Understanding Electricity & Gas Prices in Ireland 1 ST SEMESTER (JANUARY JUNE) 2009

Transcription

1 Understanding Electricity & Gas Prices in Ireland 1 ST SEMESTER (JANUARY JUNE) 2009

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3 Understanding Electricity & Gas Prices in Ireland 1 st Semester (January June) 2009 Report prepared by Martin Howley, Dr Brian Ó Gallachóir & Emer Dennehy January 2010

4 2 Electricity & Gas Prices in Ireland (1 st Semester 2009) Sustainable Energy Ireland Sustainable Energy Ireland was established as Ireland s national energy authority under the Sustainable Energy Act SEI s mission is to promote and assist the development of sustainable energy. This encompasses environmentally and economically sustainable production, supply and use of energy, in support of Government policy, across all sectors of the economy including public bodies, the business sector, local communities and individual consumers. Its remit relates mainly to improving energy efficiency, advancing the development and competitive deployment of renewable sources of energy and combined heat and power, and reducing the environmental impact of energy production and use, particularly in respect of greenhouse gas emissions. SEI is charged with implementing significant aspects of government policy on sustainable energy and the climate change abatement, including: Assisting deployment of superior energy technologies in each sector as required; Raising awareness and providing information, advice and publicity on best practice; Stimulating research, development and demonstration; Stimulating preparation of necessary standards and codes; Publishing statistics and projections on sustainable energy and achievement of targets. It is funded by the Government through the National Development Plan with programmes part financed by the European Union. Energy Policy Statistical Support Unit (EPSSU) SEI has a lead role in developing and maintaining comprehensive national and sectoral statistics for energy production, transformation and end use. This data is a vital input to meeting international reporting obligations, for advising policy makers and informing investment decisions. Based in Cork, EPSSU is SEI s specialist statistics team. Its core functions are to: Collect, process and publish energy statistics to support policy analysis and development in line with national needs and international obligations; Conduct statistical and economic analyses of energy services sectors and sustainable energy options; Contribute to the development and promulgation of appropriate sustainability indicators. Sustainable Energy Ireland Reproduction of the contents is permissible provided the source is acknowledged.

5 Electricity & Gas Prices in Ireland (1 st Semester 2009) 3 Highlights This report analyses data published by Eurostat collected under the new methodology for the EU Gas and Electricity Price Transparency Directive that came into effect on January 1 st The focus of the report is on the fourth cycle of electricity and gas price data gathered under this improved methodology and is thus limited to the period January June 2009, i.e. the first semester During this semester, crude oil prices increased to around the $70 - $80 per barrel level from 43 at the start of the semester. Highlights Highlights - Business Customers In the first half of 2009 Irish electricity prices for business continued to fall while many other EU countries experienced rises. While Irish prices remain above the European average, the gap closed in all consumption bands. In the main electricity consumption band (IC), prices fell by 7.4% year on year, compared to an average increase of 7.5% across Europe. However, prices remain above the EU average in all consumption bands. Ireland experienced a 15% decrease in electricity prices to medium sized business customers (consumption band IC) in the first semester 2009 compared with the previous semester. In Europe as a whole, this category of consumer experienced a 2.2% increase and the Euro Area 1 a 4.3% increase. With the exception of the smallest consumption band, where the relative ranking remained unchanged, there was significant improvement in Ireland s ranking compared with the EU average electricity prices in all other business consumption bands. Business sector electricity prices in Ireland for the first half of 2009 were above the EU average in all consumption bands for which data is available, ranging from 9% to 23% above. This is an improvement on the previous semester when they ranged from 12% to 38% above. Prices to medium sized business customers (bands IC and ID) were 38% above the EU average during the second half of 2008 and these have moved to being 15% above in the first half of Similarly, for large business customers (band IE) prices went from being 38% above the EU to 12% above. Gas prices to Irish business with medium consumption levels (band I3) have been falling since early 2008 and fell by 15.8% in the year to first semester Business sector gas prices in Ireland for the first half of 2009 were 13% above the average for EU countries for the smallest consumers but 7% to 10% below the EU average in the two main midrange consumption bands. Gas prices to business fell by 15.4% for medium sized consumers (band I3) in Ireland in the first semester of Europe as a whole experienced an 8.7% decrease for this category of consumers and the Euro Area an 8.1% decrease. Business gas prices in Ireland for the first half of 2009 were below the average for Euro Area States in mid-range consumption levels (bands I2 to I4 15%, 12% and 3% below respectively). In the smallest consumption (band I1), Ireland was 8% above the average in the Euro Area. Highlights - Residential Customers Irish domestic electricity prices rose by 14.8% year on year to the first semester of 2009, consisting of a rise of 14.9% in the first half of 2008 followed by a fall of 0.1% in the second half. Irish prices were 22% above the EU average in the first half of When adjusting for purchase power parity to remove currency and other effects, Irish domestic electricity prices in the main consumption band were just 4% above the EU average, and were actually below the EU average for higher volume consumers. Ireland experienced a 0.1% price decrease in domestic electricity for average consumers (band DC) during the first half of Europe as a whole experienced a 0.9% decrease for this category of consumer and the Euro Area a 1.5% increase. 1 Euro Area refers to the group of EU Member States that have adopted the euro as their currency.

