London and Brussels - Europeans are paying the steepest energy bills in four years and face ever higher payments as governments pile on extra charges to help finance a e1 trillion (R14 trillion) modernisation of Europe’s energy infrastructure.
Politicians from Britain to Germany, Italy to Romania, under pressure from electorates squeezed by economic downturn, are promising to cap energy prices or at least draw their sting. Even so, consumers will continue to bear the bulk of the costs of replacing ageing power networks and kick-starting renewable energy projects.
The European Commission has estimated that infrastructure improvements will have cost e1 trillion by the end of the decade.
Legally binding targets to lower carbon emissions by 2020 mean that energy generation needs to become cleaner, but utilities say they cannot afford to finance the costs, so these will increasingly find their way onto customers’ bills.
The wholesale price of energy, which previously made up the vast majority of a household bill, is a dwindling proportion; indeed wholesale prices in many EU countries have fallen in recent years as cheaper renewable energy enters the system, but retail prices have still been rising.
RWE npower, the British unit of German utility RWE, said it expected the share of commodity prices as a component of energy bills to drop to 35 percent in 2020, down from 50 percent three years ago.
“The cost of funding government policies for renewable energy, social support and energy efficiency is increasing faster than any other part of an energy bill,” Paul Massara, RWE npower’s chief executive, said. “These initiatives are all important, but consumers need to be aware that delivering them is causing energy costs to increase and will continue to do so for some time.”
Utility bills differ from nation to nation, and how they are compiled is opaque, but analysts say the commodity price will continue to fall as a proportion of energy bills across Europe.
Danish households, for example, pay Europe’s highest electricity bills at around e0.31 per kilowatt-hour because 55 percent of the cost is made up of taxes, according to a report into energy bills by VaasaETT energy research group.
Across Europe’s 15 oldest members (EU15), transmission charges, taxes or renewable subsidies accounted for about half the average household bill, VaasaETT said.
In Denmark, where there is cross-party political agreement on the need to limit energy use, taxes and charges have found a relatively high level of public acceptance.
In Britain, where electricity prices are below the EU average and the wholesale cost is a greater proportion of bills than in any of the EU15, news that utilities will raise prices has kicked up a political storm.
The European Commission is reassessing green subsidies as technologies such as onshore wind and solar power become more competitive. It has also promised to analyse the impact of energy costs on industry. – Reuters