PV Parity project (IEE/10/307 / SI ) Electricity prices scenarios until at least the year 2020 in selected EU countries. Deliverable 2.

Transcription

1 PV Parity project (IEE/10/307 / SI ) Electricity prices scenarios until at least the year 2020 in selected EU countries Deliverable 2.2 Prepared by WIP Renewable Energies (WIP) Sylvensteinstr Munich, Germany January 2012 With the support of The sole responsibility for the content of this publication lies with the authors. It does not necessarily reflect the opinion of the European Communities. The European Commission is not responsible for any use that may be made of the information contained therein.

2 Acknowledgements This document has been produced as part of the project PV Parity Definition of gridparity for photovoltaics and development of measures to accompany PV applications to the grid-parity and beyond. The document corresponds to Deliverable 2.2 and presents the electricity prices scenarios until at least year 2020 in selected EU countries. The list of the partners cooperating in this project are shown below and more information about them and the project is available under PROJECT CONSORTIUM WIP EPIA ECN TUC SUER GSE EGP ICON TUW IDAE EDF EN The work for this report has been coordinated by WIP Renewable Energies. 1

3 Table of contents Executive Summary... 3 List of figures... 4 List of tables Introduction The PV Parity Project Project strategic objectives Impact on the EU Energy Policy Electricity prices evolution in the period between Structure of the electricity markets Collection of electricity prices in the period between Electricity prices according to Eurostat in the period between Electricity prices evolution in the period between Austria Belgium Czech Republic France Germany Greece Italy Portugal Spain The Netherlands United Kingdom Electricity price scenarios Energy Roadmap EPIA, On the way to competitiveness (2011) Greenpeace/EPIA, Solar generation VI (2011) IEA, Technology Roadmap (2010) Conclusion References

4 Executive Summary The objective of the PV Parity project is to support the achievement of the target of generating 20% of EU s final energy consumption (corresponding to 30-35% of the electricity generation) from renewable energy sources (RES) by 2020, as adopted by the European Union under the Directive 2009/28/EC. PV Parity projects aims to support the increase of the PV penetration in EU electricity markets and PV grid parity at a lowest possible price for the community. The target countries of the PV Parity project are Austria, Belgium, Czech Republic, France, Germany, Greece, Italy, Portugal, Spain, the Netherlands and United Kingdom. PV Parity project will also support the achievement of the High RES scenario of the Energy Roadmap 2050 developed by the European Commission (EC), which sets the target of increasing the share of RES in gross final energy consumption (75% in 2050) and in electricity consumption reaching 97% [EC-IA50]. This deliverable is prepared for the PV Parity project in order to provide an overview on the evolution of the electricity prices between in the target countries and the projections of the electricity prices until 2020 and beyond based on different scenarios from European Commission (EC), International Energy Agency (IEA) and European PV Industry Association (EPIA). The evolution of the average electricity prices between years is explored for different market segments, namely are retail (residential, commercial/industrial endusers), wholesale (commercial/industrial endusers), power exchange (average purschase and average peakload prices) and power generation costs. The data for this part is collected from the PV Parity partners and from database of Eurostat. For the electricity price projections until 2020 and beyond alternative scenarios have been taken into account to define the future trends of electricity prices. The scenarios and their projections on the electricity prices taken into account are Energy Roadmap 2050 (2011) by EC, On the way to competitiveness (2011) by EPIA, Solar generation VI (2011) by Greenpeace/EPIA and Technology Roadmap (2010) by IEA. The scenarios in the Energy Roadmap 2050 foresee that the average prices continue rising until 2030 and afterwards either start to decrease or show an average annual increase that is lower than in the period The average electricity prices range in between /MWh in 2050, residential electricity prices (ranging in between /MWh) being the most expensive among all segments. According to EPIA On the way to competitiveness (2011) scenario, by 2020 the electricity prices are expected to vary between 0,16-0,31 /kwh for the residential segment, 0,12-0,18 /kwh for the commercial segment and 0,08-0,16 /kwh for the industrial segment. Greenpeace/EPIA, Solar generation VI (2011) scenario estimates that by 2020 the utility peak power price could be in the range of 0,1-0,3 /kwh and the utility bulk power in the range of 0,05-0,1 /kwh. IEA, Technology Roadmap (2010) foresees that by 2020 the wholesale electricity costs could be in the range of USD/MWh and the retail electricity costs in the range of USD/MWh. 3

5 List of figures Figure 1: Parameters influencing PV parity: the classical, limited approaches, which only look at PV generation and electricity prices, and the more sophisticated approaches used in the project. Source: ECN, Wim Sinke Figure 2: Structure of the electricity market. Figure is prepared by WIP-Renewable Energies based on the Regulation of Electricity Utilities- Retail Electricity presentation by [Arriaga].. 9 Figure 3: Market segments for the collection of the electricity prices from PV Parity countries...10 Figure 4: Breakdown of the electricity prices in the retail residential segment in the EU countries of PV Parity project in the first half of Source: Data collected from Eurostat [Eurostat] Figure 5: Breakdown of the electricity prices in the retail commercial/industrial segment in the EU countries of PV Parity project in the first half of Source: Data collected from Eurostat [Eurostat] Figure 6: The evolution of the Austrian electricity prices in the period Source: Data collected from the PV Parity partner TUW...18 Figure 7: The evolution of the Belgian electricity prices in the period Source: Data collected from the PV Parity partner EPIA...20 Figure 8: The evolution of the Czech electricity prices in the period Source: Data collected from the PV Parity partner EPIA...22 Figure 9: The evolution of the French electricity prices in the period Source: Data collected from the PV Parity partner EDF EN...24 Figure 10: The evolution of the German electricity prices in the period Source: Data collected from the PV Parity partner SUER...26 Figure 11: The evolution of the Greek electricity prices in the period Source: Data collected from the PV Parity partner TUC...28 Figure 12: The evolution of the Italian electricity prices in the period Source: Data collected from the PV Parity partner EGP...30 Figure 13: The evolution of the Portuguese electricity prices in the period Source: Data collected from the PV Parity partner IDAE...32 Figure 14: The evolution of the Spanish electricity prices in the period Source: Data collected from the PV Parity partner IDAE...34 Figure 15: The evolution of the Dutch electricity prices in the period Source: Data collected from the PV Parity partner ECN...36 Figure 16: The evolution of the UK electricity prices in the period Source: Data collected from the PV Parity partner ICON...38 Figure 17: Assumption on the increase of retail electricity prices for different types of consumers. Source: EPIA, On the road to competitiveness, Figure 18: Development of utility prices and PV generation costs. Source: EPIA, Solar Generation VI (2011)...47 Figure 19: Estimated electricity prices and PV market deployment according to IEA Solar PV Roadmap

