Below, we’ve provided some case studies where we analyse factors that impact electricity prices in different countries and regions worldwide.
This guide complements a separate guide outlining the general factors that may impact electricity prices
Summary – Case Studies Of Factors That Impact Electricity Prices In Different Countries & States Worldwide
Summary
What we can summarise from analysing different countries and regions is that:
– Electricity prices can be impacted by a range of different factors at once
– Some factors may impact prices more than others
– The factors that impact prices can change over time (over the course of a year, or a decade for example)
So, each geographic region might need it’s own periodic assessment to assess which factors are impacting prices, in what %’s, over a specific time period.
United States – Factors That May Have Contributed To Increased Electricity Prices
Renewable energy may have been one of the causes of increased electricity prices in some US States in the past
There’s a range of reasons renewable energy may have increased prices, which we outline below
United States – Factors That May Have Contributed To Decreased Electricity Prices
Using cheaper sources of power (like coal or hydropower) may helped lower electricity prices in some US States in the past
California Specifically – Factors That May Have Contributed To Increased Electricity Prices
Some of the main causes of increased electricity prices in California in the past may have been:
– Greater use of renewable energy
– The closure of a nuclear energy generating station, which lead to increased natural gas generation costs
Some individual reports indicate that the cost to use renewable energy in a city’s grid is the cause of higher electricity prices in places like California and Germany, rather than nuclear plants being shut down being the cause.
Vermont Specifically – Factors That May Have Contributed To Increased Electricity Prices
Some of the main causes of increased electricity prices in Vermont in the past may have been:
– Not making use of cheap natural gas
– Not making use of hydropower or coal (which are lower cost forms of energy)
Europe Generally – Factors That May Have Contributed To Increased Electricity Prices
Some of the main causes of increased electricity prices in Europe generally in the past may have been:
– Taxes and levies
– Carbon pricing
Germany – Factors That May Have Contributed To Increased Electricity Prices
Some of the main causes of increased electricity prices in Germany in the past may have been:
– The use of renewables during Germany’s energy transition
There’s a range of reasons renewable energy may have increased prices, which we outline below
– Other components determined by the German state
Such as state charges and taxes
This component overlaps with the renewable energy component
– Grid charges
– Procurement and distribution
– Other factors such as high carbon prices and carbon emission rights prices, costs of other energy sources like gas increasing in some years, and shutting down nuclear plants
Belgium – Factors That May Have Contributed To Increased Electricity Prices
Some of the main causes of increased electricity prices in Belgium in the past may have been:
– A lack of competition from lower cost energy sources in the market
– Political policy which penalises more expensive forms of electricity generation (like solar and wind), and penalises cheaper forms (like nuclear)
– Transmission and distribution tariffs
– Public taxes and levies
– Contributions to cogeneration
Denmark – Factors That May Have Contributed To Increased Electricity Prices
Some of the main causes of increased electricity prices in Denmark in the past may have been:
– Taxes and levies (with a notable % going towards renewable energy subsidisation, such as wind energy programmes)
Other Relevant Notes On Electricity In Denmark
Some relevant notes on electricity in Denmark might be:
– Some reports claim that taxes supporting renewables might have served their original purpose, and it might be time to reduce or remove them
– Despite having high electricity prices, Denmark has one of the highest index scores for their electricity supply in the world
Iceland – Factors That May Have Contributed To Increased Electricity Prices
Some of the main causes of increased electricity prices in Iceland in the past may have been:
– Increased demand for electricity
– Fully harnessing (maxxing out) energy sources that provide lower cost electricity options, such as geothermal and hydropower
– Rising tariffs leading to special contracts with heavy industries (who consume most of Iceland’s electricity) becoming more expensive
We list some of the potential reasons for increasing tariffs in the guide below
Australia – Factors That May Have Contributed To Increased Electricity Prices
Some of the main causes of increased electricity prices in Australia in the past may have been:
– Supply lagging demand (or, there not being enough total supply to pull prices down)
This may be a result of several factors, which we list in the guide below
– High prices of specific energy sources, such as natural gas
This may be a result of several factors, with one factor being the wholesale cost to generate electricity from a specific energy source
We go into more detail in the guide below
– Network charges (transmission poles & wires, & infrastructure)
i.e. the cost of transporting electricity
Some reports indicate this is the main reason/main cause for electricity price increases over the last decade
– Grid costs
– Costs charged by retailers
– Renewable energy schemes and policies
i.e. how much they cost us
– General government policy failure
i.e. failure of overall energy policy strategy to deliver more affordable electricity
– Market competition issues
Across various aspects of the energy market, such as not having enough low cost energy sources in the market, and also not having enough competition between electricity retailers
Each component impacts each State differently each year, or each decade.
