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The cheapest energy in Europe

Robert Powell
by Lovemoney Staff Robert Powell on 05 October 2011  |  Comments 17 comments

Robert Powell takes a look at how gas and electricity prices in the UK compare to the rest of Europe...

The cheapest energy in Europe

It’s time for a bit of context.

We’re constantly told how expensive it is to live in ‘rip-off’ Britain, not least when it comes to gas and electricity rates. And granted, before someone else points it out, it’s often people like me doing the telling.

So in an attempt to maybe... perhaps... possibly write a marginally positive UK utilities story, I’m going to take a look at how British energy prices compare to those of our European neighbours.

Recent hikes

The latest round of energy price hikes have seen rates rise by an average of 18% for gas and 11% for electricity across the UK. That’s on top of the rate increases in late 2010 and early 2011 that pushed up prices by around 6% across the sector. Every energy company blamed these hikes on increased wholesale costs.

These domestic price increases are far higher than those recently experienced by our European neighbours.

Figures from energyhelpline.com show that in France electricity rates rose by just 3% back in January. That’s around half of last winter’s UK rate hikes and a quarter of this year’s increases.

Gas rates in France rose by 15% in the first three months of this year. Higher than last winter’s 5.6% rise in this country, but lower than the recent gas hikes of around 18%.

It’s a similar story in Germany where gas rates have increased by 11% - far lower than UK hikes.

Tight state regulation in Spain is limiting electricity hikes to just 1.5%. That’s 86% lower than the recent round of 11% hikes in UK electricity.

Foreign-owned companies

These hike differences are made even harder to swallow by the presence of many foreign-owned energy companies in the UK sector.

EDF Energy – the supplier that hiked UK gas and electricity rates by 6.5% and 7.5% respectively in March, and 15.4% and 4.5% respectively in November – is based in France, where it provides energy for 85% of the population. As I mentioned earlier, French families have seen a mere 15% rise in gas rates and 3% in electricity this year.

ScottishPower is owned by Spanish company Iberdrola, which is upping electricity rates by 1.5% in Spain. The UK arm hiked electricity by 8.9% last November and by 10% in August.

Npower – owned by German firm RWE – hiked gas rates in the UK by 18% in August. But back in Germany, gas price rises were limited to just 11%.

Indeed, it’s easy to see why many this side of the channel are concerned that multi-national energy companies are subsidising cheap continental rates (brought on by tight regulation) with expensive British rates.

But comparing recent rate rises doesn’t really tell the full story.

Basic rates

Average energy rates for the main EU15 countries show that Britain is one of the cheapest countries for energy in Europe. The latest available figures – obtained from the Department for Energy and Climate Change (DECC) – relate to 2010 and so will not include the recent round of price hikes. But nevertheless, they do give us some indication of the general energy price differences between countries.

For electricity, the UK is fourth cheapest with an average price of 12.89 pence per kilowatt hour (p per kWh). France sits at the bottom of the list with an average of 10.15p per kWh. This can be put down to the country’s reliance on nuclear power - France has 58 operational nuclear power reactors, the second highest number worldwide behind America.

Britain performs even better on the gas table with the third cheapest rate of 4.15p per kWh.

Taxation

Scandinavian countries dominate the top spots of these price tables. Denmark is the most expensive EU15 country for electricity with an average price of 23.05p per kWh – 44% higher than the UK.

For gas, Sweden tops the list with an average rate in 2010 of 9.10p per kWh, over double the UK’s average price. Denmark comes in second with 8.06p per kWh.

However a majority of these high Scandinavian prices are made up of tax;,not wholesale costs (the reason always given by UK companies for price hikes).

56% of Denmark’s average electricity price and 51% of its gas price derives from tax, while in Sweden 42% of the average gas rate comes from tax. This is far higher than the UK where – thanks to the discounted rate of VAT on utilities – only 5% of 2010’s average electricity and gas prices came from state taxation.

That ignores any ‘feed-through’ taxes though, levied on oil companies, but ultimately passed onto the consumer. For example, the Government’s tax rise on North-Sea oil companies in the 2011 Budget has pushed the levy up to between 70% and 82% depending on the size of the oil field.

It would be naive to think that none of these cost-increases are passed onto the consumer.

Regulation

Many continental countries really seem to have made a trade off on energy prices: less volatility in the market thanks to increased regulation, in exchange for higher rates due to tax.

Spain is a good example of this.

In 2009 the Spanish government introduced ‘tarifa de ultimo recurso’  for electricity and natural gas. This state-set rate – roughly translated as ‘the tariff of last resort’ – is applicable to 7.3m homes across Spain and represents the price for the end product. This pulls consumers away from the tariffs of private energy companies.