6 List of tables Table 1: Table for the collection of electricity prices in the PV Parity countries...12 Table 2: Average retail electricity prices in the residential segment in the selected EU countries between 2001 and Source: [Eurostat]...14 Table 3: Average retail electricity prices in the industrial segment in the selected EU countries between 2001 and Source: [Eurostat]...15 Table 4: Breakdown of the retail electricity prices in Austria. Source: Data collected from the PV Parity partner TUW...19 Table 5: Breakdown of the retail electricity prices in Belgium. Source: Data collected from the PV Parity partner EPIA...21 Table 6: Breakdown of the retail electricity prices in Czech Republic. Source: Data collected from the PV Parity partner EPIA...23 Table 7: Breakdown of the retail electricity prices in France. Source: Data collected from the PV Parity partner EDF EN...25 Table 8: Breakdown of the retail electricity prices in Germany. Source: Data collected from the PV Parity partner SUER...27 Table 9: Breakdown of the retail electricity prices in Greece. Source: Data collected from the PV Parity partner TUC...29 Table 10: Breakdown of the retail electricity prices in Italy. Source: Data collected from the PV Parity partner EGP...31 Table 11: Breakdown of the retail electricity prices in Portugal. Source: Data collected from the PV Parity partner IDAE...33 Table 12: Breakdown of the retail electricity prices in Spain. Source: Data collected from the PV Parity partner IDAE...35 Table 13: Breakdown of the retail electricity prices in the Netherlands. Source: Data collected from the PV Parity partner ECN...37 Table 14: Breakdown of the retail electricity prices in UK. Source: Data collected from the PV Parity partner ICON...39 Table 15: EU27 average electricity prices. Source: Energy Roadmap 2050 (2011)...42 Table 16: Breakdown of the electricity prices. Source: Energy Roadmap 2050 (2011)...43 Table 17: Yearly retail electricity prices increases. Source: EPIA, On the way to competitiveness (2011)...45 Table 18: Yearly wholesale prices increase. Source: EPIA, On the way to competitiveness (2011)

7 1. Introduction The EU has adopted the Renewable Energy Sources RES Directive 2009/28/EC and set as objective that 20% of its final energy consumption should be derived from renewable energy sources by In terms of electricity, this means that 30-35% will need to be produced from RES by 2020 compared to about 18% in 2009 [Eurostat]. PV Parity project will also support the achievement of the High RES scenario of the Energy Roadmap 2050 developed by the European Commission (EC), which sets the target of increasing the share of RES in gross final energy consumption (75% in 2050) and in electricity consumption reaching 97% [EC-IA50]. The PV Parity project will contribute to meet these objectives by ensuring an appropriate policy framework for photovoltaic. PV Parity project also aims to support the High Renewable Energy Sources (RES) scenario of the Roadmap for moving to a competitive low-carbon economy in 2050 (Energy Roadmap 2050) of European Commission, which sets the target of increasing the share of RES in gross final energy consumption (75% in 2050) and in electricity consumption reaching 97% [EC- IA50]. This long-term objective requires triggering the creation of installations, reaching PV grid parity, and implementing alternative incentives in the selected target countries. The alternative incentives developed in this project will allow for minimising the spending of the individual countries for PV installation. Reaching a point where PV electricity could compete directly with conventional power generation requires identifying how the electricity prices will grow in the coming decade and possibly later. The overview of the trends of the electricity prices and the definition of PV grid parity are essential information needed for the later assessment of the effectiveness of the current support schemes to PV. The aim of this deliverable is to provide an insight into the status quo of the electricity prices in the selected EU countries between years and the projected electricity prices until 2020 and beyond based on alternative scenarios. The result is the overview of the current and future electricity prices in the following decades. 6

8 2. The PV Parity Project The PV Parity project aims at contributing to the achievement of increased PV penetration in EU electricity markets and PV grid parity at a lowest possible price for the community. To this end, the PV Parity project will develop (a) common definition(s) of grid parity and will define the measures to be taken to accompany PV application to grid parity and beyond. It will also provide relevant policy makers in the EU member states with a clear understanding of the necessary measures to support solar Photovoltaic technology in achieving grid parity and will develop strategies for supporting the photovoltaic sector after grid parity is achieved. In order to achieve this aim, in the first part of the project, the steps necessary to define grid parity will be carried out. This implies to identify the parameters which may influence the grid parity: (reduction of) PV generation costs - projections; (increase of) electricity prices, especially in the coming decade projections; the impact of PV generation on base, medium and peak-load generation in terms of technical and economic challenges and opportunities; the role of technologies that can be used to minimise the cost or maximise the benefits of PV such as storage, demand response, etc.. electricity transmission and distribution costs In Figure 1 the parameters influencing the PV parity are shown. Figure 1: Parameters influencing PV parity: the classical, limited approaches, which only look at PV generation and electricity prices, and the more sophisticated approaches used in the project. Source: ECN, Wim Sinke. 7

9 The project will also present information which is needed to identify support schemes most appropriate to reach grid parity and also include information on PV market developments and regulations in several European and MENA countries. The PV Parity project starts in June 2011 and will end in November The PV Parity project will be co-financed by the European Commission in the framework of the Intelligent Energy Europe (IEE) Program (Contract No. IEE/10/307 / SI ). 2.1 Project strategic objectives The strategic objective in the long-term of the PV Parity project is to ensure an appropriate policy framework for photovoltaics in order to achieve up to 12% of the EU electricity demand by This target for 2020 will imply reaching a total installed capacity of about 390 GWp [EPIA-SET20]. 2.2 Impact on the EU Energy Policy On 23 April 2009 the Directive 2009/28/EC on the promotion of the use of energy from renewable sources was published setting the target of implementing 20% Renewable Energies by In terms of electricity, this means that 30-35% will need to be produced from RES by 2020 compared to about 18% in 2009 [Eurostat]. PV Parity project will also support the achievement of the High RES scenario of the Energy Roadmap 2050 developed by the European Commission (EC), which sets the target of increasing the share of RES in gross final energy consumption (75% in 2050) and in electricity consumption reaching 97% [EC-IA50]. Solar photovoltaic energy will contribute to meet these objectives. The project will also take the National Renewable Energy Action Plans of participating countries in consideration. This long-term objective requires triggering the creation of installations, reaching PV grid parity, and implementing alternative incentives in the selected target countries. The alternative incentives developed in this project will allow for minimising the spending of the individual countries for PV installation. The methodology for alternative incentives could also be applied to other states in the European Union and in the Middle East and North Africa (MENA). In views of this objective, the PV Parity project will provide recommendations and information on the way to achieve the targets for the PV sector. The proposed project will support the implementation of domestic renewable energy applications in European countries contributing to the achievement of the 20% binding EU target for renewable energy systems in gross inland consumption by 2020 stated in the above mentioned Directive. 8

10 3. Electricity prices evolution in the period between Structure of the electricity markets During the 1990s European electricity industry had changed significantly with the reforms in the electricity sector by European Directive 96/92/EC [EUR-05], which was then replaced by Directive 2003/54/EC and Directive 2009/72/EC respectively [EU- 2011]. The scope of these Directives is to form a common European market for trading electricity and they unbundle the activities of Generation, Trading and Supply from the natural monopoly regulated activities such as Transmission and Distribution [EU-2011]. In the electricity market generation of electricity is performed by power plants selling the electricity they produce on the common electricity wholesale market for suppliers and producers. Trading of electricity is performed by companies having a supplier s licence, which purchase electricity on the wholesale market from electricity producers, importers or on the electricity exchange market and which sell it to consumers. The intermediation of suppliers facilitates trade between producers and consumers. Figure 2 summarizes the general structure of the current electricity markets. Figure 2: Structure of the electricity market. Figure is prepared by WIP-Renewable Energies based on the Regulation of Electricity Utilities- Retail Electricity presentation by [Arriaga]. The Directive 2003/54/EC allowed the end users to choose freely their power supplier according to the offerings that best meet their needs. The electricity can be purchased from energy service companies (suppliers, traders, retailers) or directly from generators. Since 2007, also household customers have also the right to 9

