The price of electricity seems to go up every year, with consumers struggling to save a few pennies to pay their more expensive electricity bills. While in each private house the bills are mitigated with increasingly efficient appliances and by only consuming electricity during the hours when it’s cheapest, the government always tries to lower the cost before winter by suspending several direct taxes.
On average, utility bills have increased by 26% between 2010 and 2017, to 217.17 GWh, according to a study by the EAE Business School, at an annual average of 4%. Spain is the sixth most expensive country in Europe for electricity with a mean price of 0.21 euro/kWh, of which 17.6% is paid in taxes. Germany leads the ranking with 0.30% euros/kWh, of which 54% corresponds to taxes.
Only last 15th October, the price of electricity reached new highs, when it reached 78.89 euro per megawatt/hour (MWh). The cost of electricity is marked by various factors that are then reflected in the final bill to the consumer. Last year alone, the cost of generating electricity accounted for 28% of the total bill. 30% was for transport, compared with 42% for marketing costs, taxes and fees.
Energy generation continues to be expensive because the weight of renewable energies is still relatively low. Of all the renewable energy options, for example, only wind power has managed to reach as high as 4% of the world's production quota.
"The Spanish electricity grid has seen progressive increases in its prices for several reasons,” says Professor Miguel Morales, author of the study. “Firstly, because of the high marketing costs and other surcharges. Secondly, there are some imbalances in generation capacity where there is a clash between the renewable production capacity with its actual availability. This, together with the reduction in capacity of some conventional energy sources, is forcing the use of a more than desirable amount of production units with a higher marginal cost, which increases the production price of the system and increases inefficiency in terms of CO2 emissions."
Faced with this uncontrolled rise in prices, the Spanish government has decided to act in the only way it can: with taxes. The Royal Decree-Law 15/2018, of 5th October, on urgent measures for energy transition and consumer protection, authorises the suspension for six months of the 7% tax on electricity generation, approved in 2012. In addition, it introduces an exemption in the Special Tax on Hydrocarbons to deactivate the so-called 'green cent'.
According to their calculations, electricity bills at the end of 2018 could rise 3.6% over the previous year if these measures are not applied. By preventing this fall in revenue via charges to consumers, there is a possibility that the surplus of income from the electricity sector could be applied to the mismatches between income and expenditure between 2018 and 2019.
Another of the measures of Pedro Sanchez’s government to lower electricity bills is to allow the contracting of power in multiples of 0.1 to adjust to people’s consumption needs. Until now, contracting was only done in terms of 1.1 kilowatts of power. Almost 40% of households consumed between 4 and 6 kilowatts, according to the Spanish Ministry for Ecological Transition, which estimates that a change of power of 0.5 kW could mean about 26 euro in annual savings for the average customer.
The extension of the deadline to apply for the new social financial aid schemes for electricity and heating will also help to reduce costs for users who have contracted the regulated tariff, officially known as the Voluntary Price for Small Consumers (Precio Voluntario del Pequeño Consumidor or PVPC).
There are 11.1 million people signed up to the PVPC, of which only 660,000 currently benefit from the hourly usage tariffs: peak, valley and supervalley. According to the government's calculations, switching to one of these tariffs could save the user around 20 euros per year, a figure that may increase with sensible energy consumption practices.
This all comes from the government, but it’s also important that the individual puts in the work in terms of energy consumption to save on their costs. According to kelisto.es, applying energy efficiency measures can achieve savings of up to 200 euro on fuel bills.
Such money-saving measures include replacing traditional lightbulbs with low-consumption or LED bulbs, having household appliances with the maximum energy efficiency rating (A+, A++ or A+++) and not putting appliances on standby.
There are other measures aimed at improving the quality of your home, such as sealing doors and windows, since up to 30% of the heat in a home is lost through the windows; or installing thermostats and timers in heating appliances. To save on your energy bills this winter, find out more about how to prepare your house to deal with the cold weather.