Households do have the option of going to the open market. But prices here are marginally more expensive. Tight state regulation also keeps rates down and narrows the gap between the cheapest and most expensive tariffs in the private sector.

All of this is great for Spanish consumers, but not so good for businesses. Indeed, Iberdrola – Spain’s largest energy provider – even went to an International Forum in Brussels last week to push for price rises, claiming that it was damaging the economy.

Which side are you on?

When it comes to the energy industry in a European context, the difference is an age-old and easily-identifiable one: regulation vs. the market, public vs. private, left vs. right.

The difficult question is this: which side of this gaping hole should the UK be on?

More: Compare energy rates with lovemoney.com | Yet another energy provider hikes rates | Haha! You didn't notice the taxman pocketing this

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Comments (17)

  • oldhenry
    Love rating 343
    oldhenry said

    Well what we should be on and what we are are vasty different. The British public was sold a 'pup' in the 1980s by Mrs T and her mates. A few cheap shares but a lifetime of being robbed blind by capitalists. Energy, rail , buses, phones and now Cameron wants the same for the NHS. Any control mechanism have proved worthless.

    Sadly Blair did nothing to stop or counteract these betrayals of the UK population and I believe coluded with the capitalists. The current Labour opposition are tained by Blairism which will take years to shake off.

    The fact is that a lot of Europe is socialist based ad they do have a higher standard of living than us with our dramatic prices rises. This country is sliding into a pit of feudalism and the future looks bleak,even education will be unaffordable soon so that the 'masses' will be doomed to become serfs only now that means burger floppers or mobile phone salepeople rather than hoeing the fields from dawn till dusk.

    Report on 05 October 2011  |  Love thisLove  0 loves
  • culluding-fool
    Love rating 60
    culluding-fool said

    When comparing prices of anything with other countries I find it has more meaning to me if prices are shown as a percentage of net income rather than in pounds and pence. I used to live abroad and used the exchange rates to compare prices where I lived as being so much cheaper than they are in UK, but the salaries were also so much lower. Therefore, we may pay less tax on energy than some other countries but which country's citizens struggle more to pay the bills?

    Report on 05 October 2011  |  Love thisLove  1 love
  • Richmond
    Love rating 1
    Richmond said

    British Governments, particularly Labour, have always had a wonderful facility for dealing with complaints about high prices caused through taxation. The strategy is to compare the price with the highest charged by another European country. Never mind the fact that the country in question has a lower tax on some other commodity.

    If the government discovers that a particular price charged in the UK is somewhat cheaper than that charged by other countries, a cheer goes up in Westminster as an excuse presents itself to up the tax and consequently the price. Petrol, of course is a fine example.

    However, the Government cannot believe its luck in raising taxes by using the excuse of global warming, a phenomina unproven as a result of human activity. Al Gore and an assorted ragbag of politicians and "experts" have staked their reputations on being right while the rest of us, like lambs to the slaughter, pay up with a smile.

    The remedy? Plant more trees, use less paper (whatever happened to our paperless society through the use of computers?), build more atomic power stations, develop clean coal for power stations, develop better aircraft jet engines, improve car engine fuel efficiency, harness solar energy, wave energy and hydro energy at a steady pace.

    We should assert ourselves regarding foreign utility companies overcharging us in order to susidize their own cirizens.

    We are indeed rip off Brittania but we are being ripped off because of the weakness of our governments who seem unable to stand up to foreigners who recognise a fool when they see one.

    Report on 05 October 2011  |  Love thisLove  0 loves
  • bnick
    Love rating 6
    bnick said

    I do not understand where the figures for electricity in France come from. We live in the Ardeche mountains about 120K south of Lyon and pay EDF 8.04 Euro cents per unit for electricity (7.8 last year).

    On the other hand if you compare food prices, Britain is much cheaper. It is no surprise Carrefours abandoned their attempt to break into the British market, how I wish we had a local Tesco/Asda/Sainsbury/Morrisons.

    Report on 05 October 2011  |  Love thisLove  0 loves
  • bengilda
    Love rating 100
    bengilda said

    So much of the cost of our energy is due to so called "green" taxation thanks to the extremism of such as LibDem MP Chris Huhne. We would all be considerably better off and have more to spend within the economy if the dubious global warming taxes and subsidies were swept away.

    Report on 05 October 2011  |  Love thisLove  0 loves
  • nickpike
    Love rating 308
    nickpike said

    Sorry oldhenry. Your socialist tripe holds no water.

    A lot of the counties mentioned get paid more than us, so relatively their energy could be cheaper.

    Report on 05 October 2011  |  Love thisLove  1 love
  • Aitken B
    Love rating 146
    Aitken B said

    It would perhaps be more useful for comparison if the prices were given without tax because it is on that that the energy company is making its profit. The tax element is only what the various governments can con or extort from us.

