Strompreis May 25: Deutschlands Energiewende braucht Merit-Order-Reform

Germany faces persistently high electricity prices as gas costs remain elevated due to geopolitical tensions, particularly the Iran conflict. The Merit-Order principle currently determines power prices based on the most expensive energy source—typically gas—which inflates costs across the entire grid. Research from the Energy Economics Institute (EWI) and the Institute for Macroeconomics (IMK) reveals that electricity costs could be reduced by billions annually through targeted reforms. Spain and Portugal have already implemented alternative models that decouple gas prices from overall electricity pricing, offering Germany a proven pathway to lower consumer bills and enhanced energy security.

How Merit-Order Pricing Drives German Electricity Costs

The Merit-Order principle ranks energy sources by production cost, with the most expensive source setting the price for all electricity. Currently, gas-fired power plants determine Germany’s electricity rates, even though renewables and coal produce much of the supply at lower costs. This system means consumers pay premium prices regardless of the actual energy mix feeding the grid.

Gas prices remain high due to global supply constraints and geopolitical risks. The Iran conflict has kept international gas markets tight, pushing German wholesale prices upward. Gas-fired power plants now determine electricity prices across the entire market, creating artificial inflation in consumer bills.

Spain and Portugal’s Alternative Model

Spain and Portugal implemented price caps that decouple gas costs from electricity pricing. These countries limit the price gas-fired plants can charge, preventing expensive fuel from inflating the entire market. The result: consumers pay significantly less while energy security remains intact.

Spain and Portugal demonstrate how targeted measures could massively reduce German electricity prices. Their approach protects consumers from volatile gas markets while maintaining grid stability. Germany could adopt similar reforms to shield households and businesses from price shocks.

Potential Savings and Economic Impact

Economic research suggests Germany could save billions annually by reforming the Merit-Order system. The EWI and IMK independently calculated that decoupling gas prices from electricity rates would significantly lower consumer costs. These savings would benefit households, manufacturers, and the broader economy.

However, German energy policy has not embraced these reforms despite mounting evidence of their effectiveness. Political resistance and concerns about market distortion have slowed adoption. Without action, German consumers will continue paying premium prices while neighboring countries benefit from cheaper electricity through alternative pricing models.

Path Forward for German Energy Policy

Germany must evaluate whether Merit-Order reform aligns with its energy transition goals. Policymakers face pressure to balance market principles with consumer protection and industrial competitiveness. The success of Spain and Portugal’s models provides a compelling case for policy change.

Reforming electricity pricing could accelerate Germany’s renewable energy adoption by reducing overall system costs. Lower electricity prices would improve household budgets and strengthen manufacturing competitiveness. The technical and economic feasibility has been proven; political will remains the primary obstacle to implementation.

Final Thoughts

Germany’s electricity prices remain artificially inflated by the Merit-Order principle, which allows expensive gas to set rates for all power sources. Spain and Portugal have proven that alternative pricing models can reduce costs by billions annually while maintaining grid stability. German policymakers must seriously consider Merit-Order reform to protect consumers, strengthen industrial competitiveness, and support the energy transition. The evidence is clear: change is both economically justified and technically feasible.

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