Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. Energy prices and costs in Europe

Energy is an indispensable aspect of our daily lives. We need it for heating, cooling, lighting and moving around; it is essential for the functioning of our homes, offices, work places and the entire economy. Its importance makes its accessibility a politically sensitive topic. This is one of the reasons why the Commission has proposed its Energy Union Strategy.

The price of energy is also sensitive. On the one hand, low prices can be beneficial — they raise our purchasing power and standard of living and they reduce costs for our businesses and so increase their competitiveness. At the same time, since energy is delivered through markets, energy suppliers need prices to cover their costs and to finance investment to ensure the future delivery of energy. High prices send signals to reduce the use of high-carbon energy or to encourage energy efficiency and the use of innovative ecodesigned products and clean technologies.

The history of energy prices and costs shows major changes and major impacts. In the 1970s and 1980s, restrictions by oil suppliers drove up prices and triggered economic shocks. More recently, new energy supplies and growing use of alternative energy sources have boosted supply, while energy efficiency measures and weak growth have reduced demand and brought wholesale prices down. The EU has found that the more competitive and liquid the energy market is, the more diverse and numerous our energy supplies and suppliers are, the less exposed we are to such volatility.

The European Commission produced a first report on energy prices and costs in 2014. This showed a picture of high global energy prices, with prices diverging considerably across EU Member States, and significantly higher for Europe than for its international trading partners, particularly the United States. Retail prices had risen more than wholesale prices because of increases in network price component and taxes and levies. Data weaknesses led to the recommendation to improve the detail, transparency and consistency of energy price data collection.

The report’s policy conclusions found that the data and evidence presented showed the partial development of the internal market for energy and a need for further measures to improve Europe’s energy efficiency and security and diversity of low-carbon energy supplies. The energy union framework strategy and its roadmap set the framework for taking this work forward every two years, starting in 2016.

This second report updates the analysis in a number of ways. First, through extensive ad hoc data collection undertaken with Member States’ statistical offices, the data on energy prices has been greatly improved, so that some of the conclusions we can draw are now even more detailed and clear. The data has been further updated, so it gives the latest picture available of the state of energy prices in electricity, gas and in the oil products sectors.

In addition, the analysis of the aggregated and case-study data is improved, enabling us to explore in greater depth the trends and impacts of energy prices, for households (especially those with low income) and industry (in particular, energy-intensive industries). The review of energy costs also helps us understand how we can respond to energy prices, often by using energy more efficiently. The report draws on the evidence in the accompanying staff working document and of studies prepared on behalf of the Commission.

EUR-Lex: SWD(2016)420: Commission Staff Working Document accompanying the report http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=SWD:2016:420:FIN

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