11 choose whether to go to the free market or stay in the protected market being supplied by distribution companies at regulated tariffs. Wholesalers and large consumers are authorized to buy electricity directly from generators while the distribution companies maintain local franchise over retail companies with regulated Third Access Party (TAP). The electricity is traded via many schemes or markets functioning in the European Union, the most applied are Over the Counter Market (Bilateral Contracts) and Organized Market (Power Exchanges or Power Pools) based on bid prices and both markets are complementary [OSC 2002]. Power exchanges are considered as a third party, which facilitate transactions between sellers and buyers. They are ruled by their own trading rules and they guarantee the payment. Power exchanges aim to facilitate electricity trade, foster competition, ensure transparency and become recognized as a European marketplace [Penados]. 3.2 Collection of electricity prices in the period between In the frame of the PV Parity project the EU countries of interest are Austria, Belgium, Czech Republic, France, Germany, Greece, Italy, Portugal, Spain, the Netherlands and United Kingdom. The electricity prices between in these selected EU countries were collected from the PV Parity partners. The evolution of the electricity prices is essential for the projections of the future electricity prices through the following decades. Figure 3 shows the market segments that were taken into account while gathering all the required data for the analysis of evolution of electricity prices. For the collection, the electricity market is divided into four segments which are retail, wholesale, power exchange and generation. Retail Wholesale Power exchange Generation Average retail electricity price residential segment Average retail electricity price commercial / industrial segment Average wholesale electricity price commercial / industrial segment Average purchase price Average peak load price Average Generation Cost Figure 3: Market segments for the collection of the electricity prices from PV Parity countries The average retail electricity prices are divided into 2 subgroups for households and industrial end-users, which are characterized by the following annual consumption bands according to Eurostat [Eurostat]: 2500kWh<annual consumption<5000kwh: household (residential) end-users 500MWh<annual consumption<2000mwh: industrial/commercial end-users 10

12 The wholesale market segment is defined for the industrial commercial end-users with 500MWh<annual consumption<2000mwh. Power exchange is examined under average purchase price and average peak load price subgroups. The generation market segment refers to the generation cost of the electricity production taking into account the energy mix for the electricity production. For the collection of the electricity prices in the period between 2001 and 2011, the project partners were asked to fill in the excel table in Table 1. This table also shows the price breakdown of each segment and the split in the components of the electricity prices. The partners provided the data requested either from Eurostat or from other sources available in their countries. The electricity prices for the retail segment are published by Eurostat. Eurostat does not report the electricity prices for wholesale, power exchange and generation market segments. Due to this fact, electricity prices from these market segments were provided by the PV Parity project partners using different sources. In order to compare the countries electricity prices taken from an identical source, first the average retail electricity price data of the target countries taken from Eurostat will be shown (section 3.3). This also provides a detailed overview of the prices as the tax including and excluding values are shown explicitly. By this way, a comparison between the countries can be done. Afterwards, the electricity prices collected by the PV Parity partners are shown in section

13 Table 1: Table for the collection of electricity prices in the PV Parity countries 12

14 3.3 Electricity prices according to Eurostat in the period between The electricity prices in the Eurostat portal are collected from National Statistical Institutes, Ministries, Energy Agencies, or in case of monopolies by single gas and electricity companies. The prices include electricity/gas basic price, transmission, system services, distribution and other services. The prices are collected and published considering three levels of taxation: - prices excluding taxes and levies; - prices excluding VAT and other recoverable taxes; - prices including all taxes, levies and VAT. From 2007 second semester onwards, prices are reported with a new methodology as defined in Commission Decision 2007/394/EC. For prices that were collected before this time a different methodology was in place. The old methodology (until 2007) was based on the tariff-price data, while the new methodology is based on the real invoiced prices that are paid by end-users. A short description of the methodology as described on Eurostat webpage is shown below. New methodology (from 2007 onwards) is based on the average half-yearly electricity prices for households and industrial end-users. The end-users are characterized by predefined annual consumption bands. Old methodology (until 2007) is based on the electricity prices for households and industrial standard consumers, referring to the status on the 1 st of January and on the 1 st of July of each calendar year. Standard consumers are characterised by predefined annual consumption. In the electricity prices taken from Eurostat residential refers to the domestic electricity prices for consumption of kwh/y for old methodology and from to kwh/y for new methodology. It should be noted that results of the comparison would vary significantly referring to a lower range of consumption that may be more representative for South European Countries. Industrial/commercial refers to the Eurostat industrial electricity prices for consumption of MWh/y for old methodology and from 500 to MWh/y for new methodology. Comparing the new methodology prices with old methodology prices is possible, but it should be noted, that not only standard reference consumers were replaced with standard bands, but also that the data collection with the new methodology is done on real price data while the old methodology was often performed on tariff price data [Eurostat]. Table 2 and Table 3 show the average residential and industrial/commercial electricity prices in the selected EU countries in the period between 2001 and The shown values are the average of the half-yearly prices of each calendar year. Only for the year 2011 just first half-yearly value is shown. 13

15 Table 2: Average retail electricity prices in the residential segment in the selected EU countries between 2001 and Source: [Eurostat] (*): Data from year 2007: Germany and Netherlands are calculated with the new methodology (**): Data from year 2011 belongs to S1 of 2011 ( ):2004 data of Spain and Portugal represents only the S1 of

16 Table 3: Average retail electricity prices in the industrial segment in the selected EU countries between 2001 and Source: [Eurostat] (*): Data from year 2007: Germany, Netherlands and UK are calculated with the new methodology (**): Data from year 2011 belongs to S1 of 2011 ( ): 2004 data of Spain and Portugal represents only the S1 of 2004 (π): 2003 data of Austria represents only the S2 of 2003 The prices in Table 2 and Table 3 present a steady increase in the electricity prices in all target countries of the PV Parity project in the last decade. 15

17 According to the values in Table 2, until 2008 Italy had the highest electricity price in the residential segment in both excluding and including taxes (also VAT). When all the taxes are excluded Belgium had the highest electricity prices in the years between 2008 and 2010, though Spain had reached the same price in 2010 and had the highest price in the first half of 2011 for the tax excluded prices. When all the taxes and VAT are included, since 2008 Germany has the highest electricity prices. When the electricity prices in the average retail commercial/industrial prices are compared Italy represents the country with the highest electricity prices for end-users in the years between when both taxes are excluded and included. Figure 4 shows the breakdown of the residential electricity prices in the first half of year 2011 in the EU countries of PV Parity project. Figure 4: Breakdown of the electricity prices in the retail residential segment in the EU countries of PV Parity project in the first half of Source: Data collected from Eurostat [Eurostat]. According to Figure 4, for household consumers, the relative amount of tax contribution is the lowest in the United Kingdom (4.8 %) where only VAT rate is applied to the basic price and no other taxes are applied. Figure 5 shows the breakdown of the commercial/industrial electricity prices in the first half of year 2011 in the EU countries of PV Parity project. 16