6 4 Electricity & Gas Prices in Ireland (1 st Semester 2009) Highlights In purchasing power parity terms, Ireland is cheaper in all gas consumption bands for domestic consumers, ranging from 15% to 30% below the EU average. Ireland experienced a 0.9% decrease in gas prices to domestic customers in the first semester 2009 compared with the previous semester for gas consumers with average consumption levels (band D2). Europe as a whole experienced a 7.2% decrease for these consumers and the Euro Area a 6.2% decrease. For residential customers with the smallest consumption levels (band D1), gas prices in Ireland were 11% below the average for the EU as a whole, while prices for medium to high consumption levels (bands D2 and D3) were 10% and 16% higher respectively during the first semester of When the focus is on just the Euro Area countries, gas prices in Ireland are below the average for low to medium consumption levels (bands D1 and D2 26% and 3% respectively). For large residential gas consumers (band D3) Ireland was 2% above the Euro Area average. Based on purchasing power parities, gas costs to domestic consumers ranged from 8% below to 28% below the average for the Euro Area countries.

7 Electricity and Gas Prices in Ireland (1 st Semester 2009) 5 Table of Contents 1. Introduction Factors Affecting Electricity and Gas Prices in Ireland Global Energy Prices Fuel Mix for Electricity Generation Investment in Electricity and Gas Infrastructure Share of Taxes in the Prices paid by Consumers in Europe Purchasing Power Energy Prices for Business Business Electricity Costs Business Gas Prices Energy Prices for Households Domestic Electricity Costs Domestic Electricity Prices EU Comparison (in ) Domestic Electricity Prices EU Comparison (in PPP) Domestic Electricity Prices Euro Area Comparison (in ) Domestic Electricity Prices Euro Area Comparison (in PPP) Domestic Gas Costs Domestic Gas Prices EU Comparison (in ) Domestic Gas Prices EU Comparison (in PPP) Domestic Gas Prices Euro Area Comparison (in ) Domestic Gas Prices Euro Area Comparison (in PPP)...35 References...36 Appendix 1 Electricity & Gas Prices in Ireland...37 Appendix 2 Methodologies for Assessing Prices...39 Contents

8 6 Electricity & Gas Prices in Ireland (1 st Semester 2009) Table of Figures Contents Figure 1 Crude Oil Price Trend 2004 to January 5 th Figure 2 Gross Electricity Generation from Fossil Fuels (excl. peat) in Europe (2007)...9 Figure 3 Business Electricity Prices in Band IC (2 nd semester 2007 to 1 st semester 2009)...16 Figure 4 Business Electricity Prices in Europe (1 st Semester 2009)...19 Figure 5 Business Electricity Prices in Euro Area (1 st Semester 2009)...20 Figure 6 Business Gas Prices in Band I3 (2 nd semester 2007 to 1 st semester 2009)...21 Figure 7 Business Gas Prices in Europe (1 st Semester 2009)...24 Figure 8 Business Gas Prices ( ) in Euro Area (1 st Semester 2009)...25 Figure 9 Domestic Electricity Prices in Band DC (2 nd semester 2007 to 1 st semester 2009)...27 Figure 10 Domestic Electricity Prices ( ) in Euro Area (1 st Semester 2009)...29 Figure 11 Domestic Electricity Prices in Euro Area at Purchasing Power Parities (1 st Semester 2009)...30 Figure 12 Domestic Gas Prices in Band D2 (2 nd semester 2007 to 1 st semester 2009)...32 Figure 13 Domestic Gas Prices ( ) in Euro Area (1 st Semester 2009)...34 Figure 14 Domestic Gas Prices in Euro Area at Purchasing Power Parities (1 st Semester 2009)...35 Table of Tables Table 1 Percentage of Gross Electricity Generation from Fossil Fuels (excl. peat) in Europe (2007)...9 Table 2 Electricity Prices and Taxes for Industrial Consumers (1 st semester 2009)...11 Table 3 Gas Prices and Taxes for Industrial Consumers (1 st semester 2009)...12 Table 4 Electricity Prices and Taxes for Domestic Consumers (1 st semester 2009)...13 Table 5 Gas Prices and Taxes for Domestic Consumers (1 st semester 2009)...14 Table 6 Categories for Business End Use of Electricity...15 Table 7 Business Electricity Prices in band IC in Europe (S to S1 2009)...17 Table 8 Business Electricity Prices ( ) in Ireland (1 st Semester 2009) EU Comparison...18 Table 9 Business Electricity Prices ( ) (1 st Semester 2009) Euro Area Comparison...20 Table 10 Categories for Business End Use of Natural Gas...21 Table 11 Business Gas Prices in band I3 in Europe (S to S1 2009)...22 Table 12 Business Gas Prices ( ) in Ireland (1 st Semester 2009) EU Comparison...23 Table 13 Business Gas Prices ( ) in Ireland (1 st Semester 2009) Euro Area Comparison...25 Table 14 Categories for Domestic End Use of Electricity...26 Table 15 Domestic Electricity Prices in band DC in Europe (S to S1 2009)...28 Table 16 Domestic Electricity Prices ( ) in Ireland (1 st Semester 2009) EU Comparison...28 Table 17 Domestic Electricity Prices (Purchasing Power Parity) (1 st Semester 2009) EU Comparison...29 Table 18 Domestic Electricity Prices ( ) in Ireland (1 st Semester 2009) Euro Area Comparison...30 Table 19 Domestic Electricity Prices (Purchasing Power Parity) (1 st Semester 2009) Euro Area...30 Table 20 Categories for Domestic End Use of Natural Gas...31 Table 21 Domestic Gas Prices in band D2 in Europe (S to S1 2009)...33 Table 22 Domestic Gas Prices ( ) in Ireland (1 st Semester 2009) EU Comparison...33 Table 23 Domestic Gas Prices (Purchasing Power Parity) (1 st Semester 2009) EU Comparison...34 Table 24 Domestic Gas Prices ( ) in Ireland (1 st Semester 2009) Euro Area Comparison...34 Table 25 Domestic Gas Prices (Purchasing Power Parity) (1 st Semester 2009) Euro Area Comparison...35 Table 26 Business Electricity Prices ( ) 1 st Semester Table 27 Business Gas Prices ( ) 1 st Semester Table 28 Household Electricity Prices ( ) 1 st Semester Table 29 Household Electricity Prices (Purchasing Power Parities) 1 st Semester Table 30 Household Gas Prices ( ) 1 st Semester Table 31 Household Gas Prices (Purchasing Power Parities) 1 st Semester