South Australia Specifically – Factors That May Have Contributed To Increased Electricity Prices
Some of the main causes of increased electricity prices in South Australia in the past may have been:
– Being reliant on inefficient gas generation from old/aged gas generation plants
– Closure of coal fired power stations
– Not having other energy sources to compete with the high price of gas
– Generally having energy policy which doesn’t adequately address the above factors
South Australia Specifically – Factors That May Have Contributed To Decreased Electricity Prices
Using predominantly wind energy, but also solar, may helped lower electricity prices in South Australia in the past
We explain the reason for this in the guide below
How Australia Might Make Electricity More Affordable
In the guide below, there’s a list of potential ways Australia might make electricity more affordable
Other Countries & Regions
It’s worth noting that some other countries and regions around the world might have cheap electricity whilst using a high % of nuclear energy in their energy mix
United States (& California)
Below, we’ve paraphrased and summarised information found in the environmentalprogress.org, dailymaverick.co.za, wattsupwiththat.com, forbes.com, burlingtonfreepress.com and eia.gov reports
View these reports for more comprehensive details
Different US States – In General
The following factors may contribute to increased electricity prices in some US States:
– Renewable energy mandates
The following factors may contribute to lower electricity prices in some US States:
– Getting a significant amount of electricity from hydropower or coal (which can be lower cost energy sources)
Different US States – 1990 to 2015
A major study found that across 29 States in the US, from 1990 to 2015, Renewable Portfolio Standards made retail electricity prices more expensive – $125.2 billion more was estimated to have been paid for in electricity with the Standards than what would have been in the absence of the policy
Some of the reasons that might have made electricity more expensive with renewable energy might have been:
– Backup energy sources (like natural gas plants, hydro electric dams), and batteries are required to provide reliable power, due to wind and solar being intermittent (and relying on adequate sunlight and wind for consistent power output)
– Solar and wind can use a large amount of land
– Solar and wind can displace cheaper baseload energy sources like nuclear plants
California – In General
Even though California has had a relatively high output of their cheapest form of electricity in some years, higher electricity prices in those years might have been a result of:
– Greater use/penetration of intermittent renewables (like solar and wind) in the energy sector
Policy like renewable portfolio standards require the purchase of renewables, and renewables can’t always provide consistent power output like natural gas, hydro or nuclear can
– The closure of the Nuclear Generating Station there, which increased natural gas generation costs in the hundreds of millions of dollars in the 12 months after closure
California – Specifically Between 2011 & 2018
California installed a significant amount of solar between 2011 and 2017, and in this time, electricity prices rose by 24%
By 2018, electricity prices in California were 67% higher than the average in the rest of the United States
Vermont
Vermont’s electricity prices might be higher because of the following factors:
– Cheap natural gas, hydropower, and coal (which are lower cost forms of energy) haven’t been utilised as much as they could have been
Most of Vermont’s electricity in 2021 came from hydroelectricity, with biomass, solar, and wind making up the rest.