18 Figure 5: Breakdown of the electricity prices in the retail commercial/industrial segment in the EU countries of PV Parity project in the first half of Source: Data collected from Eurostat [Eurostat]. According to Figure 5, for commercial/industrial consumers, France provided the cheapest and Italy the most expensive electricity in both tax including and excluding categories. 3.4 Electricity prices evolution in the period between collected from PV Parity partners A detailed description of evolution of the electricity prices for the PV Parity target countries from 2001 to 2010 is shown in the following sections between and

19 3.4.1 Austria In Austria, the electricity and gas markets are regulated by the Energie-Control (E- Control) Commission, which is the federal regulator in Austria [IEA-AU-07]. E- Control GmbH is a government-owned company providing advice on regulation to the commission. Austria is levying taxes on fossil fuels and electricity, their level being set by the Federal Ministry of Finance. On all sales of energy a value-added tax (VAT) is levied at the full rate of 20% [IEA-AU-07]. Austria is predominated by the renewables for the electricity generation. In 2009, 67% of the Austria s total electricity was generated from renewables, followed by 20% share from gases (natural and derived gases), 5% from solid fuels, 2% from petroleum products and 6% from other sources [EU-AU-11]. Figure 6 shows the evolution of the Austrian electricity prices in different market segments over the last 10 years. The electricity prices covering the residential segment of the Austrian electricity market are taken from the regulator, E-Control Austria and wholesale data is from E-Control and Eurostat. Figure 6: The evolution of the Austrian electricity prices in the period Source: Data collected from the PV Parity partner TUW The electricity prices are lowest at the generation and power exchange level, followed by the average wholesale electricity price and highest at the retail segment. An increasing trend is observed in the prices in all segments of the Austrian electricity market over the last decade. The power exchange average purchase and average peak load prices are taken from European Energy Exchange (EEX) and Energy Exchange Austria (EXAA)-Spot Market. The average generation costs are taken equal to the average power 18

20 exchange base price. The Austrian wholesale electricity market is integrated with the German one both regarding over-the-counter (OTC) trading and energy exchanges [E-Control09]. The breakdown of retail electricity prices for residential and for commercial/industrial segment are shown in Table 4. The average retail electricity prices for residential and commercial/industrial segment include VAT. Table 4: Breakdown of the retail electricity prices in Austria. Source: Data collected from the PV Parity partner TUW Average retail electricity prices Residential segment Commercial / Industrial segment Procurement cost= 44,40 % Procurement cost= 41,62 % Network cost= 27,73 % Network cost= 26,90 % Taxes= 27,87 (incl. 16,67% VAT) Value Added Tax (VAT) included? Yes (20%) Taxes = 31,48 (incl. 16,67% VAT) Value Added Tax (VAT) included? Yes (20%) The procurement and network costs constitute up to 72% of the total price in the retail residential electricity and 69% in the retail commercial/industrial electricity. 19

21 3.4.2 Belgium In 2000, the federal regulatory commission CREG (Committee for Regulation of Electricity and Gas) had been set up in order to monitor the electricity and gas markets in Belgium. CREG advises the Belgian authorities on the structure and operation of the liberalized electricity and gas markets and monitors the application and efficiency of relevant laws and regulations [US-BE-09]. As of 2010, nucleargenerated electrical power accounted for 53 % of the total electrical power generated in Belgium followed by gases (natural and derived gases) as the primary fuel which amounted to 30% of the total generation. The rest is supplied 6% from renewables, 6% from solid fuels and 3% from other sources [EU-BE-11]. Figure 7 shows the evolution of the Belgian electricity prices in different market segments over the last 10 years. The electricity prices of the Belgium electricity market were taken from the regulator CREG and from EDORA (Renewable and Alternative Energy Federation). Figure 7: The evolution of the Belgian electricity prices in the period Source: Data collected from the PV Parity partner EPIA As seen in the figure, the wholesale electricity price was available only for year 2011, power exchange electricity prices from 2006 up to 2011 and retail electricity prices from In 2011, average wholesale electricity price was the lowest among all market segments. The retail residential electricity prices show a steady increase between the years Except the retail residential segment, the electricity prices in all other market segments show an increasing trend, making a peak in year 2008 which is followed by a decline and increase again. For the years with price data, the prices are highest for the retail residential segment, followed by retail commercial/industrial, power exchange peak, power exchange average. The average 20

22 retail electricity prices for residential and commercial/industrial segment do not include VAT. The breakdown of retail electricity prices for residential and commercial/industrial segment are shown in Table 5. Table 5: Breakdown of the retail electricity prices in Belgium. Source: Data collected from the PV Parity partner EPIA Average retail electricity prices Residential segment Commercial / Industrial segment Procurement cost= 41 % Procurement cost= 54% Network cost= 31 % % network cost= 33 % General system cost= 10 % % general system cost=13 % Taxes= 18 % Taxes= 0 % Value Added Tax (VAT) included? Yes Value Added Tax (VAT) included? No The procurement, network and system costs constitute up to 82% of the total price in the retail residential electricity and 100% in the retail commercial/industrial electricity. 21

23 3.4.3 Czech Republic The Czech electricity market was fully liberalised on 1 January 2006, when the last remaining customer category, households, became eligible to choose their supplier. OTE (Operátor Trhu s Elektřinou), established in 2001,is the holder of the license for market operator s activities, which includes activities in the electricity and gas market in the Czech Republic. Continuous data processing and exchange required for the accounting and settlement of imbalance between the contractual and actual volumes of electricity and gas supplied and received are among services offered by the OTE to players in the Czech electricity and gas markets, as well as administrative procedures associated with a switch of supplier. The OTE also administers the National Register of Greenhouse Gas Emissions [OTE-2011], [CZ-EU-10]. As of 2009, the Czech electricity generation heavily relies on solid fuels (55%) followed by nuclear energy (33%), and the rest 6% from renewables and 5% from other sources [EU-CZ-11]. Figure 8 shows the evolution of the Czech electricity prices in different market segments over the last 10 years. The electricity prices covering the residential segment of the Czech electricity market were taken from EUROSTAT. The power exchange average purchase and average peak load prices were taken from OTE.. Figure 8: The evolution of the Czech electricity prices in the period Source: Data collected from the PV Parity partner EPIA There is an increasing trend in the electricity prices in all segments Czech electricity market. Average electricity prices for all customer segments in the Czech Republic are below the Europe-wide averages. Czech Republic electricity prices for households and commercial customers have been steadily increasing since 2001 but 22

24 they are still below the European averages. Prices in the power exchange are lower than the retail segment. The average retail electricity prices for residential and commercial/industrial segment do not include VAT. The breakdowns of retail electricity prices for residential and commercial/industrial segment in 2010 are shown in Table 6. Table 6: Breakdown of the retail electricity prices in Czech Republic. Source: Data collected from the PV Parity partner EPIA Average retail electricity prices Residential Procurement cost= 45.4% Network cost= 43.2% General system cost= 10.7% Taxes= 0.8% Value Added Tax (VAT) included? No The procurement, network and general system costs constitute up to 99.2% of the total price in the retail residential electricity prices excluding the VAT. 23

