International comparison of electricity and gas prices for commerce and industry FINAL REPORT ON A STUDY PREPARED FOR CREG October 2011 Frontier Economics Ltd, London.
October 2011 Frontier Economics i International comparison of electricity and gas prices for commerce and industry Executive summary 12 1 Introduction 35 1.1 Background... 35 1.2 Scope of the study... 35 1.3 Structure of the report... 35 1.4 Acknowledgements... 36 2 Methodology 37 2.1 Price trends... 37 2.2 Developing price estimates for each country... 38 2.3 Analysing the price components... 41 2.4 Identification of network costs... 52 2.5 Identification of taxes, levies and financial burdens... 52 3 Comparison of price trends using Eurostat 54 3.1 Price trends electricity... 55 3.2 Price trends gas... 58 4 Taxes levies and financial burdens 61 4.1 Categories of taxes, levies and financial burdens... 61 4.2 Issues arising... 62 4.3 Protection for large consumers... 62 4.4 Results... 63 5 Electricity price comparison for SME consumers 68 5.1 The standard SME electricity consumer... 68 5.2 Electricity prices in Belgium... 69 5.3 Electricity prices in Germany... 73 Contents
ii Frontier Economics October 2011 5.4 Electricity prices in France... 76 5.5 Electricity prices in the Netherlands... 77 5.6 Electricity prices in Great Britain... 79 5.7 Comparison of final prices and components... 81 6 Electricity price comparison for industry 86 6.1 Standard industrial electricity consumers... 86 6.2 Wholesale electricity prices for all countries... 88 6.3 Industrial electricity prices in Belgium... 90 6.4 Industrial electricity prices in France... 96 6.5 Industrial electricity prices in Germany... 101 6.6 Industrial electricity prices in the Netherlands... 103 6.7 Industrial electricity prices in Great Britain... 104 6.8 Comparison of final prices and components... 108 7 Gas price comparison for SME consumers 119 7.1 The standard SME gas consumer... 119 7.2 Gas prices in Belgium... 120 7.3 Gas prices in Germany... 124 7.4 Gas prices in France... 125 7.5 Gas prices in the Netherlands... 127 7.6 Gas prices in Great Britain... 128 7.7 Comparison of final prices and components... 129 8 Gas price comparison for industry 135 8.1 Standard industrial gas consumers... 135 8.2 Wholesale gas prices for all countries... 136 8.3 Distribution and transport charges in all countries... 137 8.4 Taxes, levies and financial burdens in all countries... 138 8.5 Comparison of final prices and components... 140 9 Conclusions 145 Contents
October 2011 Frontier Economics iii 9.1 Electricity... 145 9.2 Gas... 147 Annex A - Definition of standard customers 151 Annex B - Taxes, levies and financial burdens 152 Annex C Estimated wholesale energy prices 195 Annex D Sterling/ euro exchange rates 197 Contents
iv Frontier Economics October 2011 International comparison of electricity and gas prices for commerce and industry Figure 1. Electricity prices for SME in ct /kwh 15 Figure 2. Electricity price components for SMEs in ct /kwh 16 Figure 3. Tax intensity of electricity prices for SME (excl. PSOs) 17 Figure 4. Electricity price components for a small industrial consumer (5GWh) in ct /kwh 18 Figure 5. Tax intensity of electricity prices for a small industrial consumer (5GWh) (excl. PSOs) 19 Figure 6. Electricity price components for a medium industrial consumer (25GWh) in ct /kwh 20 Figure 7. Tax intensity of electricity prices for a medium industrial consumer (25GWh) (excl. PSOs) 21 Figure 8. Electricity price components for a large industrial consumer (250GWh) in ct /kwh 22 Figure 9. Tax intensity of electricity prices for a large industrial consumer (250GWh) (excl. PSOs) 23 Figure 10. Gas prices for SME in ct /kwh 24 Figure 11. Gas price components for SME in ct /kwh 25 Figure 12. Tax intensity of gas prices for SME (excl. PSOs) 26 Figure 13. Gas price components for an industrial consumer (10GWh) in ct /kwh 28 Figure 14. Tax intensity gas prices for an industrial consumer (10GWh) (excl. PSOs) 29 Figure 15. Summary of final electricity prices for all consumer types in ct /kwh 30 Figure 16. Summary of tax intensities for all types of electricity consumers (excl. PSOs) 31 Tables & Figures
