Electricity Prices Set for Change: When Will Households Pay Less?

In a recent agreement between political parties, including the CDU/CSU and SPD, there is a growing consensus on the need to lower electricity prices for households in Germany. Current rates have reached around 28 cents per kilowatt-hour (kWh) for new customers as of mid-March 2025, with many consumers facing costs between 30 to 40 cents, depending on their provider. This situation has prompted calls for action from both the public and business sectors.

The parties have identified a significant opportunity to reduce electricity costs by proposing a reduction in the electricity tax to the EU's minimum legal requirement. This would decrease the tax burden on households from the current rate of 2.05 cents per kWh to just 0.1 cents. However, such a reduction could lead to substantial budgetary challenges for the federal government, as it would drastically cut tax revenues, which were projected at 6.8 billion euros in 2023. Estimates suggest that revenues could drop to between 400 to 500 million euros if the tax is lowered.

Despite these financial implications, the CDU/CSU and SPD aim to lower overall electricity prices by at least five cents per kWh. This initiative would not only stem from reduced electricity taxes but also involve significant cuts to network charges, which are expected to be halved. Furthermore, the parties plan to extend and expand compensation initiatives for energy-intensive industries.

The transition to renewable energy sources is a crucial factor in achieving lower electricity prices over time. While wind and solar energy can generate electricity at relatively low costs, the significant investments required for the necessary infrastructure and grid transformations are a barrier. Current estimates indicate that the expansion of the electricity grid could cost around 651 billion euros.

Market trends indicate a gradual decline in electricity prices over the coming years. Reports show that prices for future energy deliveries are expected to decrease, with projections suggesting a reduction of 13 euros per megawatt-hour by 2029 compared to 2026 rates. This trend hints at a potential long-term benefit for consumers as the investments in renewable energy begin to yield results.

Experts predict that by the end of the decade, approximately 80% of Germany's electricity will be sourced from renewable energy, making it essential for the government to prioritize these initiatives to achieve lower costs for consumers.