25 3.4.4 France In France, Energy Regulatory Commission (CRE), an independent administrative body, regulates the electricity and gas markets. In compliance with the EC Directive, since July 2007, all electricity consumers are eligible to choose their supplier. Under the current market regime, there are different types of contracts for electricity consumers at regulated tariff or at market prices. According to the law, regulated tariffs cover the full costs [IEA-FR-09]. Among Organisation for Economic Co-operation and Development (OECD) countries in Europe, France is the second-largest electricity consumer after Germany. Over the period , electricity consumption increased by 10.6%, driven mainly by growth in demand in the commercial/public sector (25.4%) and the residential sector (13.3%) [IEA-FR-09]. In 2009, nuclear power accounted for 76% of France s electricity, followed by 13% from renewables, 5% from solid fuels, 4% from gases (natural and derived gases) and 1% from other sources [EU-FR-11]. As of 2010, the former national utility, Electricité de France (EDF), controls 58 nuclear reactors operating in the country [IEA-FR-09]. The evolution of the electricity prices in different market segments are shown in Figure 9. Figure 9: The evolution of the French electricity prices in the period Source: Data collected from the PV Parity partner EDF EN As it is shown in Figure 9, in the period between , the electricity prices in the wholesale and retail segment show a very slight increase and remain in the same /MWh range in general. In the electricity prices in the power exchange segment have the peak in year 2008 which is followed by a decline and start to rise. The breakdown of retail electricity prices for retail and wholesale segment are shown in Table 7. 24

26 Table 7: Breakdown of the retail electricity prices in France. Source: Data collected from the PV Parity partner EDF EN Average retail electricity prices Average wholesale electricity price Residential Commercial / Industrial Commercial / Industrial Network cost= 31% Network cost= 25% Network cost= 13% Taxes= 30% Taxes= 28% Taxes= 23% The retail segment has a higher share of the network costs and the taxes in the final electricity price than the wholesale segment. The network costs and taxes constitute a higher percentage in the residential electricity prices compared to the commercial/industrial prices. 25

27 3.4.5 Germany The German electricity and gas markets were fully opened to competition in 1998 [EC-DE-07]. The BNetzA (The Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway) has considerable authority to build market design features. Decisions concerning the design of Germany s electricity market are made after consultation with market participants. Instead of a single designated market operator for the entire country, there are load-serving entities and generators that buy and sell electricity either on the European Energy Exchange (EEX), where Germany s electricity is traded, or contract bilaterally (directly with each other); there is no obligation to trade via EEX [IEA-DE-07]. As of 2009, 42% of the Germany s total electricity is supplied from solid fuels, followed by 23% share from nuclear energy, 16% from renewables, 14% from gases (natural and derived gases), 2% from solid fuels, 2% from petroleum products and 3% from other sources [EU-DE-11]. Figure 10 shows the evolution of the German electricity prices in different market segments over the last 10 years. The average retail electricity prices are divided into 2 parts: taxes included and taxes excluded. The tax exclusive values are obtained from Eurostat and the tax inclusive values from BNetzA. The retail commercial/industrial segment is shown as commercial and industrial. The average power exchange purchase and peak load values are also taken from BNetzA and the values shown exclude VAT. Figure 10: The evolution of the German electricity prices in the period Source: Data collected from the PV Parity partner SUER In the period of , the electricity prices in different market segments 26

28 presented the following behaviour: lowest at the power exchange level, followed by the retail industrial (without VAT), retail industrial (with VAT), retail residential (without VAT), retail commercial (with VAT) and retail residential (with VAT) electricity prices. Overall an increasing trend is observed in the retail residential, commercial and industrial electricity prices during the last decade. The significant difference between the tax/levies included and excluded electricity prices show that taxes constitute a high amount of the electricity prices in Germany. The breakdown of retail electricity prices for residential segment including VAT is shown in Table 8. Table 8: Breakdown of the retail electricity prices in Germany. Source: Data collected from the PV Parity partner SUER Average retail electricity price Residential Procurement cost= 34.6% Network cost= 21.4% General system cost= 18.9% Taxes= 24.6% Value Added Tax (VAT) included? Yes The procurement, network, general system costs constitute up to 75% of the total price in the retail residential electricity. 27

29 3.4.6 Greece The actual liberalisation of the energy market and the simultaneous establishment of the RAE (Regulating Authority of Energy) and DESMIE (Administrator of the National System of Transportation of Electrical Energy) took place in RAE is an independent institution that is responsible for providing the Ministry of Development with solutions in regards to energy issues (production licenses, pricing, etc.), while DESMIE, apart from the management of the network, is the commercial operator of RES (Renewable energy Sources) units of the interconnected national system [EEG- 2011]. As of 2009, 55% of the Greece s total electricity was generated from solid fuels, followed by 18% share from gases (natural and derived gases) and 13% from solid fuels and 13% from petroleum products [EU-GR-11]. Figure 11 shows the evolution of the Greek electricity prices in different market segments over the last 10 years. The average retail electricity prices shown in Figure 11 do not include VAT. The electricity prices covering the residential segment of the Greek electricity market were collected from EUROSTAT, while the average wholesale electricity prices for the industrial/commercial sector were provided by RAE. The power exchange average purchase and average peak load prices were provided by Hellenic Transmission System Operator. Figure 11: The evolution of the Greek electricity prices in the period Source: Data collected from the PV Parity partner TUC 28

30 As the values in Figure 11 indicate, there is an increasing trend in the electricity prices in all segments of the Greek electricity market. The prices reached the highest value in 2008 which can be linked to the oil price spikes in As previously shown in Figure 4, the average retail residential electricity prices are lowest in Greece among the 11 target EU countries compared in the PV Parity project. In Table 9, the components of the retail electricity prices are shown. Table 9: Breakdown of the retail electricity prices in Greece. Source: Data collected from the PV Parity partner TUC Average retail electricity prices Residential Commercial / Industrial Procurement cost= 57.7 % Procurement cost= 63% Network cost= 23.7 % Network cost= 13.5 % General system cost= 8.7 % General system cost=12 % Taxes= 9.9 % Taxes= 11.5 % Value Added Tax (VAT) included? Yes Value Added Tax (VAT) included? Yes The percentage of the taxes in the total electricity price for the retail residential segment is lower than the other EU countries of the PV Parity project. 29

31 3.4.7 Italy The retail electricity market in Italy was fully liberalized in In Italy, Terna, the transmission system operator, is the main owner of the national transmission grid and is also responsible for the safe transmission and dispatch of the electricity throughout Italy and safely managing the balance between electricity demand and supply. Terna is also responsible for grid planning, development activity, and maintenance. AU (Acquirente Unico) is the entity in the charge of providing electricity for the protected market. The Italian regulatory authority for electrical energy and gas is AEEG (Autorità per l'energia elettrica e il gas) is an independent body and it regulates and controls the electricity and gas sectors [IEA-IT-09]. In 2009, 51% of the Italy s total electricity was generated from gases (natural and derived gases), followed by 24% share from renewables, 14% from solid fuels, 9% from petroleum products and 2% from other sources [EU-IT-11]. Figure 12 shows the evolution of the Italian electricity prices in different market segments since The retail residential electricity price was collected from Acquirente Unico, the retail commercial/industrial segment from AEEG and Eurostat and the power exchange average peak load prices and average generation costs from GME. Figure 12: The evolution of the Italian electricity prices in the period Source: Data collected from the PV Parity partner EGP 30