October 2011 Frontier Economics v Figure 17. Summary of final gas prices for all consumer types in ct /kwh 32 Figure 18. Summary of tax intensities for all types of gas consumers (excl. PSOs) 33 Figure 19. Forward electricity prices - Cal 2010 baseload contracts as traded between Jan-08 and Dec-09 (in /MWh) 42 Figure 20. Electricity spot market price development in Belgium (in % of the 2009 average) 45 Figure 21. Estimated hourly electricity prices in Belgium for 2010 (in /MWh) and the within year price trend 46 Figure 22. Hourly electricity prices for typical weeks within three representative seasons in Belgium for 2010 (in /MWh) 47 Figure 23. Hourly electricity prices for a typical winter week in Belgium, France, Germany, the Netherlands and Great Britain for 2010 (in /MWh) 48 Figure 24. Electricity price trends without VAT for SME consumers 55 Figure 25. Electricity price trends without VAT for small industry consumers 56 Figure 26. Electricity price trends without VAT for medium industry consumers 57 Figure 27. Electricity price trends without VAT for large industry consumers 58 Figure 28. Gas price trends without VAT for SME consumers 59 Figure 29. Gas price trends without VAT for industry consumers 59 Figure 30. Electricity prices for SME in ct /kwh 82 Figure 31. Electricity price components for SME in ct /kwh 83 Figure 32. Tax intensity of electricity prices for SME (excl. PSOs) 84 Figure 33. Scatter plot of electricity unit prices against their unit value of taxes for SME in ct /kwh (excl. PSOs) 85 Figure 34. Load profile for small industry electricity consumer (5GWh) by season 87 Tables & Figures
vi Frontier Economics October 2011 Figure 35. Load profile for medium industry electricity consumer (25GWh) by season 88 Figure 36. Electricity bill components for small industrial consumer in Belgium in 94 Figure 37. Electricity bill components for medium industrial consumers in Belgium in 95 Figure 38. Electricity bill components for large industrial consumer in Belgium in 96 Figure 39. Electricity price components for a small industrial consumer (5GWh) in ct /kwh 109 Figure 40. Tax intensity of electricity prices for the small industry consumer (5GWh) (excl. PSOs) 110 Figure 41. Scatter plot of unit electricity prices against their value of taxes and levies for the small industrial consumer (5GWh) (excl. PSOs) 111 Figure 42. Electricity price component for a medium industrial consumer (25GWh) in ct /kwh 112 Figure 43. Tax intensity of electricity prices for a medium industry consumer (25GWh) (excl. PSOs) 113 Figure 44. Scatter plot of unit electricity prices against their value of taxes and levies for a medium industrial consumer (25GWh) (excl. PSOs) 114 Figure 45. Electricity price components for a large industrial consumer (250GWh) in ct /kwh 115 Figure 46. Tax intensity of electricity prices for a large industry consumer (250GWh) (excl. PSOs) 116 Figure 47. Scatter plot of unit electricity prices against their value of taxes and levies for a small industrial consumer (250GWh) (excl. PSOs) 117 Figure 48. Hourly gas consumption pattern of SME for different seasons with a consumption of 2,300,000 kwh per year 120 Figure 49. Gas prices for SME in ct /kwh 130 Figure 50. Gas price components for SMEs in ct /kwh 131 Tables & Figures
October 2011 Frontier Economics vii Figure 51. Tax intensity of gas prices for SME (excl. PSOs) 132 Figure 52. Scatter plot of unit gas prices against their unit value of taxes for SME in ct /kwh (excl. PSOs) 133 Figure 53. Seasonal load profile for the industrial gas consumer 136 Figure 54. Gas price components for an industrial consumer in ct / kwh 142 Figure 55. Tax intensity of gas prices for an industrial consumers (excl. PSOs) 143 Figure 56. Scatter plot of unit gas prices against their unit value of taxes for industrial gas consumer in ct /kwh (excl. PSOs) 144 Figure 57. Summary of final electricity prices for all consumer types in ct /kwh 145 Figure 58. Summary of tax intensities for all types of electricity consumers (excl. PSOs) 147 Figure 59. Summary of final gas prices for all types in ct /kwh 148 Figure 60. Summary of tax intensities for all types of gas consumers (excl. PSOs) 149 Table 1. Electricity prices for a small industrial consumer (5GWh) in ct /kwh 18 Table 2. Electricity prices for a medium industrial consumer (25GWh) in ct /kwh 20 Table 3. Electricity prices for a large industrial electricity consumer (250GWh) in ct /kwh 22 Table 4. Gas prices for an industrial gas consumer (10GWh) in ct /kwh 27 Table 5. Average forward price for different procurement strategies (in /MWh) 43 Table 6. Industry customer type definition of the CREG and Eurostat 54 Table 7. Taxes, levies and financial burdens on electricity in Belgium 64 Tables & Figures