9 Electricity and Gas Prices in Ireland (1 st Semester 2009) 7 1. Introduction The fluctuations in energy prices over the past number of years are a key concern to all energy consumers in Ireland, as they impact on the rate of inflation and competitiveness. Understanding the key contributing factors and the precise impacts of energy price changes are key ingredients to developing appropriate, sensible and measured responses from businesses, householders and policy makers. Comparing energy prices in Ireland with those of other EU Member States and elsewhere is a particularly important aspect of any analysis of the impact of price changes. This report seeks to add to that analysis and thereby increase the understanding of energy price changes in Ireland. This report draws on the results of a new EU methodology for gathering energy price data that came into effect on January 1 st Significant changes have occurred recently in the international oil and gas market prices. However, the focus of the report is on the electricity and gas price data gathered under this improved methodology and is thus limited to the period January June 2009, i.e. the first semester Section 1 The report is structured as follows: Section 2 provides a context for the analysis, touching on global factors affecting energy prices, discussing some characteristics that particularly impact on prices in Ireland. Section 3 focuses on electricity and gas prices paid by industrial and services (business) customers, informing the discussion on impacts of energy price changes for business in Ireland. Section 4 focuses on price changes for domestic customers, comparing prices for households in Ireland with those of other EU Member States. Appendix 1 shows the average electricity and natural gas prices in the various consumption bands in Ireland during the 1 st semester SEI acknowledges the co-operation of electricity and gas suppliers in providing the information necessary for Ireland to comply with the European Commission Decision (2007/394/EC) amending Directive 90/377/EEC with regard to the methodology to be applied for the collection of gas and electricity prices charged to business and household end-users and to allow this analysis to be carried out. This is the fourth edition of this report focusing on energy prices. Feedback and comments on the report are welcome and should be addressed by post to the address on the back cover or by to epssu@sei.ie. Readers may also be interested in previous statistical analysis related to energy prices carried out by SEI. The report Energy in Ireland tracks changes in aggregated energy prices from The report Energy in Industry 2007 assesses how significant energy costs are as a proportion of the overall cost base for business enterprises, drawing on data from the CSO s Census of Industrial Production. Both reports are available from

10 8 Electricity & Gas Prices in Ireland (1 st Semester 2009) 2. Factors Affecting Electricity and Gas Prices in Ireland There are a number of factors that influence energy prices in Ireland and how prices here compare with prices elsewhere. These factors include, but are not limited to, imported fuel prices, energy infrastructure investment costs, Ireland s electricity generating fuel mix and non-energy costs that affect energy prices (for example taxes levied, employment costs, raw material and shipping costs). 2.1 Global Energy Prices The most significant factor affecting energy prices in Ireland is recent dramatic changes in global oil prices. This has particular effect in Ireland due to high dependence on oil. In addition there is the knock-on impact oil prices have on other energy prices, in particular natural gas and as a consequence electricity prices. Section 2 According to Ireland s energy balance, oil accounts for 64% of Total Final Consumption (TFC) 2 in Ireland, 99% in transport TFC, 39% of residential TFC, 38% of industry TFC and 30% of services TFC and 55% of Ireland s primary energy supply 3. According to EU statistics 4, Ireland s oil dependence (as a proportion of primary energy supply) is higher than any other Euro Area State except Luxembourg (63% primary energy in 2007). Figure 1 tracks the nominal crude oil prices 5 over the period Prices increased from $30 per barrel in 2004 to a peak of $144 per barrel on July 11 th As shown in Figure 1, crude oil prices doubled between July 2007 and July During the first semester (S1) of 2008, nominal crude oil prices increased by 39%. After July 2008, there was a sharp decline in the price of crude oil to a low of around $34/barrel in late December Prices during the first semester 2009 increased to the $70 - $80/barrel level. Figure 1 Crude Oil Price Trend 2004 to January 5 th 2010 Nominal Prices $/barrel Jan 02, 2004 Jul 02, 2004 Jan 02, 2005 Jul 02, 2005 Jan 02, 2006 Jul 02, 2006 Jan 02, 2007 Jul 02, 2007 Jan 02, 2008 Jul 02, 2008 Jan 02, 2009 Jul 02, 2009 Jan 02, 2010 Europe Brent Spot Price FOB ($/Barrel) Source: EIA 6 1 The 2008 data is drawn from the energy balance as of November 20 th For the latest energy balance see 2 Total Final Consumption represents all energy that end users are billed for directly. 3 Primary Energy Supply is the TFC plus primary energy used in transformation (electricity generation, oil refining, peat briquetting, etc.) 4 European Commission Directorate General for Energy and Transport, 2008, EU Energy and Transport in Figures. Statistical Pocketbook 2007/2008. ISBN These prices are daily spot prices of Brent crude oil, which is sourced from the North Sea and are used as a benchmark to price European, African and Middle Eastern oil that is exported to the West. 6 The Energy Information Administration (EIA) is a statistical agency of the U.S. Department of Energy that publishes price energy data at

