Household Energy Price Index for Europe. July 26, July Prices Just Released

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1 Household Energy Price Index for Europe July 26, 2016 July Prices Just Released The most up-to-date picture of European household electricity and gas prices: VaasaETT and two leading European energy market authorities collaborate to track monthly energy prices in 29 European countries Energie-Control Austria, the Hungarian Energy and Public Utility Regulatory Authority (MEKH) and VaasaETT are delighted to publish the results of our study of residential electricity and gas prices now covering 29 European countries. VaasaETT was recently commissioned by Hungary's MEKH to expand the coverage of HEPI to the remaining 6 countries that were not yet part of our study, namely, Estonia, Cyprus, Latvia, Lithuania, Malta, and Bulgaria. Our price survey now includes all of the 28 EU member countries in addition to Serbia who is a full candidate to membership. We would like to use this opportunity to thank the energy market authorities for their time and cooperation to ensure the quality and accuracy of the data. If you would like to know more about the latest developments in residential energy prices, visit our project webpage at and subscribe to the free monthly update of the HEPI index for Europe. In This Month s Edition In HEPI This price Month s trend Edition European energy prices stable around their all-time high Some major changes in household energy Decrease prices in in electricity July prices in Tallinn, London Household and Stockholm gas prices at a 5-year low Important decrease in gas Significant prices in London, drop in electricity Ljubljana price in and Riga Tallinn Significant Prices at PPS drop highest in gas prices in in Riga, Central Tallinn and and Eastern Sofia Europe Energy Price breakdown Significant increase in gas price in Market forces represent less Brussels than half of the energy bill Market forces represent less than half of household energy bills 1

2 European energy price development This month s HEPI report shows that in July 2016, after some significant price decreases during the past few months, the sharp drop have decelerated and the European households energy prices are mostly stable. Figure 1 shows the evolution of residential energy and distribution prices excluding taxes between January 2009 and July 2016 in 15 European capital cities. The index is calculated by weighing prices in each of the capital cities by the respective national electricity or gas residential consumption. Residential electricity prices steadily decreased over the first half of 2009 and reached a trough at 96 index points in June 2009 as the economic crisis took its toll on demand and wholesale prices plummeted. Prices started to recover in the second half of 2009 together with (temporary) green shoots in economic activity and a general feeling that the worst of the crisis was behind us. They have been on an upward trend since then. The index for electricity reached its highest value in January 2015 at 121 index points. It has since faltered, falling back to 115 points. The economic downturn which impacted energy demand and wholesale prices in 2009 is much more visible in the development of residential gas prices. The gas price index dropped significantly in 2009 and reached its lowest value only in February 2010 at 82 index points (eight months after the lowest value in the electricity price index). Retail prices started to recover in the winter of 2010 when a cold wave hit many parts of Europe. The index steadily increased until the beginning of It remained between 105 and 110 index points ever since despite a significant drop in natural gas prices on international markets during the year Recently it has taken a downturn and currently stands at 95 index points and is at a 5-year low. 2

3 Figure 1 Evolution of residential energy and distribution prices excluding taxes in the EU-15 Figure 2 Evolution of residential energy and distribution prices excluding taxes in the EU-28 3

4 Copenhagen (DK) Berlin (DE) Lisbon (PT) Madrid (ES) Dublin (IE) London (GB) Vienna (AT) Rome (IT) Brussels (BE) Paris (FR) Prague (CZ) Luxembourg City (LU) Athens (GR) Amsterdam (NL) Stockholm (SE) Nicosia (CY) Ljubljana (SI) Riga (LV) Bratislava (SK) Warsaw (PL) Zagreb (HR) Helsinki (FI) Vilnius (LT) Valletta (MT) Budapest (HU) Bucharest (RO) Tallinn (EE) Sofia (BG) Belgrade (RS) Average c per kwh Residential electricity prices Figure 3 shows the end-user price of electricity in 29 European capital cities as of July 1 st It shows that depending on where a customer lives in the EU, the price that a customer has to pay per kwh of electricity can be nearly three times the price. If we include Belgrade, the price varies by a staggering ratio of 4.7. Copenhagen and, since January 2013, Berlin are by far the most expensive cities for household customers in Europe though the price of energy represents only a small portion of the total price, the lion s share being tax, in fact. Inhabitants of Belgrade pay the least followed by inhabitants of Sofia and Tallinn. In nominal terms, prices in the capital cities of Central and Eastern Europe (CEE) tend to be lower than average; Prague is the only capital city among the CEE countries in which the price of electricity is above the European average. Figure 3 Residential electricity prices including taxes ,0 30, ,3 23,0 21,8 19,9 19,5 19,0 18,9 18,7 18,6 18,2 18,0 16,7 16,7 15,6 15,2 15,0 14,6 14,3 13,4 13,3 12,7 12,2 12,0 11,8 16, ,7 10,6 6,6 End-user electricity price (July 2016) 4

