Germans easily pay twice as much as many Americans for a kilowatt-hour of electricity. But, German households actually pay less per month on their power bills according to analysis published this week by Craig Morris at the German Energy Transition (Energiewende).
According to Morris and his co-analyst Thomas Gerke*, household power bills were 8% lower in Germany compared to the United States in 2013 ($101.46 versus $110.20 per month). Briefly stated, this outcome was due to the fact that Germans use around one-third the amount of electricity per household compared to the United States. In turn, Germany's higher electricity rates do not mean higher household power bills.
This analysis makes the important point that comparing the cost of electricity between countries is not as easy as comparing per-kilowatt-hour prices.
A closer look at the numbers
In the comparison presented, Morris and Gerke used data from the U.S. Energy Information Administration and German Association of Energy and Water Industries (BDEW) to calculate a “purchasing power parity” conversion metric for comparison. Their hope was that this type of comparison would temper the impacts of changes in exchange rates between the USD and the Euro, which would be seen strongly in a traditional calculation using exchange and discount rates. According to Morris:
“converting at [the real exchange rate] and Germans only pay around 92 dollars a month for electricity compared to the US average of 110 dollars…even at the higher exchange rate from 2014, German power bills would still only come in right at around 110 dollars.”
By using purchasing power parity to compare household electric bills, this analysis found that “the average German power bill squeaks in at the lowest level of any US census region.” In a state-by-state comparison, data from the EIA and BDEW revealed that German households pay less than per month the average household in 45 of the 50 states (all except Colorado, Utah, Illinois, Maine, and New Mexico).
But, is the comparison between German and U.S. household energy this clear cut? Or should one consider other factors before drawing conclusions? Let’s take a look at three possible confounding factors – home size, appliance use, and electricity costs associated with goods and services in Germany.
Home size and appliance use
The average family home in Germany is less than half the size of the average American home at about 1,000 versus 2,400 square feet. Furthermore, American homes are getting larger over time, with higher ceilings that result in more volume (and more energy) to heat and cool. According to the U.S. EIA, the largest homes are being built in the coldest areas of the country with the average home built in the 2000s being about 27% smaller in the southern and western United States compared to homes in the northeast and midwest.
Not only do American homes have more volume to heat and cool, but Americans are much more likely to have air conditioning systems in their homes. While the percentage of US and German households with other common appliances appears similar, clothes dryers are found in only 40% of German households compared to 83% in the United States according to Morris and Gerke*.
That being said, Morris notes that even by removing air-conditioning costs from the equation, German household bills would still be on par with the United States.
Electricity costs associated with goods and services in Germany
Using Morris’s values results in an annual power bill on the order of $1218 for German households. However, in an article presented by the earlier this month, Robert Zubrin at the National Review reported “a yearly bill of $1,700 per person, experienced either directly in utility bills or indirectly through increased costs of goods and services” for German households. This calculation raises an interesting point about indirect impacts by including both direct home energy use (at a residential rate) with the concept of indirect costs for goods and services (calculated using industrial electricity rates). However, the article unfortunately did not present similar figures for the United States using their methodology. It also did not quantitatively consider the indirect impact on German exports.
For home power bills, a press release from BDEW last month revealed that the average monthly power bill for homes in Germany decreased in real terms from 2013 to 2014.
Rates Are Not Enough
In a twitter discussion regarding this topic, University of Texas Professor and Deputy Director of the UT Energy Institute, Dr. Michael E. Webber noted that the concept of higher-prices-but-lower-bills has also been seen in the Lone Star State. According to Dr. Webber, some Austin Energy customers lowering their bills despite higher rates because of energy efficiency investments:
These comments and Morris's discussion both support the argument that comparing electricity rates is not enough. Rather, one should consider how much it costs to meet household energy needs and the factors that influence these values in order to make a more accurate comparison.
*Craig Morris was the lead author of the referenced article. Thomas Gerke made the chart comparing US and German power bills.