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German government agrees to abolish renewables levy as energy prices skyrocket

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The German government approved a draft law on Wednesday, planning to abolish the Renewable Energy Source Act (EEG) levy that consumers pay with their electricity bills from July 1 this year. 

The plan, which was issued by the Ministry of Economy and Climate Protection, also includes legal amendments that would compel energy firms to pass on the cost savings to their customers and cut electricity prices. 

The draft bill will now be sent to the Bundestag, lower house of the German Parliament, for consideration. According to Germany’s basic law, the draft doesn’t belong to the three categories which affect the interests of the Länder (country), the consent of the Bundesrat (upper house) is thus not required.  

The levy was originally planned to be abolished in early 2023, but the ruling coalition decided to bring forward the elimination of the surcharge to mid-2022 in order to relieve the burden on electricity consumers as energy prices soar.  

In October, Germany's Federal Network Agency has reduced the renewable energy levy to 3.72 cents per kWh, down from 6.5 cents per kWh in 2021. The abolition of the levy is estimated to save a four-person household almost 300 euros on their annual electricity cost.  

The EEG-levy was first enacted in 2000 to fund the expansion of solar, wind, biomass, and hydropower plants in Germany and to compensate electricity producers for the gap between market pricing and market premium. 

Following the demise, the Energy and Climate Funds (EKF) will finance the deployment of more green capacity. The early abolition is expected to add approximately 6.6 billion euros (US$7.25 billion) burden to the fund. 

According to Germany’s Federal Network Agency, a total output of 5.26 GW was installed in the country in 2021 under the Renewable Energy Sources Act, bringing the cumulative grid-connected solar capacity to 56.3 GW.  

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