5 Lisbon (PT) Berlin (DE) Prague (CZ) Warsaw (PL) Madrid (ES) Bucharest (RO) Copenhagen (DK) Sofia (BG) Athens (GR) Riga (LV) Bratislava (SK) Budapest (HU) Zagreb (HR) Vilnius (LT) Dublin (IE) Ljubljana (SI) Rome (IT) Vienna (AT) Nicosia (CY) Brussels (BE) Paris (FR) London (GB) Amsterdam (NL) Luxembourg City (LU) Valletta (MT) Belgrade (RS) Tallinn (EE) Stockholm (SE) Helsinki (FI) Average c per kwh Only some changes took place in the electricity market this month; the most significant ones were: A 9% decrease in Riga due to a drop in distribution component A 3% decrease in Bucharest (in local currency) due to a slight drop in energy component A 3% increase in Nicosia and Rome due to a rise in energy component A 2% increase in Brussels When adjusted to purchasing power in each country 1, the picture changes dramatically. Indeed, most CEE countries end up with prices which are above the European average (Figure 4). Again in this month, Lisbon is the most expensive electricity followed by Berlin and Prague as it has been in the previous months. On the other end of the spectrum, Helsinki has the cheapest electricity at PPS followed by Stockholm, Tallinn and Belgrade. Figure 4 Residential electricity prices including taxes at PPS ,9 29,4 29,1 26,5 26,0 24,1 23,4 22,9 22,6 22,5 22,4 21,4 21,2 21,0 19,6 19,3 19,3 20,3 18,1 17,6 17,5 17,3 17,2 15,4 15,4 15,2 14,8 14,7 12,9 10,9 0 End-user electricity price at PPS (July 2016) 1 PPS is an artificial common reference currency unit that eliminates price level differences between countries. One PPS thus buys the same given volume of goods and services in all countries. It is developed by Eurostat to accurately compare prices across Europe. 5

6 Residential gas prices Figure 5 shows the end-user price of natural gas in 26 European capital cities as of July 1 st The highest price by very far is paid by inhabitants of Stockholm, who pay 2.6 times as much as the second most expensive city s does for gas. This can be explained by the small size of the market; there are only 33,000 household gas customers in the whole of Sweden 3. Not accounting for Stockholm, this month Copenhagen is the most expensive city for gas followed by Lisbon. The prices in Copenhagen are over three times as high as in Bucharest, which is the cheapest city for gas. Even more clearly than for electricity, household natural gas is cheapest in the CEE countries. There were some grave changes in gas prices this month, the most significant changes in local currency are summarised below: A 14% price decrease in Riga due to a drop in energy and network components A 8% price decrease in Tallinn due to a drop in energy component A 5% price decrease in Sofia A 3% price decrease in Amsterdam, Bucharest and Lisbon A 6% price increase in Brussels due to a change in energy component 2 Please note that Helsinki, Nicosia, and Valletta have been left out of this analysis on gas prices as there is virtually no residential gas market in these cities. 3 The Swedish electricity and natural gas markets 2013 (2014: 51). 6