32 The electricity prices show an increasing trend until 2008 and then start to decrease. The electricity prices follow the order of: generation lowest, followed by power exchange and retail segment highest. The average wholesale electricity price coincides with the average power exchange purchase price. As previously shown in Figure 4 and 5, electricity prices in Italy remain among the highest among the EU countries of PV Parity project, especially for industrial consumers. Prices tend to vary considerably within each customer class depending on consumption levels and the impact of the taxation regime. In general, Italian industry pays higher prices for electricity when compared to the European average for all consumption classes, both net and gross of taxes. In Table 10, the components of the retail residential electricity prices in 2011 according to Acquirente Unico are represented. Table 10: Breakdown of the retail electricity prices in Italy. Source: Data collected from the PV Parity partner EGP Average retail electricity price Residential Procurement cost= 54% Network cost= 19% General system cost= 13% Taxes= 14% Value Added Tax (VAT) included? Yes The values in the table indicate a high percentage of procurement costs in the total residential electricity price. 31

33 3.4.8 Portugal In Portugal, the electricity industry has changed from a vertically integrated monopoly structure to a dual market structure (regulated and free market running in parallel). Since September 2006, all customers have been free to choose their supplier, although regulated tariffs will remain an option. Between 2004 and 2008, several reforms were implemented in the wholesale electricity market, which were the implementation of the futures market platform (OMIP) in the Iberian electricity market (MIBEL) and the adoption of the Spanish spot market as the day-ahead market for Portuguese market players in 2007 [IEA-PT-09]. As of 2009, 36% of the Portugal s total electricity was generated from renewables, followed by 29% share from gases (natural and derived gases), 26% from solid fuels, 7% from petroleum products and 2% from other sources [EU-PT-11]. Figure 13 shows the evolution of the electricity prices in different market segments in Portugal during the last decade. The average wholesale electricity price commercial/industrial segment coincides with retail commercial industrial electricity price. The electricity prices covering the residential segment of the Portuguese electricity market are collected from Eurostat. The average generation costs coincide with the average power exchange purchase price and these values are obtained from OMEL. The average power exchange peak load price is provided from MIBEL. Figure 13: The evolution of the Portuguese electricity prices in the period Source: Data collected from the PV Parity partner IDAE 32

34 As seen in Figure 13, the electricity prices in different market segments are lowest at the generation and power exchange level, followed by the retail segment commercial/industrial (equal to wholesale price) and retail residential electricity prices. An increasing trend is observed in the prices in residential and commercial segments of the Portuguese electricity market during the last 10 years. The breakdown of retail electricity prices for residential segment including VAT is shown in Table 11. Table 11: Breakdown of the retail electricity prices in Portugal. Source: Data collected from the PV Parity partner IDAE Average retail electricity price Residential Procurement cost= 35% Network cost= 21% General system cost= 21% Variabilized fixed costs = 17% Taxes= 6% Value Added Tax (VAT) included? Yes The procurement, network, general system and variabilized costs constitute up to 94% of the total price in the retail residential electricity. 33

35 3.4.9 Spain In Spain, the electricity and gas markets have been fully open to competition since OMEL (Operador del Mercado Iberico de la Energia) is responsible from the management of the day-ahead and intra-day market and also from the settlement and communication of payment obligations and collection rights deriving from the energy contracted in the day-ahead and intra-day electricity production markets. In 2007, Spain and Portugal established the all-iberian electricity market (MIBEL) with the goal of improving security of supply and economic efficiency. The wholesale electricity market is integrated with the wholesale electricity market of Portugal into an Iberian regional market (MIBEL). A common price for electricity for both countries applies when the interconnection capacity allows it [IEA-ES-09]. As of 2009, 38% of the Spain s total electricity was generated from gases (natural and derived gases), followed by 25% share from renewables, 18% from nuclear, 12% from solid fuels, 6% from petroleum products, 1% from other sources [EU-ES-11]. Figure 14 shows the evolution of the Spanish electricity prices in different market segments between The electricity prices covering the residential segment are collected from Eurostat. Average wholesale electricity price commercial/industrial segment coincides with retail commercial industrial electricity price. The average generation costs coincide with the average power exchange purchase price and these values are obtained from OMEL. The average power exchange peak load price is provided from MIBEL by taking average of the hourly market prices at the power exchange market from 08:00 to 20:00, from Monday to Friday. Figure 14: The evolution of the Spanish electricity prices in the period Source: Data collected from the PV Parity partner IDAE 34

36 As it is shown in Figure 14, the electricity prices are lowest at the generation and power exchange level, followed by the retail segment commercial/industrial (equal to wholesale prices) and retail residential electricity prices. A steady increasing trend is observed in the retail electricity prices during the last decade. The breakdown of retail electricity prices for residential segment including VAT is shown in Table 12. Table 12: Breakdown of the retail electricity prices in Spain. Source: Data collected from the PV Parity partner IDAE Average retail electricity price Residential Procurement cost= 32% Network cost= 13% General system cost= 18% Variabilized fixed costs= 17% Taxes= 19% Value Added Tax (VAT) included? Yes The procurement, network, general system and variabilized costs constitute up to 80% of the total price in the retail residential electricity. 35

37 The Netherlands With the liberalization of the Dutch retail market in 2004 all retail customers free to choose their own electricity supplier. At the same time, legal unbundling of supply and distribution network operations was instituted. The Dutch regulator for electricity is the Office of Energy Regulation (Energiekamer), which is a separate chamber of the Netherlands Competition Authority. The national regulator has the statutory task to check whether the prices charged to retail consumers are reasonable. All retail tariffs must be approved in advance by the regulator. If a tariff is found to be unreasonable, the regulator can impose a tariff on the supplier [IEA-NL-08]. The Netherlands is a significant producer (and exporter) of natural gas and is the second largest producer of natural gas in the EU [EC-NL-07]. Electricity is generated mainly from gas and hard coal. In 2009, gases (natural and derived gases) accounted for 63% of the total electricity generation, followed by 21% from solid fuels, 10% from renewables, 4% from nuclear and 1% from other sources [EU-NL- 11]. Figure 15 shows the evolution of the Dutch electricity prices in different market segments over the last 10 years. The electricity prices of the Dutch electricity market were taken from ECN and from ENDEX (European Energy Derivatives Exchange). Figure 15: The evolution of the Dutch electricity prices in the period Source: Data collected from the PV Parity partner ECN Among the market segments represented in the graph, only the retail residential segment includes the VAT (19%) and the rest are based on prices excluding VAT. The generation costs coincide with the average power exchange purchase price and these prices were the lowest in comparison with the other market segments. The average retail commercial/industrial, wholesale, and power exchange peak load 36