Vermont has imported a % of their electricity in the past
Europe
Below, we’ve paraphrased and summarised information found in the bloomberg.com, reuters.com, and energycouncil.com.au reports
See these report for more comprehensive details
In Early 2019
Energy taxes made up about 16% of the average EU residential end-user electricity price structure
In General
– Carbon Pricing
In Europe, carbon pricing might make wholesale electricity prices more expensive by increasing the cost of fossil fuel power generation by charging them for CO2 emissions
This might especially be the case where the benchmark carbon price increases significantly in a given year
Europe currently has an emissions trading system, and also a cap-and-trade scheme in place
– Taxes and Levies
In Europe, taxes and levies account for a third of household electricity prices
Germany
Below, we’ve paraphrased and summarised information found in the energycouncil.com.au, environmentalprogress.org, dailymaverick.co.za, and reuters.com reports
See these reports for more comprehensive details
Retail Energy Prices In Germany In General
Germany and Denmark have the highest retail energy prices in Europe, and German electricity costs twice as much as France
Germany Over The Last Few Decades
One report indicates that the use of renewable energy over the last 10 years may have led to a 34 rise in electricity prices
Another report indicates that German electricity prices rose by 51% during its energy transition [to renewables] between 2006 and 2018
Germany In 2015 & 2016
In Germany in 2015, electricity prices were comprised of the following main components:
– Renewable Energy
Germany is the renewable energy leader in Europe
There’s several different factors related to renewables that impact electricity prices
The first is feed in tariffs which guarantee an electricity price, instead of electricity being run on the ‘lowest bid auction’ system. Solar PV, biomass plants, and wind receive the largest share of feed-in tariffs
The second is the renewable energy surcharge, which pays the state-guaranteed price for renewable energy to producers, and it represented 22.2 per cent of household prices in 2016
The third is other taxes and levies, which mainly cover the cost of green schemes such as renewables, and these taxes and levies in general might be the predominant factor that impacts household electricity prices – making up around 52 per cent of their household electricity price (which is higher than the EU average of around a third of the household electricity price)
– Components Determined By The German State
The state of Germany as a whole determines components that make up more than half the power price
Around 52.8 percent of German customers’ final power bills might be made up of State charges and taxes, mainly to support the renewable sector
This component therefore overlaps with the renewable energy component
– The Grid Charge
The grid charge (a charge for the use of the power grids and is set by the federal grid regulator) represented 24.6 per cent of the bill on average
– Procurement & Distribution
Made up 22.8 percent of final power bills
General Factors That Impact Household Electricity Prices
The factors that might generally impact final power bills for households in Germany might be:
High wholesale prices
High carbon prices, and carbon emission rights prices
Gas prices being up
Renewable support fees
Grid transport costs
Germany’s Electricity Prices vs France’s
Germany’s electricity prices are twice as much as France’s, and installing green energy sources, as well as shutting down its nuclear plants might be part of the cause for Germany
Other Information
Some other resources on German electricity prices are the cleanenergywire.org, americanexperiment.org, cleanenergywire.org, and forbes.com reports
Both California & Germany
From forbes.com:
… some countries (like Germany), and states in the US (like California), [have] expensive electricity
… fossil fuels … and [the] closure of nuclear power [plants are not the] cause of [these] price rises
The reason [for these prices might be that] wind and solar are [unreliable, variable energy sources that depend on the weather, require backup energy sources like natural gas plants, energy storage like hydro storage and storage batteries, importing or exporting electricity for deficits or surpluses, and other measures]
Belgium
Below, we’ve paraphrased and summarised information found in the europeanscientist.com, and energyprice.be reports
See these reports for more comprehensive details
In General
The following factors may have lead to Belgium’s energy sector going from producing cheap energy, to having more expensive electricity prices:
– A lack of competition from cheaper energy sources in the electricity market
– ‘Green ideology’ leading to political policy which subsidised the most expensive forms of electricity generation (i.e. renewables like solar and wind), and penalising nuclear which is cheaper (especially when it’s already been depreciated)
Between 2007 to 2016
Between 2007 to 2016 in Belgium, the total electricity bill for private individuals increased 69.51%
The main causes for this might have been an increase in the following things:
– Renewable energy and cogeneration contributions
– Transmission and distribution tariffs
– Public taxes and levies
Denmark
Below, we’ve paraphrased and summarised information found in the bloomberg.com, statista.com, tax-news.com, dailymaverick.co.za, wikipedia.org, and energycouncil.com.au reports
See these reports for more comprehensive details
In General
Taxes (general taxes, and other taxes) and levies might account for a large proportion of the price of household electricity in Denmark
One report indicates that 40 percent of a household electricity bill in Denmark is tax, with these revenues partly being used to subsidize renewable energy and being used on green schemes
Another report indicates that 69 per cent of Denmark’s household electricity price is made up of taxes and levies
General taxes may also increase the household price of electricity in Denmark, as well as public subsidies paid by electricity consumers to support renewables
2019
In 2019 in Copenhagen, energy taxes amounted to 41 percent, which is the highest energy taxation in major European cities
Impact Specifically Of Wind Energy On Electricity Prices
Denmark derives nearly half its electricity from wind Denmark’s wind energy programme has doubled its electricity prices since 1995
Suggestions To Remove The Tax On Electricity In Denmark
More than 50 percent of Denmark’s energy now comes from renewable sources, so, some argue that the taxes to subsidise renewable energy may have served their original purpose, and the tax should be lowered significantly to make electricity more affordable for consumers
According to some reports, the tax on the overall economic growth from such a tax cut may offset any lost tax revenues specifically from the renewable energy subsidies tax
Electricity Supply Ranking In Denmark
It’s perhaps worth mentioning that Denmark households pay high electricity prices, but, the electricity supply has an index score of 6.8 out of a possible 7, which is ranked as one of the best in the world
Norway, Singapore and Switzerland are the only countries that had a higher ranking than Denmark in 2018.
Iceland
Below, we’ve paraphrased and summarised information found in the askjaenergy.com report
See this report for more comprehensive details
In 2017
Wholesale electricity prices rose in the year of 2017. Some of the causes of that price rise might have been:
– Increased demand for electricity
– Maxxing out/fully harnessing energy sources that provide lower cost electricity options, such as geothermal and hydropower
– Rising tariffs leading to special contracts with heavy industries (who consume most of Iceland’s electricity) becoming more expensive
Increased tariffs might have been a result of power suppliers needing to raise their revenues, due to an increased cost of doing business (due to factors like LCOE’s for new power plants rising), and a requirement to get a return on capital used for power production
Australia (& South Australia)
Below, we’ve paraphrased and summarised information found in the finder.com.au, theconversation.com, energycouncil.com.au, abc.net.au, and arena.gov.au reports
See these reports for more comprehensive details
General Causes Of Electricity Prices In Australia
The main reasons that electricity prices in Australia are high might be because of:
Supply lagging demand (due to various reasons)
Gas prices being high
Other factors that might impact electricity prices might include:
Renewable energy policies
Network costs
Market competition issues
Retail customers of electricity in most States across Australia pay 44% more for electricity in 2018 compared to a decade ago
The main cause might be the network component – the cost of transporting the electricity.
Next comes the retail component – the cost of billing and servicing the customer
Next is the the wholesale component – the cost of generating the electricity
The final cause might be the government policy component – the cost of environmental schemes that we pay for through our electricity bills.
Each component impacts each State differently each year, or each decade. So, an assessment of what is impacting electricity prices might be required periodically.
Additionally, policy failure might be the reason for increased retail customer electricity prices over the last decade.
Several reports indicate that renewable energy policies are not the only factor that affects retail electricity prices in Australia
What Factors Make Up Power Bills In Australia
Power bills in Australia (which have gone up in recent decades) are made up of these main components:
1. Network Charges (Transmission Poles & Wires, & Infrastructure) – make up about two-fifths of the increase in bills over the decade
2. A Gap Between Supply & Demand, & Not Enough Overall Supply – caused by coal plants being closed, ageing failing coal plants, and suppliers withholding power from the market until demand increases, which can all reduce supply in the market, which pushes prices up.
3. Cost Of Electricity Generation/Wholesale Cost Of Electricity – the biggest factor in 2017. Some States can be reliant on a particular energy source, that when it increases in cost, pushes up electricity prices. Natural gas is an example of this in Australia.