viii Frontier Economics October 2011 Table 8. Taxes, levies and financial burdens on electricity in FR, DE, NL and GB 65 Table 9. Taxes, levies and financial burdens on natural gas in Belgium 66 Table 10. Taxes, levies and financial burdens on natural gas in FR, DE, NL and GB 67 Table 11. Share of SME electricity consumers buying electricity on the default offer in Q3 of 2010 69 Table 12. Market shares for SME electricity consumers in Belgium in 2009-2010 (normalised) 70 Table 13. Electricity bill and unit price for SME in Belgium (Nov. 2010) 71 Table 14. Electricity bill components for SMEs in Belgium in 73 Table 15. Published electricity tariffs for SME in Germany 74 Table 16. Average German SME electricity tariffs in ct /kwh 75 Table 17. Electricity bill components for SME in Germany in 76 Table 18. Electricity bill and unit price for SMEs in France (Nov. 2010) 77 Table 19. Electricity bill components for SMEs in France in 77 Table 20. Electricity bill components for SMEs in the Netherlands in 78 Table 21. Electricity bill components for SME in Great Britain in 81 Table 22. Electricity bill components for SME in 83 Table 23. Characteristics of industrial electricity consumers 87 Table 24. Average unit cost of electricity in 2010 for industrial consumers in ct /kwh 89 Table 25. Transmission and distribution unit charges for industrial consumers in Belgium in ct /kwh 91 Table 26. Aggregated unit value of taxes and levies for industrial electricity consumers in Belgium in ct /kwh 92 Table 27. Aggregate unit value Public Service Obligations for industrial electricity consumers in Belgium in ct /kwh 92 Tables & Figures
October 2011 Frontier Economics ix Table 28. Electricity bill components in and unit price for small industrial consumer in Belgium 93 Table 29. Electricity bill components in and unit price for medium industrial consumer in Belgium 94 Table 30. Electricity bill components in and unit price for large industrial consumer in Belgium 95 Table 31. Aggregate network unit charges for industrial electricity consumers in France in ct /kwh 97 Table 32. Aggregated unit value of taxes and levies for industrial electricity consumers in France ct /kwh 98 Table 33. Electricity bill components in and unit prices for industrial consumers in France 99 Table 34. Comparison of estimated built-up prices and prices in the market in France (excluding all taxes) in 100 Table 35. Adjusted electricity bill components in and unit price for industrial consumers in France 100 Table 36. Aggregate network unit charges for industrial electricity consumers in Germany in ct /kwh 101 Table 37. Aggregated unit value of taxes and levies for industrial electricity consumers in Germany in ct /kwh 102 Table 38. Electricity bill components in and unit prices for industrial consumers in Germany 102 Table 39. Aggregate network unit charges for industrial electricity consumers in the Netherlands in ct /kwh 103 Table 40. Aggregated unit value of taxes and levies for industrial electricity consumers in the Netherlands in ct /kwh 104 Table 41. Electricity bill components in and unit prices for industrial consumers in the Netherlands 104 Table 42. Aggregate network unit charges for industrial electricity consumers in Great Britain in ct /kwh 106 Table 43. Aggregated unit value of taxes and levies for industrial electricity consumers in Great Britain in ct /kwh 107 Tables & Figures
x Frontier Economics October 2011 Table 44. Electricity bill components in and unit prices for industrial consumers in Great Britain 107 Table 45. Electricity bill components in for a small industrial consumer (5GWh) 108 Table 46. Electricity bill components in for a medium industrial consumer (25GWh) 112 Table 47. Electricity bill components in for a large industrial consumer (250GWh) 115 Table 48. Market shares in 2009-2010 (normalised) for SME gas consumers 121 Table 49. Share of SME gas consumers which remain on the default offer (number of connections) per region in Q4 of 2010 121 Table 50. Total gas bill and unit price for SME in Belgium 122 Table 51. Gas bill components for SME in Belgium in 124 Table 52. Average German SME gas price in ct /kwh 124 Table 53. Gas bill components for SME in Germany in 125 Table 54. Gas bill and unit price for SME in France 126 Table 55. Gas bill components for SME in France in 127 Table 56. Gas bill components for SME in the Netherlands in 128 Table 57. Gas bill components for SME in Great Britain in 129 Table 58. Average unit cost of wholesale gas in 2010 for industrial consumer 136 Table 59. Transport and distribution unit charges for the industrial gas consumer in ct /kwh 138 Table 60. Taxes and levies for the industrial gas consumer in per year 140 Table 61. Gas bill components and unit prices for an industrial consumer 141 Table 62. Data on renewable and cogen obligations in Flanders for 2010 157 Table 63. DSO surcharges for public service missions in Flanders ( /MWh) 159 Tables & Figures
