Are Europeans paying too much for their energy? For years, household energy prices in Europe have been increasing at a faster rate than in America (and the International Energy Agency has warned that the “energy gap” with the US is going to put European industry at a disadvantage for decades). How can we bring down our bills?
There’s obviously a lot of variety in energy prices between EU countries (with Germans, Danes, and Belgians paying the most for their electricity, while Bulgarians, Lithuanians, and Hungarians pay the least). Furthermore, whilst energy prices across the EU have increased since 2008, they have nevertheless been relatively stable since around 2013. Still, energy can represent a big proportion of the average household budget, and with belts having been tightened for much of the last decade, should the price of energy be a top priority for the next EU Commission?
What do our readers think? First up, we had a comment sent in by László, who thinks energy prices are too high in Europe relative to what the average person earns in each Member State. Is that objectively true? Are high energy prices a problem?
To get a reaction, we put his comment to Hans Van Steen, Head of Unit of DG Energy in the European Commission. What would he say?
For another perspective, we put the same comment to Lucie Middlemiss, Associate Professor in Sustainability at the University of Leeds in the UK, and Co-Director of the Sustainability Research Institute. How would she respond?
Good question! So, I would say energy prices are definitely too high for some people in Europe, in the sense that there is a substantial demographic of people that experience energy poverty, and those people struggle to pay their energy bills. So, it’s a very difficult question because there’s a tension between the need for providing energy to people irrespective of their level of income, and the concerns that we have about climate change and the use of energy, and how consuming energy creates climate change problems. However, I think price is a poor way to regulate that. The current situation, particularly in my country – in the UK – is that people in lower income brackets really have to spend a lot of their money on energy, and as a result they don’t use enough, they get unhealthy, and we have lots of other costs to society associated with that.
Next up, we had a comment from Civanova about capping energy prices. The UK is currently experimenting with this policy (due to be launched in 2019), but Chivanova is worried that capping bills will discourage investment in infrastructure. Is she right to be concerned?
How would Hans Van Steen from the European Commission respond?
And what would Lucie Middlemiss from the University of Leeds have to say?
First, I’d say that it’s really not the case that energy prices are being capped in a meaningful way in the UK. There is some sort of limit on how much energy companies can charge to customers, but there’s always a profit margin within that, and it’s quite a substantial profit margin. It’s also particularly in relation to pre-paid metered customers, so people who pay in advance for their energy. And, still, the costs of energy for those people are still substantially higher than the costs for the rest of the market. So, while it might sound like we’re capping energy prices in the UK, we’re not really. We’re sort of making sure that no-one is charged a ludicrous amount of energy, but we’re not necessarily capping all energy prices.
I think capping profits is quite similar to capping prices, really. In the sense that, ultimately that’s the objective of capping prices. I think she’s right, it could discourage investment in infrastructure because there isn’t any room for manoeuvre for companies if they have capped prices, but having said that so would that be the case if they capped profits. I don’t think it would make much of a difference.
One of my colleagues here talks about the prospect of changing the pricing structure for energy. At the moment, you quick frequently pay more for the first amount of energy you get, because you pay a standing charge on gas and electric, and then you pay less as you consume more. What that does is it penalises the people who consume less, and I think it would make a lot of sense to try and do the opposite of that: so, allow a certain amount of energy at a low price, and as households consume more and more and more, charge more for the extra they use. Because that would probably help reduce use, but also it would mean that energy-poor households had access to cheap energy. Having said that, there are exceptions – so people with some forms of disability will always need to use more energy, and we have to be sensitive to that because they have different needs to those without disabilities…
Finally, we had a comment from Tarquin, who blames the EU for high energy prices across Europe. He thinks that EU competition laws have fragmented the energy market, and that green levies have pushed up prices. Is he right?
How would Hans Van Steen respond to this criticism?
What about Lucie Middlemiss? Did she agree with Tarquin that EU policies are to blame?
Green levies pushing up prices is not happening at an EU level, it’s at the national level. But I think he’s got something there, in that if we charge environmental policy back through energy prices, which we do in the UK (though I’m not sure about all the other EU nations), then that’s really problematic. Basically, my opinion is that environmental levies ought to be paid for via general taxation, because then the price of energy is not effected by the need to do things about both environmental problems but also social problems. So, currently, energy efficiency policy can really make a difference to people living in fuel poverty as well to environmental targets, and both of these things are funded through prices. I agree that that’s wrong. I don’t think it’s got anything to do with the EU though.
In terms of EU competition, yes, I also think that’s problematic. In the EU there’s a strong drive towards so-called “free market for energy”, which doesn’t exist anywhere. In the UK, we know that because we’ve had a liberalised market for the longest out of all the EU nations, and still we have a really low number of people actually engaging with the market in the way they’re supposed to. That’s because the market doesn’t really work, particularly for people in energy poverty because very often they’re too scared to engage in switching, because it’s a form of change and feels very risky if you’re on a low income. Quite often they’re not able to; if they’re in debt then energy providers won’t take them on, for instance. So, I think the idea of the market is not working in reality, and as a result energy prices – particularly for the energy poor – end up being higher than they should be…
Are energy companies charging too much? Should bills be capped? Or would that discourage much-needed investment and slow the transition to green energy? Let us know your thoughts and comments in the form below and we’ll take them to policymakers and experts for their reactions!