7 Stockholm (SE) Copenhagen (DK) Lisbon (PT) Rome (IT) Berlin (DE) Amsterdam (NL) Dublin (IE) Vienna (AT) Madrid (ES) Ljubljana (SI) Paris (FR) Prague (CZ) London (GB) Brussels (BE) Athens (GR) Bratislava (SK) Vilnius (LT) Luxembourg City (LU) Warsaw (PL) Tallinn (EE) Zagreb (HR) Riga (LV) Sofia (BG) Budapest (HU) Belgrade (RS) Bucharest (RO) Average c per kwh Figure 5 Residential gas prices including taxes , ,34 8,95 7,62 6,92 6,84 6,74 6,71 6,53 6,26 6,10 5,85 5,66 5,37 5,23 4,96 4,95 4,65 4,43 3,94 3,88 3,68 3,65 3,31 3,21 2,92 6,23 0 End-user natural gas price (July 2016) Even with Stockholm and Lisbon in the lead with the highest adjusted price, the prices at PPS offer a very different outcome. Prague is on its usual third place, while Warsaw has jumped to fourth place to replace Sofia which has dropped significantly. At the end of Europe s lowest adjusted prices for gas there are no major changes as Luxembourg, London and Brussels hold their positions. Generally speaking, the CEE countries no longer exhibit Europe s lowest gas prices when adjusted to PPS (Figure 6). 7

8 Stockholm (SE) Lisbon (PT) Prague (CZ) Warsaw (PL) Vilnius (LT) Ljubljana (SI) Sofia (BG) Rome (IT) Bratislava (SK) Madrid (ES) Belgrade (RS) Copenhagen (DK) Berlin (DE) Athens (GR) Amsterdam (NL) Vienna (AT) Zagreb (HR) Dublin (IE) Bucharest (RO) Budapest (HU) Paris (FR) Riga (LV) Tallinn (EE) Brussels (BE) London (GB) Luxembourg City (LU) Average c per kwh Figure 6 Residential gas prices including taxes at PPS , ,49 4 9,14 8,19 8,18 7,95 7,92 7,74 7,58 7,38 7,25 7,06 6,71 6,54 6,30 6,25 6,13 7, ,07 5,95 5,91 5,64 5,53 5,41 4,96 4,90 3,95 End-user gas price at PPS (July 2016) Energy price breakdown The breakdown of end-user energy prices into four components; energy, distribution, energy taxes and VAT, also shows major variations that can be seen in Figures 7 and 8. Our survey shows that on average, the energy price component (including retail margins) represents about 4 of the end-user price of electricity, distribution 32%, energy taxes 12% and VAT 16%, while energy (including retail margins) represents 48% of the end-user price of natural gas, distribution 28%, energy taxes 8% and VAT 16%. Copenhagen is a very unusual case; the cost of energy as a commodity represents just 12% of the end-user electricity price, by far the lowest of all surveyed cities, whereas the energy taxes represent an astonishing 47% (four times Europe s average) and 67% if we include VAT. A similar (albeit to a lesser extent) case is Berlin where since the introduction of the Energiewende, the energy tax component represents 3 of the end-user price of electricity. 8

9 Vienna (AT) Brussels (BE) Sofia (BG) Zagreb (HR) Nicosia (CY) Prague (CZ) Copenhagen (DK) Tallinn (EE) Helsinki (FI) Paris (FR) Berlin (DE) London (GB) Athens (GR) Budapest (HU) Dublin (IE) Rome (IT) Riga (LV) Vilnius (LT) Luxembourg City (LU) Valletta (MT) Amsterdam (NL) Warsaw (PL) Lisbon (PT) Bucharest (RO) Belgrade (RS) Bratislava (SK) Ljubljana (SI) Madrid (ES) Stockholm (SE) Average Overall, the results show that market forces represent only about half of the enduser price both for electricity and gas, whereas national fiscal and regulatory elements are responsible for the other half through distribution tariffs, energy taxes and VAT. In places where the energy component (the competitive part of the price) is lower, so is the incentive for customers to look for more competitive offers 4. Figure 7 Residential electricity price breakdown % 17% 17% 17% 2 15% 17% 2 17% 19% 14% 7% 5% 16% 11% 12% 9% 12% 17% 17% 17% 19% 21% 13% 19% 17% 17% 17% 18% 17% 2 16% 6% 13% 4% 1% 9% 3% 13% 12% 19% 21% 28% 1 8% 11% 7% 4% 12% 12% 21% 26% 17% 18% 24% 3 19% 28% 29% 33% 16% 37% 34% 45% 42% 27% 28% 17% 34% 43% 33% 47% 34% 53% 43% 51% 4 35% 48% 32% 29% 19% 82% 32% 29% 63% 59% 53% 53% 45% 52% 37% 41% 44% 37% 36% 35% 38% 4 45% 21% 35% 37% 28% 32% 33% 32% 35% 31% 29% 4 28% 29% 28% 12% Energy Distribution Energy Taxes VAT 4 You may download the latest version of VaasaETT's survey of utility customer switching at 9