    Chris Huhne's levy is not in the least questionable it is downright dishonesty. Surely no-one still believes that CO2 is causing any discernable change in the climate. That 1 additional CO2 molecule in 72,000 other ones is the culprit? What utter rubbish and by the way CO2 is a gas necessary to life on earth, it is certainly not a pollutant.

    Report on 05 October 2011  |  Love thisLove  3 loves
  • RARS
    Love rating 2
    RARS said

    Surely the future of energy must lay with the nuclear sector as shown by France having the cheapest electricity. If we built many more nuclear power stations there would be a lot more employment (building and operating them) and we would not be reliant on ever reducing and more expensive fossil fuels.

    Report on 05 October 2011  |  Love thisLove  0 loves
  • keepitfrench
    Love rating 0
    keepitfrench said

    Electricity not as cheap as it should be with 58 nuclear reactors and a lot of houses with solar panels selling it all back to the grid. Wages not exactly sky high in France either nickpike unless you're related to the establishment. I know plenty of people working long days and taking home the 'smic' or minimum wage which if you go into the supermarkets with in France won't exactly buy you very much due to the prices they charge for things like kids clothes, toiletries, etc. Queues for cheap food from the charities are getting longer by the day. You're right bnick they need some competition from the likes of dare I say it Tesco's, Asda etc but then that would just bring it problems too I fear........Another revolution might be required to sort it all out!

    Report on 05 October 2011  |  Love thisLove  0 loves
  • Mike10613
    Love rating 626
    Mike10613 said

    The price of energy relative to incomes is what counts and income are static in the UK. Taxation has gone up too and so people have a falling standard of living; unless you shop around for every thing and cut out luxuries. Many companies that used to supply government, national and local are going out of business. Companies selling luxury goods are going out of business and stores lay empty in retail parks. Welcome to Tory Britain, Nickpike!

    Report on 05 October 2011  |  Love thisLove  0 loves
  • fenemore
    Love rating 251
    fenemore said

    I agree with RARS sentiment on nuclear power, but challenge the assumption that it would create more employment - at least for British workers.

    The fact is that the Government has got into bed with EDF on the building of new reactors - that means that it will be French workers who will build and run them. With the EU's open door policy on free movement of labour - there is not a thing anyone can do about it. Any Britains they employ you will find emptying waste bins, cleaning toilets and sweeping floors.... although thinking about it - they will probably use cheap ex Eastern Block country workers for those - so no jobs for us at all then!

    Report on 05 October 2011  |  Love thisLove  0 loves
  • electricblue
    Love rating 769
    electricblue said

    Those with mortgages are paying far less due to low interest rates and the same are benefiting the MANY successful business sectors which don't need to borrow. There are two huge glass manufacturing plants locally, both are French owned and with hundreds of well paid employees, virtually none of them French. The suggestion that major construction projects in the UK would have a majority of low paid foreign workers during either construction or after commissioning is quite laughable. I don't think many posting on here want to hear about British success stories because they don't suit the boring Socialist rubbish they keep spouting. Every time we have an article which compares the UK with the rest of Europe we get the same moaners who ignore the facts of the article and paint us as the worst country.

    Report on 05 October 2011  |  Love thisLove  0 loves
  • DLZ
    Love rating 18
    DLZ said

    As a percentage UK prices may be increasing more than some other EU countries, but the price rise is not because both their base prices and taxes are higher. We've nearly got the cheapest prices in the EU, both with and without taxes.

    http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Energy_price_statistics

    Report on 16 November 2012  |  Love thisLove  0 loves
  • DLZ
    Love rating 18
    DLZ said

    And one of the highest GDP and net pays.

    Report on 16 November 2012  |  Love thisLove  0 loves
  • fsjfeb
    Love rating 0
    fsjfeb said

    nice look at how British energy prices compare to those of our European neighbours

    thanks Robert

    Report on 06 July 2013  |  Love thisLove  0 loves
  • olivia222
    Love rating 0
    olivia222 said

    Nice article.

    I used to have very high energy bills but then I decided to switch supplier I used Tower Utility to compare prices. At first I thought that there is no way to find good deal on a website which compare suppliers but now my bills are lower. And they can offer you special deal for business and that's a huge advantage for me.

    Report on 06 August 2013  |  Love thisLove  0 loves
  • tridonic
    Love rating 0
    tridonic said

    Maybe the chap who has written this does not get to see his Bills , there is no mention of the Standing Charge which can be 20-50p a day in UK ,check your bill and you can see the SC can be more than energy used if your a low efficient user ,and npower has closed its no SC tariff in May 2013 after we moved and now charges this while cutting the unit charge. This is fine if your a Heavy user but as Low Energy users we get hammered.

    Report on 17 December 2013  |  Love thisLove  0 loves

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