IMAGE CREDITS: (c) BigStock – Sashkin
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This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 731264.
Since forced by the Troika to increase taxes electricity in Portugal is subject to 22% sales tax. Some tried to argue this would encourage the use of more energy saving appliances and lighting, but heating obviously falls outside of this unless you switch to solar or increase thermal insulation. These measures though desirable cost money which too many cannot afford. Equally subsidies for photovoltaic panels, solar water heaters and thermal insulation have been cut and are also subject to the same high sales taxes. It seems only the rich can protect themselves from exploitation by electricity generators and the tax man. The short sightedness of rationing subsidies which would reduce consumption of electricity and punishing the poorest with inflated sales taxes on essential utility supplies needs to be reexamined.
If they are they will argue that it’s based on supply and demand. Energy is important and essential to life but there are plenty of ways to live and enjoy life with less of it.
Eds IMHO, there should be no taxation on solar energy in the private sector.
Absolutely YES at least in Italy
It’s a market with little competition and monopolistic market shares always lead to overpricing unless regulation prevents it somehow.
Try living in Malta, where, if your landlord doesn’t register you as living in the property, you get charged a higher tariff, which on a monthly bill can see almost double what ‘normal’ people pay. !!
Yes they are.
Of course, at least in Spain
Try to live in Portugal! 😢
Are energy companies charging too much?
this is another conspiracy of policy right across the Western world. It is intended to impoverish the people whilst those at the top steal their money by forcing them to buy energy at a rigged price. Rigged by massive taxation and outright over charging.
The energy companies are being encouraged to fleece European people by those in the back room who make the policy to do so.
How relevant is this DE question- “if the price of energy should be a top priority for the next EU Commission”? Why should it? To determine or fix prices is not within its power or mandate! The EU is not a “Competition- Price Commission”!
To clarify: The “Energy policy” is a shared competence between the EU and its Member States. Some insight into the complex European energy mix:
Once the free market principle has been adopted it cannot haphazardly be changed like ones underpants! Or is this just another EU ploy to make them appear all powerful- by insinuating to have the ability to dish out political presents (price decreases) to the ever hungry & demanding? This is hopefully not the beginning of the top down command economy of the failed Communist USSR regime?
It is clear that the “Pan European energy” comes from “privatized” sources, like any commodity or service being subject to Vat & taxes- but “regulated & overseen” nationally & the EU.
This is also evident by the services of the “Nordpool Group” who is trading in power.
Part of Merkels “knee-jerk politics” in Germany is the costs of its “Energiewende”.
That surely contributes to higher energy costs in Germany & eventually impacts on other EU Members.
“Germany’s biggest energy group E.ON reported a record loss of 3.2 billion Euros last year, stemming from costs triggered by the need to radically restructure in order to accommodate the phasing out of nuclear power.”
Does the EU wish to “regulate” & determine losses & profits? What else?
In Portugal the energy prices for us is Over the roof ,super expensive for our wages, the people of Portugal are struggling with these prices and as well as bottled gás and fuel prices to Run the Cars the goverment is sofocating the intire economy of Portugal with all these taxas
In Portugal is TOOOOOOO much. We c ant afford too heat in winter. Its absurd.
Maria very a poeple are dying because of it
Oh, yes! Just a take a look at Portugal, to its energy market and to al the scandalous relations of successive governments with energy companies!
Valter very true
In Denmark electricity is too expensive because of the scam called “wind energy”.
i think that Energy prices depend on many factors such as government taxes, the price of oil, the condition of the electric grid in each country etc etc
In Greece, we pay a lot for Energy because of Geography too. Many islands that you can’t connect with the central system so we have small electric factories to each island.
Energy prices in Portugal are just ridiculous… From fuel to electricity we’re paying some of the highest prices in Europe!
Pedro very true the goverment is choking the whole economy
Yes. Why can’t we have free energy like earthship houses do?
Surely yes in Greece ! I remember I payed the 35% of my salary for just one bill…
No governments are overtaxing power bills. (Almost 70% in total in Holland)
Portugal is freezing. Ask portuguese gov why…
Yes at least in Portugal
Are energy companies charging too much?
Once the UK is free of the obstructive globalist policies, enforced by EU jurisdiction, which keep us tied to slavish company rules, this utility robbery will no longer exists in the UK. Politicians will once again have the freedom to return to our own laws and law enforcement. Which will enable us to take up our once practised and fully working for the people policy, called nationalisation, we can expect the costs to return to a properly functioning non profit level. Along with our transport and water charges.
Of course the very wealthy overpaid investors will no longer profit from our taxes which is going to make these thieves very unhappy indeed. Sincerely sorry for the rest of Europeans presently being fleeced at a rate that is unbelievable. An elderly friend in France, with a small two bedroom house, is presently paying £100.00 per week to heat the place, cook and do laundry. On top of that she has to burn a log fire.
Macron needs to follow in the footsteps of the man he loves to emulate, and settle on St Helena, off the coast of Africa. And the sooner the better for the hard pressed French people being robbed of food to heat their little homes. In the meantime, he should keep his sweaty hands off Trumps knee. His geriatric next of kin definitely won’t like that open revelation to his peccadillo or having to spend eternity in exile once the ‘nation’ he doesn’t like and wants rid of, has deserted him for Madame Le Pen.