11 Jan | Aeroventic
New data and analyses for building the Energy Union in a robust way - the 2018 energy prices and costs report in Europe

ec.europa.eu

Increasing competition on wholesale energy markets from greater amounts of renewable energy, improved interconnections and a more integrated internal electricity market have led to lower wholesale prices in recent years, according to the latest (biennial) report on energy prices and cost in Europe published today. The report also highlights how these lower supply costs, together with recently stable network tariffs and taxes and levies, enabled household electricity prices to fall in 2017 for the first time since 2008. However, the report also warns of the EU's ongoing high exposure to volatile and growing fossil fuel prices and notes that wholesale prices have started to rise again

The EU remains heavily dependent on imports of oil and gas, and the increase in fossil fuel prices (especially crude oil) made the cost of EU energy imports in 2017 rise by 26% to EUR 266 billion. The increase in oil prices could have had a negative impact on EU growth (-0.4% GDP in 2017) and on inflation (+0.6%), the report estimates.

The report therefore supports the EU's decarbonisation objectives and the Commission’s recent a long-term strategy for greenhouse gas reductions and the initiative from December 2018 to strengthen the international role of the euro. With figures indicating that future electricity production costs are expected to increase for fossil fuel electricity (due to import prices and the carbon price) and fall for renewables (linked to the decreasing costs of investment as technologies evolve), the report suggests that future electricity market prices could reduce the need for subsidising renewable energy technologies by 2030.

The report analyses the impact of energy costs on households' budgets (particularly for the poorest, for whom energy bills can account for more than 10% of spending) and the international competitiveness of EU businesses (particularly of energy-intensive industries for which energy costs generally range from 3-20% of their production costs). It looks at energy taxation (4.7% of total tax revenues) and at fossil fuels subsidies (which did not decrease in recent years) in a context of rising energy subsidies to finance the energy transition (€170 billion in 2016). Finally the report also looks at the impact of price regulation and the potential benefits of dynamic pricing.

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Energy prices and costs in Europe

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