October 2011 Frontier Economics xi Table 64. DSO surcharges for occupation of public land in Flanders ( /MWh) 159 Table 65. Data on the renewable obligation in Wallonia for 2010 160 Table 66. DSO surcharges for public service missions in Wallonia ( /MWh) 161 Table 67. Data on the renewable obligation in Brussels for 2010 163 Table 68. DSO surcharge for public service obligations related to distribution of natural gas in Flanders ( /MWh) 167 Table 69. DSO surcharges for use of public land within the natural gas distribution in Flanders ( /MWh) 167 Table 70. DSO surcharges for public service obligation within the tariff for distribution of natural gas in Wallonia ( /MWh) 168 Table 71. Surcharges for use of the public domain in Wallonia from 2011 in ct /kwh 169 Table 72. DSO surcharge for public service obligations within the charge for distribution of natural gas in Brussels ( /MWh) 169 Table 73. Upper bounds for municipal concession fees (electricity) 180 Table 74. Upper bounds for municipal concession fees (natural gas) 183 Table 75. Energy tax rates electricity (excl. VAT) 185 Table 76. Energy tax natural gas (excl. VAT) 187 Table 77. Estimated wholesale costs of electricity for delivery in 2010 (ct /kwh) 195 Table 78. Estimated wholesale costs of gas for delivery in 2010 (ct /kwh) 196 Table 79. Average monthly exchange rates 2008-2010 (GBP/EUR) 197 Tables & Figures
12 Frontier Economics October 2011 Executive summary The purpose of this study, commissioned by the CREG and its General Council, is to carry out a comparison of electricity and gas prices for commerce and industry in Belgium and four nearby countries, Germany, France, the Netherlands and Great Britain (GB). The comparisons refer to standard consumer definitions provided by the CREG for small and medium sized enterprises (SMEs) and different sizes of industrial consumer. A specific objective is to assess the importance of taxes, levies and financial burdens included in the final prices. Methodology The main steps we have undertaken to carry out the analysis are as follows: we first collected information on taxes, levies and financial burdens in each jurisdiction, paying particular attention to their application to larger consumers (entitlement to reduced rates of tax or levy, exemptions and caps on the total amounts paid); second, we collected representative electricity and gas price information for the SME consumer, where available, enabling direct comparison of the published prices. We did this using published price offers and price simulators to build up a picture of prices that took account of the market shares of the main suppliers, the proportion of consumers buying under different types of offer and geographical differences arising from variations in network charges. For countries without published prices, we use the same approach as for industry described below; third, we carried out an analysis of the three core price components by calculating: the supplier s cost of energy: for SME consumers we deducted the network charges and taxes, levies and financial burdens from the observed final price in order to obtain the energy costs for industrial consumers we multiplied the hourly consumer load profiles by the estimated hourly cost of energy, assuming that the energy was procured using market-based forward contracts for electricity and, for gas, under a combination of forward contracts and long-term gas supply contracts for continental countries and under forward contracts for GB; Executive summary