11 Electricity and Gas Prices in Ireland (1 st Semester 2009) Fuel Mix for Electricity Generation The fuel mix for electricity generation has a key bearing on the variation in the price of electricity in different countries. This is particularly significant with respect to an electricity fuel mix which relies on internationally traded fuels such as gas and oil but also coal. During periods of volatile price movements in these fuels there is a strong knock-on impact electricity prices. Other factors that impact electricity prices include the level of competition in electricity generation, labour costs, taxation policy and the level of investment in infrastructure (i.e. improving the transmission and distribution networks). Figure 2 and Table 1 show the percentage of electricity generation in Europe that is fossil fuel based (coal, oil & gas) and separately the proportion of electricity generated from gas and oil. Figure 2 Gross Electricity Generation from Fossil Fuels (excl. peat) in Europe (2007) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Austria Belgium Bulgaria Czech Republic Cyprus Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovakia Slovenia Spain Sweden United Kingdom EU27 % Gross electricity generation from coal, oil and gas % Gross electricity generation from oil and gas Source: Based on Eurostat data As highlighted in Table 1, Ireland has close to the highest overall dependency of electricity generation on fossil fuels at 81% behind the Netherlands at 83% and Cyprus and Malta both at 100%. Ireland also has a high dependency on oil and gas generation at 62%. Only Italy and Luxembourg have higher gas and oil generation dependency than Ireland at 66% and 72% respectively. For gas dependency in electricity generation, Ireland and Italy share the third highest share at 55% behind Netherlands at 57% and Luxembourg at 72%. Table 1 Percentage of Gross Electricity Generation from Fossil Fuels (excl. peat) in Europe (2007) Section 2 Austria Belgium Bulgaria Czech Republic Cyprus Percentage Electricity Generated from: Coal, Oil & Gas 27% 37% 20% 12% 100% 71% 5% 31% 9% 34% 37% 41% 81% 80% Gas & Oil 18% 29% 7% 4% 100% 20% 5% 14% 5% 13% 37% 39% 62% 66% Gas 16% 29% 5% 4% 0% 18% 5% 13% 4% 12% 22% 38% 55% 55% Denmark Estonia Finland France Germany Greece Hungary Ireland Italy

12 10 Electricity & Gas Prices in Ireland (1 st Semester 2009) Percentage Electricity Generated from: Coal, Oil & Gas 41% 20% 72% 100% 83% 60% 64% 24% 19% 7% 59% 2% 77% 43% Gas & Oil 41% 20% 72% 100% 59% 3% 38% 21% 8% 3% 37% 1% 43% 25% Gas 40% 17% 72% 0% 57% 2% 28% 19% 6% 3% 31% 1% 42% 22% Latvia Lithuania 2.3 Investment in Electricity and Gas Infrastructure Luxembourg Malta Netherlands Investment in electricity and gas infrastructure assets is a further contributing factor to electricity and gas prices, depending on the level of costs and the extent to which these costs are passed through to final customers. Poland Portugal Romania Slovakia Slovenia Spain Sweden United Kingdom EU27 Section 2 In terms of electricity infrastructure, Ireland relies on an extensive high-voltage transmission network and a medium- and lowvoltage distribution network to transport electricity domestically. Rapid growth in electricity demand in Ireland (4.7% per annum average annual growth ) coupled with a long period of significant under-investment in electricity transmission and distribution network led to a network investment programme since 2000, in both transmission and distribution networks. For the period , the Commission for Energy Regulation approved an expenditure of 1.4 billion for the transmission system and 4.2 billion for the distribution system. In the year 2009, this resulted in transmission use of system charge of 0.9 c/kwh and distribution use of system charge of 2.95 c/kwh. In 2008, Eirgrid launched Grid 25 as its strategy for planning a major infrastructure programme to put in place the electricity transmission system needed for economic growth in Ireland. The strategy sets out a investment of a further 4 billion approximately in the transmission system over the period to 2025 to accommodate the increased demand for electricity, a 40% penetration of renewable energy, adequate conventional capacity to complement the level of wind on the system and provide further interconnection to the UK or Europe beyond the 500 MW connector to the UK currently under construction. 2.4 Share of Taxes in the Prices paid by Consumers in Europe Another factor that affects the prices paid by consumers is the amount of non-recoverable taxes that are levied on energy. Business can generally recover value added tax (VAT) but not other taxes including energy taxes, carbon taxes, climate change levies, so the level of ex-vat taxes is important. Householders cannot generally recover any taxes so the level of total tax levied is important. Table 2 to Table 5 show the level of taxes applicable to assessing price comparisons in Europe for industry and households. In Ireland s case there were no non-recoverable taxes levied on electricity 7 or gas 8 for industry in the 1 st semester 2009 and the level of VAT levied on households at 11.9% of total price (13.5% VAT is levied on the basic price) is at the lower end compared with the other countries. Table 2 shows the basic price for electricity and the non-recoverable taxes for industrial electricity consumers whose annual consumption is between 500 and 2,000 MWh 9. The non-recoverable tax varies from zero (for 5 Member States including Ireland) to Netherlands at 1.90 c/kwh, the latter representing 16% of ex-vat price of electricity (data for the all taxes excluded price for Italy was not available for this semester). The Member States are ranked in increasing order of basic price plus non-recoverable taxes. 7 In accordance with the EU Energy Tax Directive, Chapter 1 of Part 2 of the Finance Act 2008 introduced excise duty, called electricity tax, on supplies of electricity made on or after 1 October There are two tax rates: 0.50 per megawatt hour (MWh), for electricity supplied for business use; and 1 per MWh, for electricity supplied for non-business use. This is not applied to electricity for residential use. 8 Emissions trading, while not a tax, has resulted in an increase in wholesale electricity prices affecting all customers. The level of increase will vary across the EU and depends on the carbon content of fuel mix used in electricity generation and the level of price pass through to customers. This increase is not explicitly quantified and forms part of the basic electricity price. Emissions trading will also tend to increase the cost of using gas for companies involved in emissions trading. This is not reflected in the basic price nor is it captured in the recoverable or non-recoverable taxes. 9 Based on industrial electricity consumption band IC.

