The bulbs will continue to glow the same as before, without overheating, but the risk is that our bills will get hotter this fall. “Last quarter the electricity bill increased by 20%, next quarter it will increase by 40%”, was the alarm launched by the Minister of Ecological Transition, Roberto Cingolani, who spoke on 13 September in Genoa during the conference “Towards a transition social “organized by the CGIL. Indeed, energy prices are rising around the world as the global economy re-emerges from the pandemic, fueling concerns about inflation, which has grown in Europe as economies rebound and commodity prices rise. Costs for consumers in the Eurozone increased by 2.2% in July, the highest rate since October 2018. And on the energy side, Italy risks being among the most penalized countries on the continent.
Italy’s dependence on natural gas imports
As we now know, factors such as the fuel used to generate energy play a key role in the prices paid for electricity. For its energy mix, Italy relies mainly on natural gas. To give an example: in 2018, as reported by the Statista portal, gas represented 45% of our country’s electricity production. We are the second largest importer in Europe (over 90% of demand), the price of which largely depends on the wholesale price. Italy’s main supplier is Russia (32 billion cubic meters were imported in 2018, while domestic production did not reach 3.5 billion). But now, in addition to the boom in commodity prices following the pandemic, there is also the scarcity of fuel. Indeed, Russia is supplying less gas to Europe, while Asia is hoarding cargoes of natural gas, making it more difficult to fill storage sites, which have been emptied after a harsh winter. And so, gas reference prices in Europe hit the record (fueling energy prices and increasing earnings for utilities, including Germany’s RWE AG and France’s Engie SA, as Bloomberg recalls). In short, all this to say that Cingolani’s forecast is not exaggerated: the high costs of energy in Italy are destined not only to persist, but also to worsen.
From Germany to Bulgaria
In addition to the increase in the prices of raw materials and the scarcity of natural gas, other factors also contribute to the price of energy in the EU of 27: the different conditions of supply and demand within the individual countries, the geopolitical situation, the mix energy, import diversification, network costs, environmental protection costs, adverse weather conditions or levels of excise and taxation. As far as we are concerned, Europe has already called Italy to remove the accessory charges from the bills and the Draghi government in the context of the NRP has given its word. Although the highest value is found in Denmark, where taxes represent 67.8% of the final price. And in fact, on closer inspection, among European domestic consumers, in the second half of 2020, it was not us who were worse off, but precisely the Danes, Germans and Belgians. According to data revised this spring by Eurostat (next update in October), electricity prices were in fact higher in Germany (0.3006 euros per kWh), Denmark (0.2819 euros per kWh) and Belgium (0.2702 euro per kWh). Italy was in seventh place (just over 0.22 euros), after Ireland, Spain and Austria, while the lowest were recorded in Bulgaria (0.0982 euros per kWh), Hungary (0.1009 euros per kWh ) and Estonia (0.1291 euros per kWh). Thus, the price of electricity for household consumers in Germany and Denmark was more than three times higher in 2020 than in Bulgaria.
Spain’s negative record
But with this summer things have changed further. Now, the average daily price of electricity in the wholesale market sees Spain (with Portugal) in first place, which set a new record on Monday at 154.16 euros per megawatt hour, the highest price in history and on 6, 9% more only from the day before. Today, September 14, the price dropped to 153.43, approaching that of Italy (152.58 euros). Immediately below, Switzerland with 150.06 euros per megawatt hour. The repercussions of these market prices on the bills of Spanish households and companies represent one of the main emergencies for which public opinion is asking for answers from the center-left government led by Prime Minister Pedro Sanchez. in particular, to the increase in the cost of wholesale gas and in the tariffs of emission rights. Spanish Prime Minister Pedro Sanchez announced a reduction of the electricity tax from 5.1% to 0.5% to ease the electricity bill of Spanish consumers. It would be the second energy tax cut this year. It hasn’t helped so far.
The cost of the ecological transition
But the higher costs are a bit of a headache for all Eurozone politicians. In fact, governments now fear a backlash when the increase in bills will lead voters (also pushed by those politicians who will take advantage of the indignation) to show resistance to paying for the energy transition. Europe has the most ambitious decarbonization plans in the world: last July the EU Commission presented the plan to cut emissions by 55% by 2030, with Von der Leyen announcing: “Those who pollute will pay more” . But now some countries have started to oppose some points on the agenda. France is lobbying to water down or delay coal market interventions, while the Netherlands and Hungary express concern about the social impact. Meanwhile, outside the EU, Swiss voters rejected an ambitious climate law this year that would have raised taxes on gasoline and air flights. “Nobody is questioning that the ecological transition should be made as soon as possible, without delay and with enormous sacrifices,” Minister Cingolani always said in Genoa. “I really believe in the ecological transition, but it cannot be done at the expense of vulnerable groups. These things must be said, we have a duty to face them ».