* Energy consumers to pay for energy modernisation,
* Non-commodity costs in end-user bills to rise as a
* In EU15 about half the household bill is charges, tax and
By Karolin Schaps and Barbara Lewis
LONDON/BRUSSELS, Nov 5 Europeans are paying the
steepest energy bills in four years and face ever higher
payments as governments pile on extra charges to help finance a
1 trillion euro ($1.4 trillion) modernisation of Europe's energy
Politicians from Britain to Germany, Italy to Romania, under
pressure from electorates squeezed by economic downturn, are
promising to cap energy prices or at least draw their sting.
Even so, consumers will continue to bear the bulk of the
costs of replacing ageing power networks and kickstarting
renewable energy projects.
The European Commission has estimated that infrastructure
improvements will have cost a trillion euros by the end of the
Legally binding targets to lower carbon emissions by 2020
mean that energy markets need to become cleaner, but the
utilities say they cannot afford to finance the costs, so these
will increasingly find their way onto customers' bills.
The wholesale price of energy, which previously made up the
vast majority of a household bill, is a dwindling proportion;
indeed wholesale prices in many EU countries have fallen in
recent years as cheaper renewable energy enters the system, but
retail prices have still been rising.
RWE npower, the British unit of German utility RWE
, said it expected the share of commodity prices as a
component of energy bills to drop to 35 percent in 2020, down
from 50 percent three years ago.
"The cost of funding government policies for renewable
energy, social support and energy efficiency is increasing
faster than any other part of an energy bill," said Paul
Massara, chief executive of RWE npower.
"These initiatives are all important, but consumers need to
be aware that delivering them is causing energy costs to
increase and will continue to do so for some time."
Utility bills differ from nation to nation, and how they are
compiled is opaque, but analysts say the commodity price will
continue to fall as a proportion of energy bills across Europe.
Danish households, for example, pay Europe's highest
electricity bills at around 31 euro cents per kilowatt-hour
because more than half of the cost, or 55 percent, is made up of
taxes, according to a report into energy bills by VaasaETT
energy research group.
Across Europe's 15 oldest member states (EU15), transmission
charges, taxes or renewable subsidies account for roughly half
the average household bill, VaasaETT said.
In Denmark, where there is cross-party political agreement
on the need to limit energy use, taxes and charges have found a
relatively high level of public acceptance.
In Britain, where electricity prices are below the EU
average and the wholesale cost is a greater proportion of bills
than in any of the EU15, news that utilities will raise prices
has kicked up a political storm.
Prime Minister David Cameron has promised a review of green
subsidies as part of efforts to curb prices, after the
opposition Labour Party pledged to freeze prices if elected in
The European Commission, the EU's executive, is reassessing
green subsidies as technologies such as onshore wind and solar
power become more competitive with conventional energy forms.
The Commission has also promised to analyse the impact of
energy costs on industry.
Some major users such as metal smelters have threatened to
leave Europe, where they say they are punished relative to their
peers in, say, the United States, where shale gas has driven
down power prices to roughly half EU levels.
It's not all bad news for EU industrial consumers.
In Germany, renewable energy support costs have risen this
year to 20.4 billion euros from 1.9 billion euros a decade ago,
energy association BDEW said, but industry, which uses most of
the energy, doesn't shoulder its fair share of those costs.
German households use only 26 percent but bear 36 percent of
this cost, or 7.4 billion euros.
In some cases, the Commission is investigating to determine
whether industry waivers distort competition.
For many experts, the obvious way to cap energy bills is by
using less, but that requires upfront investment in improved
building insulation, for instance, which some nations are
reluctant to shoulder.
In Denmark, it is becoming a way of life for businesses and
Denmark's state energy company DONG Energy has
adapted its business model to sell energy savings measures as
well as energy.
"It may seem paradoxical that energy companies go ahead and
tell customers that they can reduce their energy consumption.
But it is possible to develop new business opportunities from
binding energy savings," DONG Vice President Torben Harring told