13 Electricity and Gas Prices in Ireland (1 st Semester 2009) 11 Table 2 Electricity Prices and Taxes for Industrial Consumers (1 st semester 2009) Basic Price plus Nonrecoverable Taxes Basic Price Non-recoverable Taxes Non-recoverable Taxes in per 100 kwh in per 100 kwh as % of ex-vat price Estonia % Bulgaria % Sweden % Finland % France % Turkey % Norway % Romania % Denmark % Croatia % Portugal % Latvia % Poland % Lithuania % Greece % Czech Republic % Belgium % United Kingdom % Slovenia % Netherlands % Germany % Spain % Luxembourg % Cyprus % Ireland % Hungary % Slovakia % Italy Malta % Austria Section 2

14 12 Electricity & Gas Prices in Ireland (1 st Semester 2009) In the case of gas prices to industrial customers, there are 7 Member States (including Ireland) for which the non-recoverable taxes are zero, as shown in Table 3. These prices relate to gas customers who use between 10,000 and 100,000 GJ of gas per annum 10. The non-recoverable taxes vary from zero to 8.05 per GJ indenmark, the latter representing 52% of ex-vat price of gas. Section 2 Table 3 Gas Prices and Taxes for Industrial Consumers (1 st semester 2009) Basic Price plus Nonrecoverable Taxes Basic Price Non-recoverable Taxes Non-recoverable Taxes in per GJ in per GJ as % of ex-vat price Romania % Croatia % Estonia % Poland % Turkey % Turkey % United Kingdom % Finland % Spain % Lithuania % Bulgaria % Belgium % Czech Republic % Ireland % Hungary % Portugal % France % Netherlands % Italy % Latvia % Sweden % Luxembourg % Slovakia % Germany % Slovenia % Denmark % Austria Based on industrial gas consumption band I3

15 Electricity and Gas Prices in Ireland (1 st Semester 2009) 13 Table 4 Electricity Prices and Taxes for Domestic Consumers (1 st semester 2009) Other Taxes VAT Price including all Taxes Basic Price (excl. VAT) All Taxes in per 100 kwh in per 100 kwh as % of total price Bulgaria % Estonia % Lithuania % Romania % Latvia % Poland % Turkey % Croatia % Greece % France % Finland % Czech Republic % Slovenia % United Kingdom % Hungary % Portugal % Malta % Slovakia % Cyprus % Norway % Spain % Sweden % Luxembourg % Netherlands % Austria % Belgium % Ireland % Italy Germany % Denmark % Section 2 The level of taxes applied to household electricity prices is significantly higher than that applied to industrial electricity prices, as shown in Table 4. These prices are for customers who use between 2,500 and 5,000 kwh per annum 11. The VAT charges are shown separately from other taxes for the purposes of comparison. There are 9 Member States (including Ireland) who apply VAT charges only to domestic customers. Total taxes (VAT plus other taxes) vary from 0.67 c/kwh (UK) to c/kwh (Denmark), or between 4.6% and 54% of total prices. For Ireland, taxes account for 11.9% of the final electricity and gas prices to household consumers. Table 5 shows the level of taxes applied to gas prices for domestic customers within the EU who have an annual consumption of between 20 and 200 GJ per annum 12. As in the case of electricity, the taxes applied to domestic customers generally exceed those applied to industrial customers, although for domestic customers there are more Member States who apply zero non- VAT tax to gas prices. The amounts of total tax vary from 56 c/gj (UK) to 13.16/GJ (Denmark) or 4.2% to 51% of final domestic gas prices. 11 Based on household electricity consumption band DC 12 Based on household gas consumption band D2