4. Costs Charged By Retailers – Responsible for nearly a quarter of the increase over the decade. It includes a retailer’s costs, such as profits, marketing, and so on. Other contributing factors can be the makeup of the retailer market, such as a small number of retailers in the market, and not enough competition to push prices down. It might be the hardest part of a power bill to monitor, and be the least transparent to consumers too.
5. Renewable Energy Schemes – i.e. ‘green schemes’. Responsible for about one-sixth of the increase in bills. Includes renewable energy targets, energy programs that pay customers for power sent into the grid, and energy efficiency programs. Although, more competition by renewables in the energy market could help reduce costs/prices in some ways too.
The arena.gov.au report contains more information on the above components
Another report also indicates that a significant chunk of what consumers are charged in Australia is to ensure the grid can deliver at peak times.
Different Factors Impacting Electricity Prices In South Australia
South Australia has on average the highest electricity prices in the world, with a major reason being that they have relied heavily on gas, and old, inefficient gas power plant
One significant study found that renewables in South Australia – specifically wind and solar generation, but mostly wind generation – reduced wholesale prices more than the subsidies paid for them (they reduced wholesale prices by an average of about $37 per megawatt hour, whilst subsidies paid for them were $11 per megawatt hour of electricity produced). In total, renewables brought wholesale prices down about 30 per cent in a 5 year period (taking into account all the factors that led to the past prices)
A key reason for this might be that renewable generators have a low to zero ongoing cost, which enables them to sell/offer electricity on the wholesale market cheap, and displace expensive gas generator electricity prices
Despite the competition and cheaper electricity from renewables though, gas still pushed prices up about 40% in the same period
The closure of several coal-fired power stations further compounded the issue, leaving South Australia even more reliant on expensive generation from gas-fired power stations
And, there would have been even higher prices in South Australia without renewables, fundamentally because of the high price of gas
Not having good energy policy at a federal level might be part of the problem, because other kinds of generation aren’t coming in to compete with gas-fired power stations
Renewables Might Not Be The Main Cause Of Electricity Prices In Other Specific States Around Australia
Some reports indicate that between 2004-2014, Australian retail electricity prices for households nearly doubled, and the cost of renewables (like green schemes such as feed-in tariffs (FiTs)) represented only a small share of the percentage of the energy bill
Specifically in the State of Queensland for example, it’s claimed that renewable schemes account for less than 10 per cent of the total bill, with network charges accounting for about 50 per cent of the typical residential customer’s bill
In Victoria and South Australia, renewable schemes might make up the same %
In Tasmania, when breaking down the costs that make up Aurora Energy’s regulated tariff, renewable energy certificates account for 5.6 per cent of the household bill
In most states in this time, network costs (needing to investment in network infrastructure to replace aging assets.) and generation costs formed the largest components followed by the retail costs.
How Australia Might Make Electricity More Affordable
To make electricity prices more affordable (by increasing supply, saving on costs, etc.), or to make Australia’s electricity market more competitive, some options might be:
– Gas prices could be reduced significantly
By putting more gas into the domestic market (by limiting exports, and doing other things), and gas companies doing more exploration and developing to increase supply (but there could be a significant lag on this)
– New energy policy
That provides certainty into the future for investors, to encourage investment in new power plants (to replace the ones that shut down).
The same thing for energy storage might also help
– Increasing generation capacity of clean energy (which increases supply in the market)
– Increases in home electricity generation in the form of home solar set ups (currently on more than 1.7 million homes), and also home battery packs
These things might both help in reducing costs paid by consumers (such as expensive new plants and networks) to ensure the grid can deliver power during peak periods
‘Demand’ response programs (that offer cash incentives to those who can turn off their power when the grid is stressed – usually during extreme heat) can do the same thing
How the above points play out in the future may impact costs and electricity prices.
The ACCC released a blueprint to reduce Australian electricity prices (with 56 recommendations), which can be viewed at accc.gov.au
But, as noted on page 44 of a cleanenergycouncil.org.au 2019 report, the Australian government chose to pursue only several of these recommendations.