10 Vienna (AT) Brussels (BE) Sofia (BG) Zagreb (HR) Prague (CZ) Copenhagen (DK) Tallinn (EE) Paris (FR) Berlin (DE) London (GB) Athens (GR) Budapest (HU) Dublin (IE) Rome (IT) Riga (LV) Vilnius (LT) Luxembourg City (LU) Amsterdam (NL) Warsaw (PL) Lisbon (PT) Bucharest (RO) Belgrade (RS) Bratislava (SK) Ljubljana (SI) Madrid (ES) Stockholm (SE) Average Figure 8 Residential gas price breakdown % 17% 17% 17% 3% 2 17% 2 17% 14% 11% 16% 21% 12% 7% 16% 17% 18% 2% 17% 19% 17% 17% 4% 7% 13% 9% 15% 21% 12% 33% 4 34% 32% 39% 46% 43% 65% 27% 62% 62% 2 21% 11% 11% 18% 4 21% 31% 3 5% 4% 4% 2 4% 8% % 25% 36% 25% 33% 29% 29% 35% 38% 25% 71% 55% 58% 51% 49% 71% 49% 45% 54% 56% 48% 34% 38% % 39% 48% 39% 1 42% 9% 17% 18% 17% 2 16% 35% 28% 32% 3 Energy Distribution Energy Taxes VAT Visit our project webpage at and subscribe to the free monthly update of the HEPI index for Europe. 10

11 For More Information Christophe Dromacque HEPI Project Manager Office: +358 (0) Mobile: +358 (0) (English / French) Rafaila Grigoriou Analyst rafaila.grigoriou@vaasaett.com (English / Greek) Hanna Launonen Analyst hanna.launonen@vaasaett.com (English / Finnish) Silke Paizoni Regulation and Competition Office: +43 (1) Silke.Paizoni@e-control.at (English / German) László Szabó Head of Unit of Analysis and Modelling Department of Analysis and Statistics Office: szabolaszlo@mekh.hu (English / Hungarian) 11

12 About the Authors Energie-Control Austria Energie-Control Austria was set up by the legislator on the basis of the new Energy Liberalisation Act and commenced operation on 1 March Energie-Control is headed by Mr. Wolfgang Urbantschitsch and Mr. Andreas Eigenbauer as managing directors and is entrusted with monitoring, supporting and, where necessary, regulating the implementation of the liberalisation of the Austrian electricity and natural gas markets. More at: The Hungarian Energy and Public Utility Regulatory Authority The main responsibilities of the Hungarian Energy and Public Utility Regulatory Authority are consumer protection, providing regulated access to networks and systems, carrying out regulatory competencies in order to maintain security of supply and fostering competition. The scope of the infrastructures, which have to be overseen by the Hungarian Energy and Public Utility Regulatory Authority, has been extended in 2011 with the complete regulation of district heating and in 2012 with the water public utilities. As market progresses are becoming more widespread, we put emphasis on our market monitoring task and we pay specific attention to regional market integration both in electricity and natural gas. More at: VaasaETT Global Energy Think Tank VaasaETT is a research and advisory consultancy dedicated to customer related issues in the energy industry. VaasaETT advises its clients based on empirical evidence brought about from extensive research in the area of customer behaviour and competitive market behaviour (including smart energy offerings, demand response, energy efficiency, smart home, smart grid). VaasaETT s unique collaborative approach enables it to draw on an extensive network of several thousand energy practitioners around the world who can contribute to its research activities or take part in industry events it organizes allowing VaasaETT to integrate global knowledge and global best practice into its areas of expertise. VaasaETT s truly global focus is reflected by research and strategic support having been provided to a diverse array of organizations on 5 continents including for instance 28 of the Fortune Global 500 companies, the European Commission, Government and public research bodies in Europe, Japan, the UAE, the Middle East and Australia. More at: 12