16 14 Electricity & Gas Prices in Ireland (1 st Semester 2009) Section 2 Table 5 Gas Prices and Taxes for Domestic Consumers 13 (1 st semester 2009) Other Taxes VAT Price including all Taxes Basic Price (excl. VAT) All Taxes in per GJ in per GJ as % of total price Romania % Croatia % Poland % Turkey % Estonia % Lithuania % United Kingdom % Hungary % Slovakia % Bulgaria % Luxembourg % Czech Republic % Latvia % France % Portugal % Belgium % Spain % Ireland % Germany % Austria % Slovenia % Italy % Netherlands % Sweden % Denmark % 2.5 Purchasing Power When comparing prices of goods across countries it is important to not only correct for differences in currencies but also for the differences in income and living standards. This is of particular importance when comparing prices paid by domestic consumers. Some factors impacting on gas and electricity prices in a country are the costs associated with labour and services. In wealthier countries the cost of living as well as labour and services costs tend to be higher. For domestic consumers, comparing electricity and gas prices on the basis of purchasing power parity is a method that may be used to separate the price differences associated with differences in wealth from those associated with other factors. Purchasing Power Parities (PPPs) are currency conversion rates that convert to a common currency as well as equalising the purchasing power of different currencies. In other words, they eliminate the differences in price levels between countries due to differences in currency exchange rates and in living standards. This purchasing power exchange rate equalises the purchasing power of different currencies in their home countries for a given basket of goods. Using a PPP basis is arguably more useful when comparing differences in living standards on the whole between nations because PPP takes into account the relative cost of living and the inflation rates of different countries, rather than just a nominal gross domestic product (GDP) comparison. 13 Based on household gas consumption band D2

17 Electricity and Gas Prices in Ireland (1 st Semester 2009) Energy Prices for Business The EU Gas and Electricity Price Transparency Directive refers to gas and electricity prices charged to business end-users, however it recognises that suppliers generally can t distinguish between industrial and commercial services users and so accepts that business end-users may include other non-residential users. In essence therefore, business prices refer to all non-residential prices. Gas and electricity prices include all charges payable including: energy consumed, network charges, other charges (capacity charges, commercialisation, meter rental etc) all netted for any rebates or premiums due. Initial connection charges are not included. Prices are recorded as national average prices. 3.1 Business Electricity Costs The prices represent weighted average prices, using the market share of the electricity suppliers surveyed as weighting factors. Arithmetic average prices were provided by Member States only when weighted figures could not be calculated. In either case, Member States are required to ensure that a representative share of the national market is covered in the survey. Market shares should be based on the quantity of electricity invoiced by electricity suppliers to business end-users. If possible, the market shares are calculated separately for each consumption band. The information used for calculating weighted average prices is managed by Member States, respecting confidentiality rules. In order to ensure confidentiality, data relating to prices are communicated only where there are, in the Member State concerned, at least three end-users in each of the categories. Three levels of prices are provided: Prices excluding taxes and levies, Prices excluding VAT and other recoverable taxes, Prices including all taxes, levies and VAT. Section 3 Electricity prices are surveyed for the following categories of business end-user: Table 6 Categories for Business End Use of Electricity Business End-User Annual electricity consumption (MWh) Lowest Highest Band - IA < 20 Band - IB 20 < 500 Band - IC 500 < Band - ID < Band - IE < Band - IF <= Data and analysis on electricity costs in this section are based on the returns from the revised Gas & Electricity Price Directive for the first semester of Analysis here is confined to the average electricity price excluding VAT and other recoverable taxes as this is the most relevant for business consumers. Data is presented on the trend in electricity prices since the start of the data collection under the new methodology as well as focusing on the latest semester data. The prices shown refer to average prices being charged by suppliers. For individual business customers, the price paid for electricity to a supplier will depend to some extent on the load profile of the customer and may be higher or lower than the average because of this. Figure 3 shows the trend in electricity prices in consumption band IC for Ireland, EU and Euro Area and clearly shows the price of electricity to Irish business falling in the first semester of 2009 while they continued to rise in Europe.

18 16 Electricity & Gas Prices in Ireland (1 st Semester 2009) Figure 3 Business Electricity Prices in Band IC (2 nd semester 2007 to 1 st semester 2009) c/kwh Section S S S S1 Ireland Euro Area EU 27 Business sector electricity prices in Ireland for the first half of 2009 were above the average in all consumption bands for which data is available, ranging from 9% to 23% above, as shown in Figure 3 and Table 8. This is an improvement on the previous semester when they ranged from 12% to 38% above. Bands IC and ID were 38% above the EU average during the second half of 2008 and these have moved to being 15% above in the first half of Similarly, Band IE had gone from being 38% above to 12% above. Table 7 shows the ex-vat electricity prices in band IC ( MWh per annum) for the four semesters between the second half of 2007 and the middle of 2009 for all countries. Also shown is the price change for each country between the semesters and for the latest 12 months. Price change in the first semester of 2009 ranged from a 18% increase in Luxembourg to a 34% price decrease in Cyprus. Ireland experienced a 15% decrease. Europe a a whole experienced a 2.2% increase and the Euro Area a 4.3% increase. Note that the percentage price change shown in Table 7 is calculated from the published Eurostat euro values for each country. Percentage price change in national currencies may differ considerably from these. Over the 12 month period from the first semester (S1) 2008 to S price change varied from 36% increase in Latvia to a 17% decrease in Cyprus. Ireland experienced an decrease of 7.4% over the 12 month period. This decrease for Ireland compares with a 7.5% increase experienced in Europe and the 8.3% in the Euro Area.

