While almost everyone thinks that the prices they pay for electricity are probably higher than they should be, people living in Germany have good reason to feel shocked. They’re now paying the highest prices in the European Union. 

Why is energy more expensive?

A typical household in Germany will pay 63.7% more for energy this year. But they’re the lucky ones that have existing contracts. Customers signing new contracts can expect to pay an eye watering 174.3% more. But why?

Since 2019, people have been spending more time at home. Remote working is now the norm and a combination of all this time in the house, along with two particularly cold winters means we’ve been using more energy than before. 

But the price hike doesn’t just come from us customers. A huge swathe of energy companies went bust in 2021 because suppliers agreed contracts to sell gas for less than it’s now costing them to buy. 

On top of all this, Germans need to deal with inflation. Inflation is when the purchasing power of a currency declines compared to the price of products. Germany’s rate of inflation rose again to 5.3% in February. According to Germany’s Federal Statistical Office Destatis, energy product prices had a big impact on the inflation rate.


Russia is exporting fewer resources

Russia is the world’s largest exporter of gas and they decide how much gas goes where, when it goes, as well as for how much. While this is difficult for Germany at the best of times, the Russia-Ukraine war has pushed energy prices even higher. 

The main reason for this is because half of all homes in Germany are kept warm by gas, 32% of which came from Russia in 2021. But it’s not just gas that Germany gets from Russia. 53% of coal and 34% of oil also came from Russia in 2021. 

But how does the war in Ukraine relate to your energy bills? Germany has condemned Russia’s actions, placed sanctions and cancelled a large gas pipeline project called Nord Stream 2. In response to this, Russia is exporting fewer resources to Europe, which drives up the prices and causes Germany to use their energy reserves, which are down to around 30%.

A global squeeze on energy

When a major provider like Russia decides to export less to Europe, countries like Germany have to look elsewhere. But that’s easier said than done because all of the world’s countries still need the same amount of energy. 

As a result, energy suppliers are having to look for resources in other countries. However, this global squeeze on energy means that countries that normally export resources are struggling to meet their own energy demands. That’s why countries like Indonesia banned all coal exports. 

Because the global energy market is a delicate web that relies on a handful of countries to supply most of the resources, political and economic upheaval like the pandemic and the war in Ukraine are a recipe for higher prices. 

However, even if the prices stay where they are, the German government is taking action by cutting surcharges on electricity prices, cracking down on profiteering companies and giving out one-time grants to struggling households. All the same, make sure you factor these higher costs into your monthly finances to avoid getting caught out further down the line.

What can I do to shield myself from high prices?

As much as we’d like to give you a one-trick-fix for high energy prices, it looks like things might get worse before they get better. Here are a few tips to help you weather the storm:

  • Consider changing to a new supplier if your old provider went out of business and another firm picked up your contract by default. Use price comparison sites to find a deal.
  • The market can change quickly, keep contracts short so you don’t get locked in at high prices for years.
  • Work out which appliances consume most electricity, sometimes it can be cheaper to replace old machines in the long run. 
  • If you own your own home, renewable energies and technology can reduce costs.