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Energy Prices And Costs In Europe - European Commission

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Energy prices and costs in EuropeRefining Forum, 25 April, 2019Tom HowesDG ENERGY1

Wholesale andinternational pricesThe volatility of international fossil fuels prices impacts the EU energy pricesCrude oil (Brent) and European wholesalegasoline, diesel and heating oil pricesSources: Platts, ECBWholesale electricity prices in the EUSources: Platts, European power markets2

Wholesale andinternational pricesInternational gas and electricity pricesWholesale electricity prices for industrySources: Eurostat, CEIC and IEAEuropean, US and Japanese wholesale gas pricesSources: Platts, Thomson-Reuters

Retail pricesDifferent price structures across MS, fuels and consumer groupsHousehold electricity prices in 2017Industrial electricity prices in 2017Household gas prices in 2017Median and large industrial gas prices in 2017Source: Directorate-General for Energy

Retail prices forindustry - TaxationThe importance of taxation in electricity pricesTaxes on industrial electricity over timeTaxes on industrial electricity in 2017Taxes on electricity in 2017:small vs large industrial consumersSource: DG ENER in-house data collectionSource: Directorate-General for Energy

Costsfor the EU's economyThe energy import bill The EU is stillexposed to volatileglobal fossil fuelmarkets, which canimpact on fiscalregimes andmacroeconomicstability.Source: Directorate-General for Energy

Costs for the industry competitivenessEnergy shares in total production value and real unitenergy costs Energy share of purchasesof energy in the EU stablearound 2% of the totalproduction valueSources: EC, Eurostats Relative real unit energy costsgenerally stable in recent yearsSource: DG JRC and DG ECFIN

Costs for the industry –competitivenessDeclining energy shares in production costs(but still significant for energy intensive sectors)Energy share of productioncosts (range)Examples of sectorsAverage European businessComputers and electronics, motor vehicles, other transportequipmentWaste management and accommodation and restaurantsEnergy intensive sectors in manufacturingCement, lime and plaster, Clay building materials, Pulp and paper,Glass, Iron and steel, Basic chemicals, Non-ferrous metals0-3 %1%3-5 %3-20 %Sources: Trinomics (2018), Ecofys (2018)

Costs for the industry –competitivenessKey plant level result from case studies of EIIs DecliningNb: energy efficiencydirective:2020 Commissionassessment of thepotential for energyefficiency in ion andstorage of energy.Sources: CEPS, Ecofys (2018)

Costs for the industry – energyintensityDeclining energy intensities in most of the energy intensive sectorsSources: Trinomics (2018), Ecofys (2018)

Costs for the industry competitivenessInternational price comparisons over timeRetail electricity prices – EU vs G20Sources: Eurostat, CEIC , ERRA, IEARetail gas prices– EU vs G20

Costs for the industry CompetitivenessInternational comparisons on energy costs and intensityEnergy costs and energy intensity in energy intensive sectorsSources: Trinomics (2018)

Energy Subsidies Public spending, energy subsidiesincreasing to drive the energytransition ( 170 bn in 2016). fossil fuels subsidies not declining.Sources: EC, Trinomics (2018) Wide differences in support tofossil fuels exist in the EU.Sources: EC, Trinomics (2018)

Energy TaxationEnergy taxation provides stable and significant government revenues 280billionper yeari.e. close to5% of taxrevenuesSource: Eurostat

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Energy prices and costs in Europe This third energy prices and costs report (following 2014, 2016) assessestrends in prices and costs of fuels in Europe, providing background factsand figures for EU energy policy making It updates data (including on 2014 subsidies estimates), adds more data onpetroleum products, and on energy costs, especially for energy intensiveindustries (drawing on DG GROW studies & analysis). It provides evidence supporting the ongoing energy transition (includingthe LTS), and a timely review of taxation, subsidies, revenues and ( / )imports.

Retail pricesDifferences in price dynamics across MS fuels and consumer groupsHousehold electricity prices 2008- 2017Electricity prices for industry in 2008 - 2017Household gas prices in 2008- 2017Gas prices for industry 2008- 2017

Retail prices for industry price regulationPrice regulation : the case for non-household electricity and gas marketsMark-upsMark-ups

Costsfor householdsenergy poverty: energy as a share of household expenditureExpenditure on energy in lower middle income EU households(Euros and share of total expenditure) Spending on energyaverages 5.5%, up to10% Wide differences acrossMember States

Competitiveness - Costsfor the industryEnergy costs and competitiveness at macroeconomic level The EU's overallcompetitiveness remainsstable compared to maintrading partners The reliability and thequality of service of energyis a competitive advantagefor the EU

Costs for the industry –competitivenessRepresentativeness of samples for the plant level analysis

Costs for the industry –competitivenessX-sectorial comparisons in line with x-band comparisonsSource: CEPS, Ecofys (2018)

Prices, costs and investmentsProjections suggest future prices increasingly cover(investment) costs, reducing need for subsidiesSource: Left graph Platts, METIS(2030); right graph: PRIMES

The energy transition - Pricesvs costs and investmentsLooking forward:Investments in electricity capacitySource: Left graph Platts, METIS(2030); right graph: PRIMES

To discuss! Volatile (international) fossil fuel prices still drive EU prices Decarbonisation, long term strategy Price divergence across MS has declined, but can still be significant internal market International position of the EU stable (generally between Asia and fossil fuelproducer countries) international competitiveness Major tax and levy divergences across MS, fuel and consumer group Competition distortions, weak price signals for energy policy goals Energy costs affect macroeconomy, households, industry Imports, / supports, subsidies & price signals Support for level playing field, appropriate subsidies Energy taxes provide revenues Energy subsidies need reviewing (NECPs) and should decline in the future

Industrial electricity prices in 2017 Household electricity prices in 2017 Household gas prices in 2017 Median and large industrial gas prices in 2017 Retail prices Different price structures across MS, fuels a