38 electricity prices were in the same range of /MWh during the last decade. The VAT included retail residential electricity price is the highest among all market segments represented in Figure 15. In all market segments electricity prices have exhibited a relatively steady increase since 2004, peaking at 2009 and then showing a slight decrease in 2010 and The breakdown of retail electricity prices for retail and wholesale segments is shown in Table 13. Table 13: Breakdown of the retail electricity prices in the Netherlands. Source: Data collected from the PV Parity partner ECN Average retail electricity price Average wholesale electricity price Commercial / Industrial Residential Commercial / Industrial Network cost 16% 14% 8% Taxes 54% 8% 9% Value Added Tax (VAT) included? Yes (19%) No No The taxes constitute 54% (including 19% VAT) of the retail residential electricity prices, while they constitute 8% (excluding VAT) and 9% (excluding VAT) of the total price in the retail commercial/industrial and wholesale segments respectively. 37

39 United Kingdom The energy markets in England, Scotland and Wales are regulated by the Office of the Gas and Electricity Markets (Ofgem), the independent regulator funded by the energy companies who are licensed to run the gas and electricity infrastructure [DECC-2011]. Ofgem s priority is to protect consumers by promoting competition and regulating the national transmission and regional distribution grids [Ofgem-2011]. As of 2009, 45% of the total electricity generation in UK was supplied from gases (natural and derived gases), 28% from solid fuels, 18% from nuclear energy, 7% from renewables and 1% from other sources [EU-UK-11]. Figure 16 shows the evolution of the UK s electricity prices in different market segments over the last 10 years. The electricity prices were collected from the regulator Ofgem and from DECC (Department of Energy and Climate Change). Figure 16: The evolution of the UK electricity prices in the period Source: Data collected from the PV Parity partner ICON When the electricity prices in different market segments are compared, it is noticed that at generation level, the cost is higher than the wholesale level. This is because the generation companies take into account the fact that they could have peak prices, while at wholesale level, the wholesalers can buy from generation companies producing at base load prices. Due to this fact, the average wholesale prices in the graph are at the lowest level, followed respectively by generation costs, power exchange purchase, power exchange peak load, retail commercial/industrial and retail residential electricity prices. In all market segments, there is a steady increase 38

40 in the electricity prices since The breakdown of retail electricity prices for all market segments including VAT is shown in Table 14. Table 14: Breakdown of the retail electricity prices in UK. Source: Data collected from the PV Parity partner ICON Average retail electricity price Residential Commercial / Industrial Average wholesale electricity price Commercial / Industrial Power exchange Average purchase price Average peakload price Procurement cost 47% 60% 80% 80% 80% Network cost 33% 20% 0% 0% 0% General system cost 10% 10% 10% 10% 10% Taxes 5% 5% 5% 5% 5% Value Added Tax (VAT) included? Yes Yes Yes Yes Yes Profit 5% 5% 5% 5% 5% In all segments the taxes are lower than other PV Parity project countries. Although the retail residential prices constitute the highest level among the UK s electricity market segments, when the PV Parity project countries are compared (Figure 4), the relative amount of tax contribution for residential consumers is the lowest in the UK (4.8 %) where only VAT rate is applied to the basic price and no other taxes are applied. 39

41 4. Electricity price scenarios In order to define the future trends of the electricity prices, the scenarios stated in the following roadmaps are taken into consideration: European Commission, Energy Roadmap 2050 [EC-RM50], [EC-IA50] EPIA, On the way to competitiveness (2011) [EPIA-2011] Greenpeace/EPIA, Solar generation VI (2011) [SG-VI] IEA, Technology Roadmap (2010) [IEA-ETP-10] A detailed description of each scenario is shown in the following paragraphs. 4.1 Energy Roadmap 2050 Roadmap for moving to a competitive low-carbon economy in 2050 (Energy Roadmap 2050) analyzes the implications of the EU s commitment of achieving 85% reduction of energy related CO 2 emissions compared to 1990 (corresponding to 80% GHG emissions reductions by 2050). In 2030, energy-related CO 2 emissions are between 38-41% lower, and total GHG emissions reductions are lower by 40-41%). The general aim of the Roadmap is to develop a vision and strategy of how the EU energy system can be decarbonised and become more secure and competitive by The Energy Roadmap 2050 show a Reference scenario, a Current Policy Initiatives scenario and other 5 different combinations of 4 decarbonisation options (Scenario 2-6), which are based on the same demographic and macroeconomic assumptions as the Reference scenario and Current Policy Initiatives scenario. The decarbonisation scenarios include features and mechanisms that lead to high decarbonisation and technology penetration [EC-IA50S], [EC-RM50]. The scenarios in the Energy Roadmap 2050 are described below. Reference scenario The Reference scenario includes current trends and long-term projections on economic development (gross domestic product (GDP) growth 1.7% pa). The scenario includes policies adopted by March 2010, including the 2020 targets for RES share and GHG reductions as well as the Emissions Trading Scheme (ETS) Directive. For the analysis, several sensitivities with lower and higher GDP growth rates and lower and higher energy import prices were analysed. Scenario 1: Current Policy Initiatives (CPI) This scenario updates measures adopted, e.g. after the Fukushima events following the natural disasters in Japan, and being proposed as in the Energy 2020 strategy; the scenario also includes proposed actions concerning the "Energy Efficiency Plan" and the new "Energy Taxation Directive". 40

42 Scenario 2: High Energy Efficiency This scenario is driven by a political commitment of very high primary energy savings by The scenario includes a very stringent implementation of the Energy Efficiency Plan and aims at reaching 20% energy savings by It includes more binding minimum requirements for appliances and new buildings; high renovation rates of existing buildings; establishment of energy savings obligations on energy utilities. This leads to a decrease in energy demand of 41% by 2050 as compared to the peaks in [EC-IA50]. Scenario 3: Diversified supply technologies In this scenario no technology is preferred; all energy sources can compete on a market basis with no specific support measures. Decarbonisation is driven by carbon pricing assuming public acceptance of both nuclear and Carbon Capture &Storage (CCS). This option is mainly driven by carbon prices and carbon values (equal for ETS and non ETS sectors) [EC-IA50]. Scenario 4: High Renewable Energy Sources (RES) This scenario aims at achieving very high overall RES share and very high RES penetration in power generation. It includes strong support measures for RES leading to a very high share of RES in gross final energy consumption (75% in 2050) and a share of RES in electricity consumption reaching 97% [EC-IA50]. Scenario 5: Delayed Carbon Capture &Storage (CCS) This scenario is similar to Diversified supply technologies scenario but assumes that CCS is delayed, leading to higher shares for nuclear energy with decarbonisation driven by carbon prices rather than technology push. It reflects acceptance difficulties for CCS regarding storage sites and transport; large scale development of CCS is therefore assumed feasible only after 2040 [EC-IA50]. Scenario 6: Low nuclear This scenario shows consequence of a low public acceptance of nuclear power plants leading to cancellation of investment projects that are currently under consideration and no life time extension after 2030 [EC-IA50]. It is similar to Diversified supply technologies scenario but assuming that no new nuclear (besides reactors currently under construction) is being built resulting in a higher penetration of CCS (around 32% in power generation). In the Impact Assessment of the Energy Roadmap 2050 [EC-IA50] states that the decarbonisation scenarios are based on "global climate action" price trajectories for oil, gas and coal [SEC-2011] reflecting that global action on decarbonisation will reduce fossil fuel demand worldwide and will therefore have a downward effect on fossil fuel prices. Oil, gas and coal prices are therefore lower than in the Reference scenario and Current Policy Initiative scenario. It is also mentioned in the Roadmap 41

