Geopolitics, taxes, supply and demand—here are the reasons behind the variation in electricity prices in Europe.
4 min read
It’s no secret—electricity prices have been rising dramatically in Spain and it is important to know how to save energy. Many Spanish businesses and families are finding it more difficult to cover their monthly bills. In fact, electricity expenses constitute an ever increasing proportion of fixed costs—both in Spanish homes, and European homes at large. Factors like the raw materials used to generate energy, how much a country depends on imports for those raw materials, and the geopolitical situation in each EU member state all have an impact on how much electricity ends up costing consumers. But how does the situation in Spain compare to that of our EU neighbors? To offer you some insight, we’ve put together a breakdown of electricity expenditures in France, Germany, and Italy. Read on to learn what we found out!
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The electricity price hikes imposed on our French neighbors have been just as high as those in Spain. Though France produces electricity independently, prices there are set by the European market. However, in response to the rising prices, the French government has put a cap of 4% on increases in the price of regulated-market electricity until April of next year.
Electricity prices in Germany
When it comes to European electricity price hikes, Germany holds the gold medal. Last year, one kilowatt hour (kWh) of electricity cost 31.81 cents on average, an increase of almost 5% compared to the year before, when one kWh cost 30.43 cents. However, this rise is in keeping with both European and national trends. In fact, electricity prices in Germany have gone up by almost 63% in the last 15 years.
Electricity prices in Spain
While you might get the impression you’re witnessing an electricity price apocalypse whenever you turn on the evening news, the kWh price in Spain is just €0.23. This puts us in fifth place compared to our European neighbors in terms of how fast our electricity costs are rising.
Electricity prices in Italy
The price per kWh in Italy is currently at €0.234, one of the highest in Europe. However, it’s important to note that approximately 48% of total bill costs are contingent on the terms Italian consumers agree upon with their electricity providers. What’s more, other costs such as taxes also contribute to this high figure.
Electricity in Europe—price comparison
As you can see, a number of crucial factors contribute to EU electricity prices. Keeping in mind that electricity prices are about as volatile as the value of Bitcoin, the table below will give you a rough idea of how prices have evolved across Europe.
Electricity Prices Comparison in Europe
France
0.1933
+12.97%
-1.28%
Germany
0.3193
+7.26%
+6.22%
Spain
0.2323
+26.81%
+0.39%
Italy
0.2259
-0.09%
+4.92%
If we look beyond Europe and compare price changes between Spain and the UK, the cost of electricity in the UK has been even higher than the rest of Europe. This is likely due to its high dependence on gas and renewable energy for generating electricity. This pressure contributed to prices reaching an eye-watering £2.530 per megawatt/hour last September.
What factors influence electricity prices?
The cost of your electricity bill depends on factors such as the contracted company (which also affects how many appliances you can use simultaneously), how many people live in your home, the hours of the day when you consume most electricity over the course of the month, and how much time you spend at home. Here’s a list of the main factors that impact your electricity bill:
Demand. If there are sudden changes in temperature—such as heat waves or cold spells—or periods where consumers spend more time at home, electricity costs increase drastically. Energy-producing companies then have to produce more electricity, meaning their production costs also rise.
Production costs. Rises in the price of energy sources like gas, coal, and petrol have a direct effect on our electricity bill, as these are the raw materials most used to generate electricity. Factors such as geopolitics play an important role in these costs. This is because a country’s relationship with gas- or petrol-exporting countries has a direct impact on the cost of raw materials.
Taxes. VAT and energy tax also have a crucial impact on the final price of electricity.
Cost of emitting CO2. The amount of money that pollution-creating electricity centers have to pay to produce energy also affects consumers’ wallets.
While renewable energy has advanced considerably in recent years (wind energy accounts for 22% of electricity production in Spain), it still doesn’t have a strong impact on the kilowatt price.
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