision what share is ultimately carried by electricity consumers and to what extent public budgets subsidise the financing of the electricity system. In response to the energy crisis from 2022 onwards, public funds were used more extensively—such as through the electricity price cap (“Strompreisbremse”) and transfers to the EEG account.

In 2023, public spending on the electricity system exceeded revenues

To date, the electricity system spending associated with general supply has predominantly been borne by private actors. Since the start of the 2020s and accelerated by the energy crisis, public spending on the electricity system has increased. In 2024, public actors covered 24% of spending on generation and retail.

“With public actors take on a growing share of expenditure, a shift in the financing of the electricity system is becoming apparent,” says Dr Philip Schnaars. As a result, the public balance between revenues from the electricity system (e.g. the electricity tax) and expenditure on the electricity system turned negative for the first time.