Article

Electricity prices (Europe)

Introduction

Non-household consumers are considered, by Eurostat, medium-sized users, which encompasses an average consumption of 500MWh – 2 000MWh (per annum).

Until 2012, energy’s price augmented proportionately to the inflation. Nevertheless, between that year and 2020 industries benefited from a decrease that amounted to 0,0162 euros per KWh, and, even with the increase that took place during the second semester of 2020, the price did not surpass 0,0822 euros per KWh. Sadly, the trend continued and, nowadays, the cost without taxes is at EUR 0,0857 per KWh.

However, the major concern for non-household consumers was the weight of the taxes. This amount has been rising concerningly fast over the last 13 years, from 13,8% in the first half of 2008 to 33,2% in the same period of 2021 (Eurostat’s data). This provoked that the total price were EUR 0,1155 per KWh (adjusted for inflation) in the first half of the present year.

What is causing energy prices to rise?

Undoubtedly, there are several factors influencing electricity prices in Europe. The most obvious one is that, while the global population keep increasing, the demand will grow exponentially; in addition to that, emerging countries are pushing global demand, but mainly of cheaper and more contaminating sources of electricity.

Simultaneously, the surge in the price of CO2 following the EU policy could also help us understand the current situation.

In that sense, the “Fit for 55”, the drive that established a 55% reduction on carbon emissions by 2030, is an extremely ambitious plan, and a crucial stimulus for a rapid transition towards an eco-friendlier economy. Notwithstanding, some European non-household consumers highlight that these measures could result in higher levels of instability (thus provoking price hikes). Moreover, both the decrease in fossil fuel subsidies and the augment in renewable energy and efficiency grants add up to this potential outcome for the electricity prices in Europe.

In spite of that, renewable sources of energy have generated the 38% of electricity in the UE during 2020, meaning that they have surpassed fossil fuels as the primary power source. The European Commission electricity prices analysis also signals that 9 ME have already abandoned coal and that several other countries are following their lead. That meant a 31% reduction in emissions compared to 1990.

The Covid 19 pandemic triggered a sort of roller-coaster effect in electricity prices in Europe. The restrictions that followed the subsequent waves decimated energy demand around the globe, but, thanks to the stimulus packages and the progressive opening of the borders, energy consumption has surged, as well as pollution.

Notwithstanding, greener methods for energy supply could, eventually, help European countries to reduce electricity price’s volatily by improving EU’s independence from foreign energy imports. Consequently, the transition towards greener energy sources nurses a hope (specially for enterprises) that the EU’s energy security will be secured.

Electricity price by country (Europe)

Be as it may, Europe’s industrial sector is deeply concerned, as the competitiveness of many businesses is at stake. Because of that, some sector’s representatives pinpoint at Brussel’s passiveness as the most preoccupying factor in this scenario.

Germany and Italy’s industries were the worst affected by this situation, as they had to pay 0,1813 euros per KWh and 0,1584 euros per KWh, respectively.

The Southern country was one of the most exposed to EU’s lack of independence in the generation of energy, as up to 40% of its power supply is generated with natural gas and 50% of it comes from Russia. In addition to that, of the 0,1584 euros per KWh paid, 40,7% were levies and non-recoverable taxes.

Only 11 ME benefited from lower fees. Romania’s electricity prices dropped 5,1%, and Portugal’s diminished 5,2%, but it was in Slovenia where the larger decreases were registered (-6,5%). On the other hand, every other ME suffered increases, being Denmark (29,8%), Bulgaria (18%) and Estonia (16,3%) the less fortunate.

Poland, the Czech Republic, Germany, and the Netherlands have also faced increasing natural gas prices. In none of them did the cost per megawatt-hour go below 68 euros, but it was Spain where the prices skyrocketed.

Spain electricity prices

Natural gas prices reached EUR 71,54 per megawatt-hour in this ME, and the sudden spikes in electricity prices of the past months have posed multiple issues both for households and non-household consumers.

Spain’s geographical location minimizes interconnectivity, which implies a more difficult access to the international grid. Due to this reason, Algeria is one of Spain’s top gas importers; however, tensions between Algeria and Morocco have arisen, resulting in the ending of the transit deal that allowed the former to circulate the gas through the latter. Consequently, the Medgaz pipeline is now the one that enables the connection and Spain electricity prices have reflected these changes.

This complex situation is also contributing to the deceleration of Spain’s recovery rates up to the point of obliging some industry firms to take drastic measures.

For example, the increasingly higher electricity bills have led metal and chemical producers to halt their production, as their financial viability is at stake. Also, many food retailers claim to have seen their electricity bills double, which they tried to alleviate by reducing the usage of refrigeration (when possible).

How to reduce electricity bill in industry

Nonetheless, this kind of strategies present several dangers (e.g., food safety). Then, business have to resort to other techniques that allow them to reduce their industrial energy consumption while ensuring their service’s quality.

The first step in order to avoid excessive electricity expenses is evaluating the real needs of your enterprise, so that you can contract the optimal tariff (if your business is based in Spain, you can check our article on that subject by clicking this link).

Another option is turning to renewable energies, as these last few years their cost has been diminishing dramatically. As a matter of fact, sources of power such as biomass, geothermal and onshore wind can, nowadays, provide electricity in a more competitive manner than non-renewable energies, according to IRENA. Moreover, their efficiency will keep increasing and the companies that drive reforms on that respect will not have that many difficulties adopting future European policies.

Notwithstanding, reducing your energetic consumption will always encompass two crucial processes: monitoring and managing. Our software, Gradhoc, has been actualized so that it takes into account all electricity prices (Europe); moreover, you will have at your disposal live data regarding the power sources and requirements for your equipment. This integration of IA into our experience and know-how in the industrial cold’s field will be your greatest ally when maintaining and reinforcing the competitiveness of your organization by improving your energy efficiency. (Call to action)

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