Over the last ten years, power prices in Europe have fallen by roughly 15 per cent. However, there are major differences between individual European countries, and between the industrial and retail markets. These are the key findings of a study carried out by KEMA for Eurelectric, the organization that speaks for Europe’s power
companies.

It’s now ten years since Europe began liberalizing its energy market. A good point, Eurelectric felt, to take stock of what has been achieved so far. Europe opted for liberalization partly to ensure safe and reliable energy supplies at reasonable prices. Eurelectric therefore asked KEMA to collate data on price developments over the period 1995 to 2004. KEMA has eased the migration to a free energy market for numerous European countries by helping to establish regulatory bodies and energy exchanges.

Big differences
To track prices over the study period, KEMA looked at representative groups of domestic and industrial consumers. The data revealed that users in both groups were paying more or less the same for their power in 2004 as they had been in 1995. Allowing for inflation, that equates to a real-terms price fall of 15 per cent. However, there were big differences from one country to another. Furthermore, price movements in the industrial sector had followed a very different course from that seen in the retail sector. The price paid by industry had initially fallen sharply, before rising equally sharply toward the end of the ten-year period (see figure). By contrast, domestic prices had remained on an even keel.

Energy bill
Another difference between the two markets was the make-up of the overall energy bill. Consumption charges far outweighed fixed charges in the industrial sector, whereas there was a roughly fifty-fifty split in the bill paid by the average domestic consumer. In relative terms, householders also paid two to three times as much in tax as industrial users. 
The proportion of the overall power bill attributable to government policy initiatives rose by 30 per cent in the retail sector, but almost tripled in the industrial sector.