43 that the electricity prices are calculated in such a way total costs of power generation, balancing, transmission and distribution are recovered, ensuring that investments can be financed. The average electricity prices foreseen in the Roadmap scenarios for 2030 and 2050 for different sector are shown in Table 15. Table 15: EU27 average electricity prices. Source: Energy Roadmap 2050 (2011) (Euro'08 per MWhe) 2005 Reference Scenario 1 Scenario Average price (*) Industry Households Services (Euro'08 per MWhe) Scenario 3 Scenario 4 Scenario 5 Scenario Average price (*) Industry Households Services (*) Average price over all consumer types, including final consumers and energy branch. According to Table 15, in 2050 the average electricity prices are highest in the High RES scenario (Scenario 4) and lowest in the Diversified supply (Scenario 3) Energy efficiency (Scenario 2), having lower prices than the Reference scenario and Current Policy Initiatives scenario (Scenario 1), which is attributed to the lower procurement of fossil fuels under global climate action. The average prices continue rising until 2030 and further rise in the High RES scenario (Scenario 4). After 2030, the prices either start to decrease or show an average annual increase that is lower than in the period The breakdown of the electricity prices in Table 15 are represented in Table

44 Table 16: Breakdown of the electricity prices. Source: Energy Roadmap 2050 (2011) (Euro'08 per MWhe) Fixed and capital costs Variable and fuel costs Tax on fuels and ETS payments Grid and sales costs Average price of electricity (pre-tax) (*) Average price of electricity (after-tax) (*) (Euro'08 per MWhe) Fixed and capital costs Variable and fuel costs Tax on fuels and ETS payments Grid and sales costs Average price of electricity (pre-tax) (*) Average price of electricity (after-tax) (*) 2005 Reference Scenario 1 Scenario Scenario 3 Scenario 4 Scenario 5 Scenario (*) Average price over all consumer types, including final consumers and energy branch. According to Table 16, the fixed operational and capital costs for power generation continue rising until The increase in the capital costs is more significant in the decarbonisation scenarios (Scenarios 2-6) as compared to the Reference and Current Policy Initiatives (Scenario 1) scenarios. The Impact Assessment of the Energy Roadmap 2050 [EC-IA50] explains the 155% increase in the fixed and capital costs in the High RES scenario (Scenario 4) with the additional investment needs in generation, grid, storage and back-up capacities. It is also shown that the variable and fuel costs are shifted towards the capital costs in the decarbonisation cases 43

45 (most significantly in the High RES scenario) compared to the Reference and Current Policy Initiatives (Scenario 1) scenarios. In the decarbonisation scenarios the unit costs of transmission and distribution increase substantially, being highest in the High RES scenario. Impact Assessment of the Energy Roadmap 2050 [EC-IA50], the substantial decrease in the costs related to ETS auction payments are ascribed to the decarbonisation of the power sector in all scenarios in the last two decades of the projection period. Due to these effects on the costs components the electricity prices decline between 2030 and 2050 in all decarbonisation scenarios except the High RES scenario. On the other hand, the prices start to increase until 2030 which is attributed to the increases in capital cost, grid costs and auctioning payments. Having high investment requirements combined with stronger requirements on the electricity grid extension, that are not completely compensated by savings in fuel and other variable costs, the High RES scenario is an exemption from other cases [EC-IA50] and it shows the highest electricity prices. 4.2 EPIA, On the way to competitiveness (2011) According to EPIA s study On the way to competitiveness (2011) [EPIA-2011], the electricity prices will increase in the coming decade. To study these trends and consider the conditions under which PV will reach full competitiveness, EPIA has conducted an analysis of electricity markets in the following European countries: France, Germany, Italy, Spain and the United Kingdom. In this study, the retail and wholesale price evolutions are shown and the assumptions are based on the historical growth rates or expected growth. The retail electricity prices are analyzed for three market segments: Residential customers: systems round 3 kw Commercial customers: systems around 100 kw Industrial consumers: systems around 500 kw Figure 17 shows the assumption on the increase of retail electricity prices for different types of consumers until

46 Figure 17: Assumption on the increase of retail electricity prices for different types of consumers. Source: EPIA, On the road to competitiveness, 2011 The electricity prices for end-users are expected to show a steady increase until According to the graph in Figure 17, by 2020 the projected electricity prices are expected vary between 0,16-0,31 /kwh for the residential segment, 0,12-0,18 /kwh for the commercial segment and 0,08-0,16 /kwh for the industrial segment. The breakdown of the growth trend of prices for each segment and country until 2020 and in the long term (between 2020 and 2055) are shown in Table 17. Table 17: Yearly retail electricity prices increases. Source: EPIA, On the way to competitiveness (2011) CAGR: Compound Annual Growth Rate 45

47 The retail electricity prices in all segments are expected to grow from 2% to 5.4% yearly depending on the respective country considered. Table 18 shows the wholesale electricity prices in the target of this study for the period between 2010 and Table 18: Yearly wholesale prices increase. Source: EPIA, On the way to competitiveness (2011) Country Forecast CAGR France 5.7% Germany 6.2% Italy 3.8% Spain 6.6% United Kingdom 6.7% The wholesale electricity prices are expected to increase between 3.8% and 6.7% depending on the country. 4.3 Greenpeace/EPIA, Solar generation VI (2011) EPIA Solar Generation VI (2011) [SG-VI] study provides the electricity price trends until In this study the historical development and the future trends of the retail electricity prices are compared to the cost of PV electricity. The utility prices are divided separated as peak power prices and bulk power. In Figure 18, the foreseen electricity prices and the PV generation costs until 2040 are represented. 46

48 *h/a: Hours of sun per annum. 900 h/a corresponds to northern countries of Europe, 1800 h/a corresponds to southern countries of Europe Figure 18: Development of utility prices and PV generation costs. Source: EPIA, Solar Generation VI (2011) According to Solar generation VI study,by 2020, the utility peak power price could be in the range of 0,1-0,3 /kwh and the utility bulk power in the range of 0,05-0,1 /kwh. In 2040, the utility peak power price could be in the range of 0,13-0,45 /kwh and the utility bulk power in the range of 0,05-0,13 /kwh. 4.4 IEA, Technology Roadmap (2010) The BLUE Map Scenario in IEA Energy Technology Perspective (ETP) (2008) [IEA- ETP-10] provides wholesale and retail electricity generation costs estimations. The BLUE Map scenario describes how energy technologies may be transformed by 2050 to achieve the global goal of reducing annual CO 2 emissions to half than 2005 levels. The set of ETP 2008 BLUE Scenarios targets a 50% reduction in CO 2 emissions by In the BLUE Map scenario 46% of global power is generated from renewables by