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Energy prices and costs in Europe
CEPS08/03/2019
Manuel Rivas Rábago, DG ENERGY
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• This third energy prices and costs report (following 2014, 2016) assesses trends in prices and costs of fuels in Europe, providing background facts and figures for EU energy policy making
• It updates data (including on 2014 subsidies estimates), adds more data on petroleum products, and on energy costs, especially for energy intensive industries (drawing on DG GROW studies & analysis).
• It provides evidence supporting the ongoing energy transition (including the LTS), and a timely review of taxation, subsidies, revenues and ($/€) imports.
Energy prices and costs in Europe
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Source: Directorate-General for Energy
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Wholesale and international prices
The volatility of international fossil fuels prices impacts the EU energy prices
Crude oil (Brent) and European wholesale gasoline, diesel and heating oil prices
Wholesale electricity prices in the EU
Sources: Platts, ECB Sources: Platts, European power markets
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Source: Directorate-General for Energy
International gas and electricity prices
European, US and Japanese wholesale gas prices
Sources: Eurostat, CEIC and IEA
Wholesale electricity prices for industry
Wholesale and international prices
Sources: Platts, Thomson-Reuters
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Source: Directorate-General for Energy
Industrial electricity prices in 2017
Household electricity prices in 2017 Household gas prices in 2017
Median and large industrial gas prices in 2017
Retail prices
Different price structures across MS, fuels and consumer groups
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Source: Directorate-General for Energy
Taxes on industrial electricity over time Taxes on industrial electricity in 2017
Retail prices for industry - Taxation
The importance of taxation in electricity prices
Source: DG ENER in-house data collection
Taxes on electricity in 2017:small vs large industrial consumers
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Source: Directorate-General for Energy
Retail prices for industry -price regulation
Price regulation : the case for non-household electricity and gas markets
Mark-ups
Mark-ups
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Source: Directorate-General for Energy
The energy import bill
• The EU is stillexposed to volatile global fossil fuel markets, which canimpact on fiscal regimes and macroeconomicstability.
Costs for the EU's economy
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Source: Directorate-General for Energy
energy poverty: energy as a share of household expenditure
Costs for households
• Spending on energy averages 5.5%, up to 10%
• Wide differences across Member States
Expenditure on energy in lower middle income EU households (Euros and share of total expenditure)
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Source: Directorate-General for Energy
Energy costs and competitiveness at macroeconomic level
Competitiveness - Costs for the industry
• The EU's overallcompetitiveness remainsstable compared to main trading partners
• Despite the existence of significant energy pricedifferentials
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Source: Directorate-General for Energy
Energy shares in total production value and RUECs
Costs for the industry -competitiveness
Sources: EC, Eurostats
• Energy share of purchases of energy in the EU stable around 2% of the total production value
• RUECs relatively stable in recent years
Source: DG JRC (own calculations based on WIOD) and DG ECFIN
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Source: Directorate-General for Energy
Declining energy shares in production costs(but still significant for energy intensive sectors)
Costs for the industry –competitiveness
Examples of sectors Energy share of production
costs (range)
Average European business 0-3 % Computers and electronics, motor vehicles, other transport
equipment 1 %
Waste management and accommodation and restaurants 3-5 % Energy intensive sectors in manufacturing
Cement, lime and plaster, Clay building materials, Pulp and paper,
Glass, Iron and steel, Basic chemicals, Non-ferrous metals
3-20 %
Sources: Trinomics (2018), Ecofys (2018)
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Source: Directorate-General for Energy
International price comparisons over time
Costs for the industry -competitiveness
Retail electricity prices – EU vs G20 Retail gas prices– EU vs G20
Sources: Eurostat, CEIC , ERRA, IEA (Trinomics 2018)
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Source: Directorate-General for Energy
International comparisons on energy costs and intensity
Costs for the industry -Competitiveness
Sources: Trinomics (2018)
Energy costs and energy intensity in energy intensive sectors
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Source: Directorate-General for Energy
• Public spending, energy subsidies increasing to drive the energy transition (€170 bn in 2016).
• fossil fuels subsidies not declining despite the EU's international commitments.
Energy Subsidies
• Wide differences in support to fossil fuels exist in the EU.
Sources: EC, Trinomics (2018)
Sources: EC, Trinomics (2018)
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Source: Directorate-General for Energy
Energy taxation provides stable and significant government revenues
Energy Taxation
€280billion per year
i.e. close to 5% of taxrevenues
Source: Eurostat
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Source: Directorate-General for Energy
Projections suggest future prices increasingly cover(investment) costs, reducing need for subsidies
Prices, costs and investments
Source: Left graph Platts, METIS(2030); right graph: PRIMES
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Source: Directorate-General for Energy
▪ Volatile (international) fossil fuel prices still drive EU prices
➢ Decarbonisation, long term strategy
▪ Price divergence across MS has declined, but can still be significant
➢ internal market
▪ International position of the EU stable (generally between Asia and fossil fuel producer countries)
➢ international competitiveness
▪ Major tax and levy divergences across MS, fuel and consumer group
➢ Competition distortions, weak price signals for energy policy goals
▪ Energy costs affect macroeconomy, households, industry
➢ Imports, $/€
➢ supports, subsidies & price signals
➢ Support for level playing field, appropriate subsidies
▪ Energy taxes provide revenues
▪ Energy subsidies need reviewing (NECPs) and should decline in the future
To discuss!
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Source: Directorate-General for Energy
THANK YOU!
More information on:https://ec.europa.eu/energy/en/data-analysis/energy-prices-and-costs
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Source: Directorate-General for Energy
BACK UP SLIDES
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Source: Directorate-General for Energy
Taxes in household electricity over time Taxes in Household electricity prices in 2017
Retail prices -Taxation
The importance of taxation in electricity prices
Source: DG ENER in-house data collection
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Source: Directorate-General for Energy
Electricity prices for industry in 2008 - 2017
Household electricity prices 2008- 2017 Household gas prices in 2008- 2017
Gas prices for industry 2008- 2017
Retail prices
Different price structures across MS, fuels and consumer groups
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Source: Directorate-General for Energy
Internal market -Retail prices
Price regulation : the case for household electricity and gas markets
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Source: Directorate-General for Energy
Internal market -Retail prices
Dynamic pricing - 2
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Source: Directorate-General for Energy
Internal market -Retail prices
Dynamic pricing - 1
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Source: Directorate-General for Energy
Price regulation and energy poverty indicators
Note that the % of the population which is unable to keep their homes adequately warm and the % of the population
with arrears on the utility bills are not separated for the gas and electricity market.
Used weights are the total household consumers per country and per energy market.
Source: Eurostat
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Source: Directorate-General for Energy
Looking forward: Investments in electricity capacity
The energy transition - Prices vs costs and investments
Source: Left graph Platts, METIS(2030); right graph: PRIMES