What will change in electricity and gas prices in 2024?

Energy - What will change in electricity and gas prices in 2024?

Household customers will see some changes to the cost of electricity and gas in the new year. For example, the energy price brakes, which cap the price for a large proportion of consumption above a certain level, expire at the end of the year. Grid charges for electricity will also increase significantly.

For gas, the CO2 levy will be increased at the beginning of the year. In addition, the VAT reduction for gas and district heating will be abolished on March 1. Both will be taxed at 19 percent instead of seven percent.

The wholesale prices for electricity and gas, which have fallen again in the meantime, provide some compensation. As a result, many suppliers have announced a price reduction at the turn of the year.

Electricity: basic suppliers announce price cuts

These include many basic suppliers, i.e. the energy companies that supply most households in a grid area with electricity or gas. These are often municipal utilities. According to the comparison portal Verivox, they have announced an average price reduction of 13 percent in their basic supply and special tariffs at the turn of the year.

"For a three-person household with an annual consumption of 4,000 kilowatt hours, this corresponds to a reduction of around 283 euros per year," explains Verivox energy expert Thorsten Storck. At the same time, however, 83 increases averaging 6 percent were announced. This means additional costs of 93 euros for a typical household.

It should be noted that only 24 percent of the total consumption volume of household customers is still supplied via a basic supply tariff. However, according to the Federal Network Agency, the basic suppliers still have a "strong position" in their distribution areas: They supplied a further 37 percent of household electricity via contracts outside the basic supply.

According to the comparison portal Check24, grid fees are rising by around 32 percent. For an annual consumption of 5,000 kilowatt hours, this means additional annual costs of EUR 163. According to Check24, the price differences between the basic supply and alternative providers remain large: the average price for the basic supply will be just under 44 cents per kilowatt hour in future, while the average price for alternative providers will be just under 30 cents.

Downward trend in exchange electricity prices

The wholesale price plays an important role in the end customer price. "The downward trend in exchange electricity prices has continued in recent months," says electricity market expert Mirko Schlossarczyk from the consulting firm Enervis. He cites lower coal and gas prices as reasons for this. The expansion of capacity and the feed-in of electricity from renewables also increased noticeably in 2023. Electricity consumption is also significantly lower than in the previous year.

In the coming months, the price level will consolidate or continue to fall slightly. "Electricity prices for supply in the coming months and for 2024 as a whole are currently consistently below EUR 100 per megawatt hour." The last time there was a price level like this on the futures market was over two years ago. However, uncertainties remain. For example, it is almost impossible to make precise feed-in forecasts for renewables. The crisis mode in the gas market is also far from over. Rapidly rising gas prices would immediately be reflected in rising electricity prices.

Expert: End customer prices could fall

For household customers, Schlossarczyk expects end customer prices to remain the same or fall further in the coming months under normal circumstances. "This should be more apparent for existing customer contracts than for new customer contracts due to the different procurement strategies of suppliers."

The price reductions of the last few months have already been largely taken into account there, so this effect should be less pronounced. However, the noticeable increase in grid fees will have the opposite effect. "This will affect existing and new customers alike from January 2024."

Gas: Basic suppliers announce price reductions

As with electricity, there are also a large number of price reductions among basic gas suppliers. Verivox counted 500 with an average reduction of 15 percent. This contrasts with 56 increases averaging 12 percent.

Check24 expects gas costs to average EUR 2537 in 2024 for an annual consumption of 20,000 kilowatt hours, 17% more than in 2023, which corresponds to EUR 370. At EUR 217, the largest share of this is due to the VAT rate being raised again from 7% to 19% on March 1. The model calculation also shows higher costs due to the abolition of the gas price brake and the higher CO2 levy. Network usage fees, on the other hand, fell slightly, according to the report.

Wholesale gas prices also fall

Wholesale prices also play an important role in the end customer price for gas. "Wholesale prices in the gas market are currently falling significantly," says gas market expert Sebastian Gulbis from the consulting firm Enervis. The reasons for this include well-filled gas storage facilities and a sufficient supply of liquefied natural gas (LNG) and Norwegian gas.

"If we continue to have warm weather and no other markets in the world enter into competition with us for LNG, we could get through the winter relatively relaxed." However, if it gets very cold and there is less LNG available for Europe, prices will shoot up again. "The crisis situation is not over yet; Russian gas has not yet been fully replaced in Europe and Germany."

Gas end customer price depends on procurement strategy

According to Gulbis, what this means for end customer prices for household customers depends heavily on the procurement strategy of the energy companies, as is the case with electricity. If, for example, suppliers have repeatedly secured long-term tranches for the coming year over the past 12 months, this could mean higher prices than with shorter-term procurement. The reason for this is that prices were significantly higher at the beginning of this period than recently.

"This means that in the current falling market, it may well be worth switching suppliers." It could be problematic for older contracts that were concluded at the end of 2022, for example, and are still valid next year. These would sometimes be above the price brakes that are now expiring. "This could result in high costs for certain customers," says Gulbis.

Consumer advice center: Check supplier change

The consumer advice centers advise electricity and gas customers to consider switching providers due to the additional costs announced for 2024. "Consumers should definitely check a tariff portal to see how much they could save by switching," said Christina Wallraf, energy expert at the consumer advice center in North Rhine-Westphalia, to the German Press Agency.

"Households should check: How much am I paying at the moment? What is my notice period? How long is my contract still running for?" said Wallraf. Anyone who is satisfied with their current provider can also enquire about other tariffs there and switch to a cheaper tariff if necessary.

For new contracts, the consumer advice center recommends a term of 12 months. In the case of bonus tariffs, consumers should check the conditions under which the bonus is paid out. Consumers should also make sure that they do not end up with a dubious provider. Households can do an internet search to find out whether there have been problems with a provider in the past.