During the period 2008-2012 the average EU electricity retail price for the EU-27 has:
increased for household consumers on average by 18%, from 0.1668€/kWh at the end of 2008 to 0.1966 €/kWh in the second semester of 2012,
increased for industry consumers by 17%, from 0.1250 €/kWh to 0.1466 €/kWh in the second semester of 2012.
The countries that have experienced the strongest rise during this time period are Lithuania, Spain, and Cyprus102 for households, and Portugal, Latvia, and Lithuania for industrial consumers. In the case of Lithuania recent market developments and in particular the shutting down of the Ignalina nuclear power plant, which was the country’s main producer of electricity, may have impacted prices. Due to the technology used, many safety concerns were raised with regards to its functioning. The shutting down of the plant was agreed as part of the accession agreement stipulated between the country and the European Union, which in turn provides financial assistance for the decommissioning of the plant.
In the case of Portugal, significant renewable energy investments have led the country to become one of the prominent players in the field in Europe. However, the costs of these investments have been transferred to retail prices, leading to significant price increases.
Pricing situation in the 2nd semester of 2012103
Figure 70 and Figure 71 show household and industry electricity prices in H2 2012. Top segments represent the amount of taxation, including VAT, while dark blue triangles show the level of prices in Purchasing Power Standards (PPS)104, allowing to better judge discrepancies among Member States in terms of living costs and general price levels.
The EU average electricity price for households including all taxes in H2 2012 was 0.1966
€/kWh, ranging from 0.0955€ in (Bulgaria) to a maximum of 0.2972€ (Denmark), while for industry the average electricity price it was 0.1412 €/kWh, ranging from 0.0915€ for (Finland) to 0.2732€ in (Cyprus). The highest electricity prices in Euro for both households and industry consumers are therefore found in Denmark and Cyprus, respectively.
102 Latest data available at the time of writing.
103 Eurostat data categorize consumers by predefined annual consumption bands. Here we have selected medium size consumers for both domestic (Band DC: 2,500 kWh < Consumption < 5,000 kWh) and industry (Band IC:
500 MWh < Consumption < 2,000 MWh) end-users.
104 Purchasing power standard (PPS) is an artificial common currency based on purchasing power parities derived from the GDP (gross domestic product) of each Member State.
Figure 70: Household electricity prices including all taxes for 2nd semester 2012
Source: (Eurostat 2013)
Figure 71: Industry electricity prices including all taxes for 2nd semester 2012105
Source: Eurostat (2013)
In PPS, electricity for domestic consumers is most expensive in Cyprus, Germany, and Poland, while for industrial consumers it becomes most expensive in Cyprus, Malta, and Italy. On the other side, the lowest electricity prices in PPS are found in Finland, France, and Luxembourg for domestic consumers and in Sweden, Finland, and France for industrial consumers. Both Finland and France have a high share of nuclear electricity, which helps keeping prices low (though some argue that these prices are kept artificially low, as they do not sufficiently take into account future costs of decommissioning plants and processing nuclear waste).
105 VAT and certain other taxes are recoverable for industry.
In all configurations, retail electricity prices are found to be very high in Cyprus. It can be argued that this might be due to the high level of fossil fuel imports which constitute the bulk of energy production patterns in Cyprus (see Section 0). The same may hold for industrial energy prices in Malta and Italy, which both have a high share of oil and gas in electricity production. As a result, when analysing individual Member State profiles it will be important to take into account not only the regulatory framework and the market conditions, but also the relevant energy mix used for electricity production. More insights into the relationship between energy mix and retail energy prices will be provided in the sections below.
It is interesting to note how the situation changes when comparing between prices in Euro and PPS, which acts as an indicator of the actual price level across countries. The differences are particularly noticeable for most new Member States; their ranking is almost inverted.
Based on these data, the following observations can be made:
The price of electricity for domestic consumers is generally higher than for industrial consumers (on average 30% across all Member States).
The share of taxes and levies (including VAT106 and other taxes) for the EU-27 is on average 30% for domestic consumers and 34% for industry consumers107.
According to Eurostat (2013), between the second semester of 2011 and the second semester of 2012 Cyprus and Greece have experienced the largest price increase for domestic consumers, while Italy and Bulgaria experienced strongest price increases for the industry sector.
Cyprus’ strong reliance on oil for electricity production has obviously a direct impact on end-user prices. In Greece, the recent transition from regulated to non-regulated markets along with increased taxation hit consumers the hardest. In Italy and Bulgaria a combination of strong reliance upon energy imports and tax increases has contributed to the price increase.
Evolution of retail electricity prices in comparison to wholesale prices (EU-15) Figure 72 below shows the evolution of average retail electricity prices in EU15 in comparison with wholesale prices for the main electricity power exchange in Europe (Vasa ETT 2013). According to the authors of the Vasa ETT report, EU15 countries experienced a 40% decrease in wholesale electricity prices following the 2008 financial crisis, while retail prices remained more or less stable throughout the period analysed. It can be assumed that before 2009 both wholesale and retail prices increased and readjusted to lower levels throughout 2009.
Wholesale prices were particularly volatile between September 2009 and March 2010. The high increase in wholesale prices in December 2010 was due to the very cold weather of that year in many Member States and to economic growth that increased energy demand.
Cold weather affected prices in such a way that base-load prices were higher than average retail prices at different time in the winter of 2009 and 2010. In comparison, retail prices remained mostly stable throughout the period analysed, slightly decreasing between 2009
106 It has to be noted, though, that some taxes and levies included here, in particular VAT, are typically recoverable by industry customers; when excluding VAT and other recoverable taxes and levies, the resulting share of taxes for industry reduces to 18.3%.
107 Greece is not included in the analysis because of missing data.
and 2010 and increasing again throughout 2011. It seems then that wholesale price volatility is not directly transmitted to end-users.
This lack of correlation between the two is explained by the fact that electricity is mostly sold through internal procurement and bilateral contracts rather than being directly acquired through the spot market (Vasa ETT 2013). Also, retail electricity prices are mostly regulated and are adjusted only few times per year.
Figure 72: Residential user electricity prices (EU-15 average)108 versus wholesale electricity prices
Source: (Vasa ETT 2013)