October 2011 Frontier Economics 13 the applicable network charges for electricity and gas given each consumer s load profile. This was done separately for transmission and distribution, or as a single bundled charge, depending on the network pricing regime in each country; and the applicable taxes, levies and financial burdens based on the initial research work, taking account of the size and other relevant consumption characteristics; and fourth, for industrial consumers, we added the different price components in order to derive a built-up price. For industrial consumers, this built-up price is the only source of end user price information available as there are no published price offers for larger consumers. Within the scope of taxes, levies and financial burdens we include any costs recovered from consumers that would not be incurred to run the business of the energy supplier or network company were it not for a legal requirement. As well as taxes, this definition includes the cost of public service obligations imposed on utilities which are then recovered in energy prices. For the Belgian regions, we also report the PSO component separately. The study is primarily focussed on taking a snapshot of prices at a particular point in time for the purposes of comparison. The date chosen when we collected price data was November 2010. However, we have also looked briefly at price trends over the last decade using Eurostat data. Price trends In order to gain some understanding of price trends, we reviewed Eurostat data for the period 2000-2010 for average unit prices. Electricity prices for both SME and industrial consumers are closely bunched with the exception of France which has significantly lower prices. In general, industrial prices are strongly driven by wholesale prices and the particular policies regarding taxes, exemptions from certain levies and industry policies. Gas prices in all five countries appear to have followed similar trends in recent years. This may in part reflect the net-back pricing approach that often underlies prices in long-term wholesale gas supply contracts on the continent. Even in Great Britain where gas-to-gas competition is more predominant, the price of gas appears to be correlated with prices for alternative forms of energy such as crude oil and oil products. For much of the period, Great Britain had the lowest gas price for the two consumer categories that we have been able to compare. Belgium is at the lower end of the price range for the remaining countries. Price series data for large industrial consumers are very limited. Executive summary
14 Frontier Economics October 2011 Taxes, levies and financial obligations We have devoted significant effort to identifying the different taxes, levies and financial obligations that apply to energy consumption. They generally fall into one of four categories: the cost of public service obligations which may be borne directly and included in the price of energy or recovered by some form of levy; the cost of measures to support the excess costs of renewable energy and, in some countries, those of co-generation; taxes on energy that resemble excise duties; and VAT on the price of energy, usually including VAT on the taxes and levies referred to above. However, because commercial and industrial consumer can normally recover VAT on purchases, we have not included VAT in our price comparisons. There are a number of different issues that need to be kept in mind when considering taxes levies and financial burdens due to differences in policy between the countries concerned. These issues are: some countries levy taxes on energy but these are then partially recycled or set off against other taxes or contributions that depend on the specific characteristics of the consumer organisation; and while most countries recover the excess costs of renewable energy from consumers, some fund these costs from the national budget. For large consumers there are often lower rates of tax, exemptions or caps on the total amount to be paid. These measures differ between taxes and between gas and electricity and there is no consistent approach in each country. Belgium is unique among the countries under consideration in having a number of federal taxes and levies which apply to energy as well as a significant number of regional ones specific to each of Brussels, Flanders and Wallonia. For this reason, we report our results separately for each region in Belgium rather than trying to produce any form of weighted average. Price comparison for SME electricity consumers Figure 1 shows the average unit prices for SME electricity consumers. Germany has the highest prices and France the lowest. French prices are low as the market is still dominated by regulated prices. These regulated prices pass on to the consumer some of the benefits of low cost nuclear power and are not directly Executive summary
