German Households Are Too Optimistic About Energy Costs and Too Pessimistic About Government Aid

Research

Researchers from the University of Münster and ZEW Mannheim asked around 400 customers of a price comparison website what their expectations were regarding the price development of electricity and gas and how they assessed the aid provided by the federal government in this respect.

The survey, which was conducted in November 2022, shows that the households underestimate the increased costs and thus may not sufficiently limit their energy consumption. “This result is particularly worrying given that saving gas is a central element of the federal government’s strategy. On the other hand, households have little confidence in the effectiveness of the federal government’s measures. Especially households in financially difficult or very difficult situations have problems understanding the effect of the measures or do not know how they work,” says Dr. Madeline Werthschulte, climate economist at ZEW.

The survey results show that in a scenario where households have to sign a new electricity contract in December, they expect on average an increase in expenditure of about 47.5% relative to their current expenditure. Against the background of wholesale prices in November 2022, this seems very optimistic.

Figure 1 shows how the customers of the website estimate the expected cost increases for electricity and gas. What is striking is not only how much the expectations differ, but also that about 34% of the respondents expect that electricity expenditure will not change or will even decrease. 85% of all respondents believe that expenditure on electricity will rise by a maximum of 100%. Expectations regarding the development of gas costs are also relatively optimistic. On average, the households surveyed expect an increase in expenditure of about 100%. Almost a quarter of households expect their expenditure on gas to remain unchanged or even fall.

On average, the households surveyed expect 16% of the increase in electricity costs and 19% of the increase in gas costs to be offset by policy measures. It is worth noting that 75% of households expect to be compensated for a maximum of 21% of their electricity costs. For gas costs, the same share of households expects a slightly higher maximum compensation, namely 25%. These rather pessimistic expectations are also reflected in the assessment of policy measures: 50% of respondents disagree with the statement that government measures are ambitious enough to ensure social cohesion.

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