19 Electricity and Gas Prices in Ireland (1 st Semester 2009) 17 Table 7 Business Electricity Prices in band IC in Europe (S to S1 2009) without VAT (c/kwh) % change Band IC July 07 - Jan 08 - July 08 - Jan 09 - S2 '07 - S1 '08 - S months Dec 07 June 08 Dec 08 June 09 S1 '08 S2 '08 S1 09 to S1 '09 Austria % 0.8%.... Belgium % 2.5% 1.4% 3.9% Bulgaria % 15.5% 0.0% 15.5% Croatia % 25.3% -8.4% 14.7% Cyprus % 26.6% -34.4% -16.9% Czech Republic % 1.3% -4.6% -3.4% Germany % 2.4% 5.0% 7.5% Denmark % 11.6% -15.7% -5.9% Estonia % 6.0% 7.0% 13.4% Finland % 5.3% 2.2% 7.7% France % -4.1% 14.1% 9.5% Greece % 6.9% 3.0% 10.1% Hungary % 6.7% 1.9% 8.7% Ireland % 9.0% -15.0% -7.4% Italy % -3.1% 2.6% Latvia % 20.6% 12.6% 35.8% Lithuania % 1.1% 10.3% 11.5% Luxembourg % 0.3% 18.2% 18.5% Malta % 32.6% -3.0% 28.6% Netherlands % 3.0% 10.8% 14.1% Norway % 11.1% -9.3% 0.8% Poland % 3.3% -0.9% 2.4% Portugal % 0.7% -0.8% -0.1% Romania % 7.2% -14.6% -8.5% Slovakia % 12.1% 10.3% 23.6% Slovenia % 5.7% 13.5% 20.0% Spain % 11.1% 8.1% 20.1% Sweden % 11.5% -13.7% -3.8% Turkey % 23.3% -8.0% 13.4% United Kingdom % 11.4% 2.7% 14.3% Euro Area % 3.9% 4.3% 8.3% EU % 5.1% 2.2% 7.5% Section 3 Ireland relative to: Euro Area 129.9% 129.4% 135.8% 110.6% EU % 133.1% 138.0% 114.7% Table 8 shows Ireland s position, relative to the EU average electricity prices to business for the first semester 2009 with the second semester 2008 shown in grey.

20 18 Electricity & Gas Prices in Ireland (1 st Semester 2009) Table 8 Business Electricity Prices ( ) in Ireland (1 st Semester 2009) EU Comparison Electricity Prices Business Consumers (excluding VAT) Cost /kwh % change since last semester Relative to EU Average 2009-S1 Relative to EU Average 2008-S2 Band IA (Consumption < 20 MWh) % 112% 112% Band IB (20 MWh < Consumption < 500 MWh) % 123% 129% Band IC (500 MWh < Consumption < 2,000 MWh) % 115% 138% Band ID (2,000 MWh < Consumption < 20,000 MWh) % 115% 138% Band IE (20,000 MWh < Consumption < 70,000 MWh) % 112% 134% Band IF (70,000 MWh < Consumption < 150,000 MWh) % 109% 123% Band IG (Consumption > 150,000 MWh) : : : : With the exception of band IA, where the relative ranking remained unchanged, there was significant improvement in Ireland s ranking compared with the EU average electricity prices in all other business consumption bands. Section 3 Figure 4 illustrates the data presented in Figure 3, colour coding the countries of Europe according to electricity price bands for the customers within consumption band IC (500 2,000 MWh per annum). This shows Ireland in the second highest category. It is interesting to compare the results of this analysis with the dependence on gas and oil in the electricity fuel mix shown in Figure 2 and Table 1. Ireland has 62% of its electricity generated by gas and oil. Interestingly, Slovakia, falls into the highest range as shown in Figure 4, has 19% coal, oil and gas in the generation fuel mix and just 8% oil and gas.

21 Electricity and Gas Prices in Ireland (1 st Semester 2009) 19 Figure 4 Business Electricity Prices in Europe (1 st Semester 2009) Sweden Finland Norway Russia Estonia Latvia Ireland Denmark Russia Lithuania Belarus Section 3 United Kingdom Netherlands Poland Belgium Germany Ukraine Luxembourg Czech Slovakia Moldova Portugal Spain France Liechtenstein Switzerland Italy Austria Hungary Slovenia Croatia Bosnia & Serbia Herzegovina Montenegro Macedonia Albania Romania Bulgaria Greece Electricity Prices (ex vat) Band IC (500 MWh to 2,000 MWh) < 0.06 /kwh /kwh /kwh /kwh /kwh /kwh > 0.11 /kwh Malta

22 20 Electricity & Gas Prices in Ireland (1 st Semester 2009) Figure 5 Business Electricity Prices in Euro Area (1 st Semester 2009) /kwh Ireland relative to Eurozone average (%) Band IA 105% Band IB 117% Band IC 111% Band ID 111% Band IE 110% Band IF 108% Band IG Section 3 0 Band IA Consumption < 20 MWh Band IB 20 MWh < Consumption < 500 MWh Band IC 500 MWh < Consumption < 2,000 MWh Band ID 2,000 MWh < Consumption < 20,000 MWh Band IE 20,000 MWh < Consumption < 70,000 MWh Band IF 70,000 MWh < Consumption < 150,000 MWh Band IG Consumption > 150,000 MWh Austria Belgium Cyprus Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Slovenia Slovakia Spain Within the Euro Area countries, business electricity prices in Ireland for the first half of 2009 were above the average in all bands where data is available, ranging from 5% above in band IA to 17% above in band IB. In the previous semester Ireland was 36% above in band IC (see Table 9) and this has reduced to 11% above the Euro Area average in the first half of Table 9 Business Electricity Prices ( ) (1 st Semester 2009) Euro Area Comparison Electricity Prices Business Consumers (excluding VAT) Cost /kwh Relative to Euro Area Average S1 Relative to Euro Area Average S2 Band IA (Consumption < 20 MWh) % 107% Band IB (20 MWh < Consumption < 500 MWh) % 125% Band IC (500 MWh < Consumption < 2,000 MWh) % 136% Band ID (2,000 MWh < Consumption < 20,000 MWh) % 135% Band IE (20,000 MWh < Consumption < 70,000 MWh) % 132% Band IF (70,000 MWh < Consumption < 150,000 MWh) % 122% Band IG (Consumption > 150,000 MWh) : : : With reference to Table 9 there was significant improvement in Ireland s ranking compared with the Euro Area average electricity prices to business in all consumption bands. 3.2 Business Gas Prices The gas prices presented include all charges payable: network charges plus energy consumed minus any rebates or premiums, plus other charges (meter rental, standing charges, etc.). Initial connection charges are not included. Prices are recorded as national average prices. These prices represent weighted average prices, using the market shares of the gas suppliers surveyed as weighting factors; with arithmetic average prices provided only when weighted figures cannot be calculated. In either case, Member States are required to ensure that a representative share of the national market is covered by the survey. Market shares are based on the quantity of gas invoiced by the gas suppliers to business end-users. When possible, the market shares are calculated separately for each band. The information used for calculating weighted average prices is managed by

