European energy bills to cost an extra €17 billion by 2015

Energy will cost European businesses an extra €17 billion (£14 billion) by 2015, with the closure of old power stations, tighter environmental legislation and fluctuation in feedstock costs among the causes.

According to an energy consultant, even though the wholesale price of power is relatively low in parts of the continent due to reduced demand and low coal and carbon prices, rising non-energy costs such as taxes, transmission and distribution charges will push bills up. It is anticipated these elements will increase by around €10 billion (£8 billion), and could make up 50 per cent of final bills.

The consultancy said the UK, Spain and Portugal would face the most significant rises, of up to 12 per cent, which it attributed to the increase in gas and coal power generation feedstock and higher carbon prices. A return to milder weather in the Iberian Peninsula will also impact costs. Across the rest of Europe price rises will be between 5 and 8 per cent.

In addition, there are fears recent unrest in Ukraine could also push up prices across the continent, and this remains a possibility, according to Andrew Hill.

“The impact of the Ukraine situation had eased off recently, though has now (in the past day or so) exerted a renewed impact on market sentiment given the potential for civil conflict (and the potential impact on gas supplies from Russia to Europe),” he told SM.

“If this were to happen, other forms of gas supply are available to the UK and Europe, though there would of course be a potentially significant short term price spike, while the alternatives found their place in the market. The UK is likely to be much less impacted by any supply interruptions from Russia – compared to other EU markets more dependent on Russian gas (Germany being one such example).”