Main Energy Sources In Some Australia States
You can see the energy sources powering each State in the energymatters.com.au report
… Queensland and NSW are mostly coal
States With The Most Expensive Electricity
You can see electricity prices in the graph for several States in the abc.net.au report
SA is first, followed by Queensland, and NSW
Other Countries & Regions
forbes.com mentions that (paraphrased) some countries and regions like France, Sweden, South Korea & Illinois (in the US) are nuclear energy leaders, but have some of the cheapest electricity in the world
It might be useful to do a more in depth analysis of these countries and regions
Countries With The Most Expensive, & Also The Cheapest Electricity Prices In The World
In a separate guide, we’ve listed the countries with the most expensive and also the cheapest average electricity prices in the world.
Some of the countries identified in the guide above can be found in this guide.
Sources
1. Various ‘Better Meets Reality’ guides
2. https://www.bloomberg.com/news/features/2019-08-10/a-green-economy-grows-in-denmark
3. https://www.tax-news.com/news/Denmark_May_Reduce_Electricity_Tax_Significantly____76736.html
4. https://www.statista.com/statistics/418075/electricity-prices-for-households-in-denmark/
5. https://en.wikipedia.org/wiki/Energy_in_Denmark
6. https://www.dailymaverick.co.za/opinionista/2019-08-13-mantashe-is-right-south-africa-must-build-more-nuclear-energy/
7. http://environmentalprogress.org/big-news/2018/2/12/electricity-prices-rose-three-times-more-in-california-than-in-rest-of-us-in-2017
8. https://www.reuters.com/article/us-eu-carbon-rally/what-is-driving-a-rally-in-eu-carbon-permit-prices-idUSKBN1L015Y
9. https://www.reuters.com/article/us-germany-energy-retail/german-consumers-paying-record-prices-for-power-portal-idUSKCN1P9233
10. https://www.cleanenergywire.org/news/debate-financing-renewables-new-ways-gathers-pace-germany
11. https://www.americanexperiment.org/2018/11/renewables-cheap-germanys-electricity-expensive/
12. https://www.cleanenergywire.org/factsheets/what-german-households-pay-power
13. https://www.forbes.com/sites/michaelshellenberger/2018/04/23/if-solar-and-wind-are-so-cheap-why-are-they-making-electricity-more-expensive/#467338031dc6
14. https://www.abc.net.au/news/2018-12-07/study-shows-impact-wind-solar-gas-power-on-electricity-prices/10590876
15. https://www.energymatters.com.au/energy-efficiency/australian-electricity-statistics/
16. https://arena.gov.au/blog/energy-prices/
17. http://theconversation.com/factcheck-qanda-are-south-australias-high-electricity-prices-the-consequence-of-renewable-energy-policy-93594
18. https://www.finder.com.au/australian-electricity-prices-rising-decade
19. https://askjaenergy.com/2017/03/17/rising-power-prices-in-iceland/
20. https://www.energyprice.be/blog/2017/11/06/electricity-price-belgium/
21. https://www.europeanscientist.com/en/features/the-belgian-electricity-industry-in-chaos/
22. https://wattsupwiththat.com/2019/05/02/researchers-say-renewable-energy-mandates-cause-large-electricity-price-increases/
23. https://www.burlingtonfreepress.com/story/money/2018/02/07/why-vermonters-should-keep-eye-electricity-costs/314637002/
24. https://www.energycouncil.com.au/analysis/electricity-prices-around-the-world-what-is-the-impact-of-renewable-charges/
25. https://reneweconomy.com.au/does-more-renewable-energy-mean-higher-prices-10310/
26. https://www.forbes.com/sites/michaelshellenberger/2019/04/22/unreliable-nature-of-solar-and-wind-makes-electricity-much-more-expensive-major-new-study-finds/#2781e09c4f59
27. https://reneweconomy.com.au/five-myths-about-south-australias-renewable-energy-59004/
28. https://www.accc.gov.au/media-release/accc-releases-blueprint-to-reduce-electricity-prices
29. https://www.eia.gov/state/analysis.php?sid=VT
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