Total electricity unit price (ct /kwh) October 2011 Frontier Economics 15 related to prices in the wholesale power market. The lower price in Great Britain is largely due to the low tax level in comparison to continental countries. Wallonia is the region within Belgium with the highest prices although these average about 1.4 ct/kwh below Germany. A comparable consumer in Wallonia has to pay, on average, about 40 per cent more for electricity than a French counterpart. No prices are available directly for Dutch and British SMEs. Therefore, we have used the price component analysis and made an allowance for retailing costs in order to derive a comparable final price. Figure 1. Electricity prices for SME in ct /kwh 18.0 16.0 15.50 14.0 12.0 13.66 13.66 14.12 12.91 12.18 10.0 9.99 8.0 6.0 4.0 2.0 0.0 Brussels Flanders Wallonia France Germany Netherlands Great Britain Source: Frontier analysis. Note data for the Netherlands and Great Britain are not based on a quoted price but the sum of the price components plus a 10 per cent allowance for retailing costs. The results of the price component analysis are presented in Figure 2. The energy components are very similar, with the exception of France. However, the network and tax components are differ significantly by country. High prices in Germany and Wallonia are associated with tax components in Germany and network components in Wallonia that are greater than those seen elsewhere. Taxes in the three regions of Belgium are very similar. Taxes in France and Great Britain are significantly lower than in the other countries considered. Executive summary
Electricity unit price (ct /kwh) 16 Frontier Economics October 2011 Figure 2. Electricity price components for SMEs in ct /kwh Taxes and levies PSOs Transmission Distribution Energy 16 12 0.90 1.24 0.66 0.84 1.30 1.60 1.30 3.30 2.25 1.03 3.23 2.94 3.21 1.06 3.51 0.80 2.42 2.15 8 3.89 4 8.04 8.02 8.00 8.69 8.23 8.20 5.04 0 Brussels Flanders Wallonia France Germany Netherlands Great Britain Source: Frontier analysis. Note data for the Netherlands and Great Britain are not based on a quoted price but the sum of the price components plus a 10 per cent allowance for retailing costs. A more graphic illustration of the relative tax position appears in Figure 3, which shows total taxes, levies and financial burdens as a percentage of the total price. Germany and the Netherlands have the highest tax intensity. The tax intensity in France, Great Britain and the three Belgian regions (excluding the cost of PSOs) is significantly lower and quite similar. Executive summary
Tax intensity of electricity bill (in %) October 2011 Frontier Economics 17 Figure 3. Tax intensity of electricity prices for SME (excl. PSOs) 25% 21% 20% 17% 15% 10% 9% 11% 11% 8% 7% 5% 0% Brussels Flanders Wallonia France Germany Netherlands Great Britain Source: Frontier analysis Price comparisons for electricity consumers in industry We derived prices for a small (5 GWh pa), medium (25 GWh pa) and large (250 GWh pa) industrial electricity consumer. The prices are the sum of our calculations of the relevant amounts for wholesale energy, network charges and taxes, given the assumed consumer characteristics. Published final prices are not available. Small industrial electricity consumers Table 1 shows the overall built-up price and Figure 4 shows the price components for the small industry consumer. Prices are significantly lower in France than other countries. This is primarily because there is still a regulated tariff in place and, until 2007, even those who had moved to the unregulated market were allowed to return to a transitional regulated tariff known as TaRTAM. We have assumed that, for the most part, industrial consumers in France are supplied under one form of regulated tariff or another. The Netherlands is the next cheapest country while Wallonia and Germany have very similar prices. Taxes are higher in Germany but we note that we have not Executive summary
Electricity unit price (ct /kwh) 18 Frontier Economics October 2011 taken account of offsets against social charges that are available to many industrial consumers and which depend on their individual circumstances. Table 1. Electricity prices for a small industrial consumer (5GWh) in ct /kwh Country/Region Unit price (ct /kwh) Brussels 9.01 Flanders 9.28 Wallonia 9.74 France 6.37 Germany 10.06 Netherlands 8.00 Great Britain 9.29 Source: Frontier analysis Figure 4. Electricity price components for a small industrial consumer (5GWh) in ct /kwh 12 Taxes and levies PSOs Transmission Distribution Energy 10 8 6 0.87 1.21 1.57 0.84 0.79 0.79 0.73 0.69 0.96 0.52 2.51 1.51 1.12 0.54 1.03 0.56 1.02 1.32 4 6.42 6.42 6.42 6.04 6.34 6.69 2 4.54 0 Brussels Flanders Wallonia France Germany Netherlands Great Britain Source: Frontier analysis. Note that for France the price component analysis has been capped at the average of the regulated and TaRTAM tariffs. Executive summary
