A Consumer Revelation: Dynamic Electricity Tariffs Largely Unknown

2024-12-05
81% of Germans are unaware of dynamic electricity tariffs, reveals vzbv. Learn about dynamic electricity tariffs, and how they could shape the future of electricity prices and energy providers in Germany.

The Federation of German Consumer Organizations (vzbv) commissioned Forsa to survey a representative sample of approximately 1,000 adults in Germany in July. Similar surveys were conducted in both 2021 and 2023. In the most recent poll, 81 percent of respondents admitted to having little to no knowledge about dynamic electricity tariffs. Over half were entirely unaware of such electricity tariffs. Projected onto Germany as a whole, this equates to 19 million households with no or minimal information on dynamic electricity tariffs. In a dynamic tariff model, energy providers pass on the market's fluctuating electricity prices to consumers. These fluctuations can result in low prices at times, but they can also spike, making consumers both the beneficiaries of low-cost electricity and at risk of high prices. Hence, both the potential for low costs and the risk of high prices rest squarely with the customer.


Dynamic Electricity Tariffs: Beneficial Even Without Shift in Consumption

By 2025, energy providers will be required to offer at least one dynamic electricity tariff. According to a report commissioned by the vzbv from the Forum for Ecological-Social Market Economy, such dynamic tariffs can benefit private households—even those with low energy consumption shifting potential. The authors of the report compared various dynamic electricity tariffs and fixed tariffs for sample households with different electricity tariffs. They focused on a period when electricity prices sharply fell and slightly increased but never reached the levels of the beginning of the year. While this scenario seems advantageous for dynamic electricity tariffs, the results were mixed. For only some sample households, dynamic tariffs were somewhat cheaper than the best-fixed prices. However, the report also noted that during times of rising electricity prices, the opposite scenario could occur. An example calculation for this was not available, though.


For the vzbv, this yields an overall optimistic assessment of dynamic electricity tariffs. "With dynamic electricity tariffs, consumers can participate in the energy transition and benefit directly from low electricity prices on the stock exchange markets," says Jutta Gurkmann, Head of Business at vzbv.


Greater Transparency for Dynamic Electricity Tariffs Proposed

A major issue with many dynamic electricity tariffs, according to the vzbv, is the lack of transparency in price formation and the complex tariff structure. "Each provider can design their electricity tariffs differently, which makes comparison difficult," says Gurkmann. Hence, vzbv advocates for minimum standards of information on dynamic electricity tariffs. Guidelines should be implemented for comparison portals to optimally compare fixed-price contracts and dynamic contracts. The report suggests comparing historical data from the past 12 months to meet the information provision requirements—a manageable task, but one with limited predictive value for the future. For comparison on electricity comparison portals, the report suggests presenting "realistic scenarios over longer periods." However, how one should create "realistic scenarios" for a commodity as volatile as electricity, subject to world market and political developments, is left unspecified.


Consumer Organization Advocates for Dynamic Electricity Tariffs with Price Protection

In addition, the vzbv demands that energy providers offer tariffs that include protection against "exorbitant price increases." Price peaks can occur if energy prices unexpectedly rise, as witnessed in 2022. Such safeguards "would make dynamic tariffs more attractive to additional consumer groups," says Gurkmann. Despite this, the authors acknowledge that such protection is likely limited, "otherwise, providers risk being unable to cover their costs." This limitation was not mentioned by the vzbv. Whether these so-called protective electricity tariffs are still cheaper than fixed tariffs overall remains unclear in the report.

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