23 Electricity and Gas Prices in Ireland (1 st Semester 2009) 21 Member States, respecting confidentiality rules. In the interest of confidentiality, data relating to prices will be communicated only where there are, in the Member State concerned, at least three end-users in each of the categories. Three levels of prices are provided: prices excluding taxes and levies, prices excluding VAT and other recoverable taxes, prices including all taxes, levies and VAT. Gas prices are surveyed for the following categories of business end-user: Table 10 Categories for Business End Use of Natural Gas Annual gas consumption (GJ) Business End-User Lowest Highest Band - I1 < Band - I < Band - I < Band - I < Band - I <= Section 3 Data and analysis on gas costs in this section are based on the returns from the revised Gas & Electricity Price Directive for the first semester of As for electricity price, the average gas price excluding (VAT and other) recoverable taxes is used as this is the most relevant for business consumers. Data is presented on the trend in gas prices since the start of the data collection under the new methodology as well as focusing on the latest semester data. Figure 6 Business Gas Prices in Band I3 (2 nd semester 2007 to 1 st semester 2009) c/kwh S S S S1 Ireland Euro Area EU 27 As shown in Figure 6 gas prices to business in consumption band I3 have been falling since the first semester of 2008 and have reduced by 15.8% over the 12 month period to the first semester 2009, with the bulk of this reduction occurring in early Business sector gas prices in Ireland for the first half of 2009 were 13% above the average for EU countries in the lowest

24 22 Electricity & Gas Prices in Ireland (1 st Semester 2009) consumption band I1 and just 1% above in band I4. Gas prices in Ireland were 10% below the EU average in band I2 (1,000 10,000 GJ per annum) and 7% below the average in band I3 (10, ,000 GJ per annum). Table 11 shows prices in band I3 for the four semesters between the second half of 2007 and the middle of Also shown is the price change for each country between the semesters and for the latest 12 months. Price changes in the first semester of 2009 ranged from a 18% increase in Bulgaria to a 28% price decrease in Lithuania. Gas prices fell by 15.4% in this consumption band in Ireland. Europe a a whole experienced an 8.7% decrease in band I3 and the Euro Area 8.1% decrease. Note that the percentage price change shown in Table 11 is calculated from the published Eurostat euro values for each country. Percentage price change in national currencies may differ considerably from these. Over the 12 month period S to S price change varied from 53% increase in Belgium to a 1.6% decrease in Sweden. Ireland experience an decrease of 15.8% over the 12 month period. This decrease for Ireland was significant in light of the 5.9% increase experienced in Europe and the 6.1% increase in the Euro Area. Section 3 Table 11 Business Gas Prices in band I3 in Europe (S to S1 2009) without VAT ( /GJ) % change Band I3 July 07 - Jan 08 - July 08 - Jan 09 - S2 '07 - S1 '08 - S months Dec 07 June 08 Dec 08 June 09 S1 '08 S2 '08 S1 09 to S1 '09 Austria : : : : Belgium % 17.9% -16.2% -1.2% Bulgaria % 30.0% 17.7% 53.0% Croatia % 0.6% 14.2% 14.8% Czech Republic % 23.4% -15.1% 4.7% Germany % 11.4% -13.3% -3.4% Denmark 7.34 : %.. Estonia % 25.7% -14.4% 7.6% Finland % 17.7% -8.6% 7.6% France % 17.6% -7.8% 8.5% Hungary % 20.9% -19.8% -3.0% Ireland % -0.5% -15.4% -15.8% Italy % 21.2% -4.6% 15.6% Latvia % 39.0% -1.2% 37.3% Lithuania % 38.2% -28.1% -0.6% Luxembourg % 8.0% -1.1% 6.9% Netherlands % 10.7% 0.0% 10.7% Poland % 11.6% -17.1% -7.5% Portugal % 6.0% 6.5% 12.9% Romania % -0.3% -16.5% -16.8% Slovakia % 47.2% -13.9% 26.8% Slovenia % 25.1% -4.2% 19.9% Spain % 18.2% -3.4% 14.3% Sweden % 2.4% -25.5% -23.7% Turkey % 32.2% -14.2% 13.4% United Kingdom % 12.4% -4.0% 8.0% Euro Area % 15.4% -8.1% 6.1% EU % 16.0% -8.7% 5.9% Ireland relative to: Euro Area 109.3% 111.1% 95.7% 88.1% EU % 116.9% 100.2% 92.9%