Tax intensity of electricity bill (in %) October 2011 Frontier Economics 19 The tax intensity of the price for small industrial consumers is shown in Figure 5. Taxes in France are a lower proportion of price than in any other country, followed by Great Britain. As expected, Germany has the highest tax intensity. Within Belgium, Wallonia has the highest tax intensity for this size of consumer followed by Flanders and Brussels. Figure 5. Tax intensity of electricity prices for a small industrial consumer (5GWh) (excl. PSOs) 30% 25% 25% 20% 15% 13% 16% 14% 11% 10% 10% 8% 5% 0% Brussels Flanders Wallonia France Germany Netherlands Great Britain Source: Frontier analysis We also found that there is a strong association between the sum of the price components and taxes for these consumers in each country and region. Medium industrial electricity consumers We now consider the medium industrial consumer. Table 2 shows the built-up prices and Figure 6 shows the price components. France remains the cheapest country due to the impact of tariff regulation. The difference between French prices and those for other countries is significantly less than for the small industrial consumer. This is because lower tax rates and exemptions reduce the impact of taxation in the other countries, especially in Germany. The overall spread of prices is also much narrower. Wallonia now has the highest price, followed closely by the other Belgian regions and Great Britain. The high price level in Great Britain follows from higher wholesale prices during peak demand periods. The higher prices in Belgium are associated with higher levels of tax than apply in the other countries considered for this size of consumer. Executive summary
Electricity unit price (ct /kwh) 20 Frontier Economics October 2011 Table 2. Electricity prices for a medium industrial consumer (25GWh) in ct /kwh Country/Region Unit price (ct /kwh) Brussels 8.65 Flanders 8.58 Wallonia 8.92 France 5.80 Germany 7.78 Netherlands 7.42 Great Britain 8.64 Source: Frontier analysis Figure 6. Electricity price components for a medium industrial consumer (25GWh) in ct /kwh 12 10 Taxes and levies PSOs Transmission Distribution Energy 8 6 0.86 0.84 0.24 1.13 1.46 0.85 0.85 0.53 0.50 0.47 1.15 0.51 0.59 0.48 0.93 4 1.37 6.54 6.54 6.54 6.14 6.45 6.64 2 3.90 0 Brussels Flanders Wallonia France Germany Netherlands Great Britain Source: Frontier analysis. Note that for France the price component analysis has been capped at the average of the regulated and TaRTAM tariffs. Executive summary
Tax intensity of electricity bill (in %) October 2011 Frontier Economics 21 Figure 7 shows the tax intensity of the prices for the medium industrial consumer. France, Germany, Great Britain and the Netherlands have very similar tax intensities of between 6-9 per cent. Wallonia has the highest intensity and the other Belgian regions have significantly higher tax intensities than the other countries considered. Figure 7. Tax intensity of electricity prices for a medium industrial consumer (25GWh) (excl. PSOs) 20% 16% 16% 13% 12% 10% 9% 8% 6% 6% 7% 4% 0% Brussels Flanders Wallonia France Germany Netherlands Great Britain Source: Frontier analysis We also find an association between the sum of price components and taxes for the seven countries / regions considered but it is not very strong. Large industrial electricity consumers Finally we consider the large industrial consumer. Table 3 and Figure 8 show final electricity prices and their build up from the three underlying components. Price spreads are much narrower than for the other industrial consumers. France remains the cheapest country but its advantage is significantly less than in the case of the small and medium industrial consumers. Prices in all regions of Belgium are now very similar and close to those in Germany. Great Britain has the highest price, driven by higher energy costs and relatively high taxes. The price component analysis reflects the fact that this size of consumer is connected directly to the transmission system and bears no charge for distribution. Some small differences in network charges and in the tax components are apparent. Network charges in Germany are significantly higher than in the other countries. Executive summary