Energy

Energy prices and costs in Europe

The prices and costs for energy evolve over time depending on many different factors like the prices of inputs, market competition and market integration conditions, regulatory and policy-related costs, taxation as well as consumers’ needs and behavioural patterns.

Starting in 2014 and for every two year since, the European Commission publishes a report on energy prices and costs, which takes stock of the latest trends for gas, electricity and oil prices as well as other energy costs in Europe and internationally.

The fourth report on energy prices and costs was published in October 2020, as part of the 2020 State of the energy union report. It focuses on progress made on the EU’s policies on the energy transition policies and initiatives related to the European Green Deal, but it also assesses the impact of the COVID-19 pandemic on the recent and expected evolution of the analysed indicators.

Wholesale and retail prices

The fourth report highlights that wholesale prices rose in recent years before starting to fall in 2019 due to economic slowdown and abundant supply.  The prices then plummeted in 2020, amid the economic crisis and mobility restrictions triggered by the COVID-19 pandemic.

Retail prices were either rising or relatively stable between 2017 and 2019.  In contrast to the trend of most of the 2010s, taxes and levies, as well as network charges, have been relatively stable or have risen slightly in recent years. This has resulted in a change of price driven by changes in the costs of generation and commercialisation of energy, the so-called energy component of prices.

Energy costs for the economy, households and industry

The report warns about the costs for the EU from its high reliance on fossil fuel imports, noting that the EU’s energy import bill reached €331 billion in 2018, after three years of consecutive rises.

The energy costs for citizens and businesses in Europe have also evolved during the same period. European households’ energy expenditure shares display a downward trend since 2013. Households' spending on energy in 2018 is a comparable share to what they were spending before the 2008 economic crisis.  At the same time, in 2018, the European poorest households still spent 8.3% of their total expenditure on energy, and up to 15% - 22% in some Central and Eastern European countries.

Energy costs shares in production costs have also fallen generally and in a more pronounced fashion across industrial sectors over the last years. The sectors’ lower energy intensity contributed to the falls in energy costs, in a context of slight price rises and increasing economic activity.

Revenues from energy taxation and taxes and levies imposed on energy products

The report shows that energy taxes continue to be an important and stable source of revenues for EU countries, amounting to 4.6% of their total tax revenues in 2018. In addition, the report also shows that the combined impact of taxes and levies on energy products varies across energy products and between EU countries and that it has a significant impact. Specifically, taxes and levies account for 41% and 30-34% of households and industry electricity prices, respectively, and for 32% and 13-16% of the households and industry gas price.

The report also analyses the evolution of realised prices across power technology generations, noting that for renewable generation they are falling along with the renewable energy’s growing market penetration.

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