Irish electricity costs €254 more than the rest of Europe - KFM
Energy prices are 26% higher in Ireland than in the EU according to a recent Eurostat energy report.
This means that households are now paying €254 more than the rest of Europe for their electricity.
Head of Communications at bonkers.ie, Daragh Cassidy, appeared on KildareFM to provide an explanation.
You can listen to the full radio interview above or read the main points discussed below.
This topic was also discussed in a radio interview on the Niall Boylan show on Ireland's Classic Hits.
How bad is the electricity situation right now?
Energy prices in Ireland are increasing, with electricity prices currently 26% above the EU average which is €254 more for households per year.
Only Denmark, Germany, and Belgium have higher prices.
Of the 44 countries in the European area such as Switzerland, Norway, and Iceland, these four countries, including Ireland, are the only ones above the average in electricity prices.
The net prices of electricity in Ireland before taxes, charges, and environmental PSO levies, are also 60% above the EU average.
So it does suggest that there’s a lot of inefficiency in the generation of electricity.
Are Irish energy consumers taxed lightly compared to the EU average?
In Ireland, the VAT and PSO levy on an electricity bill make up around 19 or 20%.
The Government has cut the national VAT down to 9% temporarily, so the cost is even less right now.
If you look at the EU average, around 36 or 37% of the bill goes into taxes, so we actually get off quite lightly in that regard compared to Europe.
Although, it’s still worth your while to apply for a tax refund and generally look for ways to pay less tax.
The net price, however, is wildly out of line with the EU average.
It’s only because some countries tax electricity so heavily that we move down the table of costs a little bit.
Again, there are a lot of inefficiencies here in Ireland that may need to be looked into by the government.
Why are energy providers increasing their prices?
This is a Europe-wide issue with energy prices being at record levels across the continent, which is causing rising inflation.
The Eurostat energy prices were recorded in the second half of 2021, so they don’t even take into account recent price increases and the impact of the conflict in Ukraine.
So it will be interesting to see what these figures look like in May 2023.
Since around October 2020, energy prices started to increase and we’ve had around 35 price increases last year, and this year has seen more price increases from suppliers.
So electricity and gas prices are at record levels.
The average electricity customer is now paying around €700 to €800 more, while gas customers are now paying around €600 more on their annual bill.
While energy demand normally plummets around summer, my fear is that when late September hits, the days get colder, and demand increases, prices are still going to be at record levels.
So people will really be looking for ways to save money on their energy bills this winter.
Why are we not seeing better offers when there are so many providers?
There are a lot of offers out there, but the rise in prices isn’t due to a lack of competition.
In Ireland, prices are increasing because the price of gas, coal, and oil has absolutely skyrocketed on wholesale markets over the past 12 to 15 months.
This, and the lack of wind output is why prices are increasing because we need to use fossil fuels when there’s no wind energy being produced.
Ireland wants renewable energy to be the future, but wind energy, for example, needs to be more consistent if it’s to reduce energy costs.
Energy suppliers are passing on increases that have been passed on to them from the wholesale market, and more suppliers aren’t going to change that.
Some suppliers have even said that despite their increased prices, they’re actually making a loss.
So if it’s a lack of competition that’s causing prices to increase then yes, more suppliers will help, but this isn’t the issue in Ireland.
In fact, I’d argue that we have two or three too many suppliers out of the 12, given the size of Ireland and its five million population.
Sometimes it's better to have a small number of suppliers but to have them bigger and stronger rather than lots of smaller suppliers.
There are still offers out there if people are willing to switch to a new supplier.
Why do Hungary, Bulgaria, and Croatia have the lowest prices in the EU?
This can be due to a variety of reasons such as the cost of living, wages, and network costs which are all lower than in Ireland.
Another reason is fuel mix. We rely on gas and coal for electricity even though we’re now using more wind and green energy.
Since we’re an island, we’re not well connected to mainland Europe like those countries are, so there are transportation costs for importing those fossil fuels.
We are connected to the UK, so we can import from there and we’re building a connection with France so that we’ll be able to import from there as well.
However, those countries are better connected to Europe, they have access to a greater energy supply, they might have their own national supply, and they might be using nuclear energy.
The likes of France, Belgium, and Sweden tend to have lower electricity prices due to their nuclear energy. I know Belgium is more expensive but that’s due to heavy taxation.
Is everything in Ireland expensive because we’re an island?
Somewhat.
In some markets, there’s definitely a lack of competition which causes higher prices.
Being a smaller country as well doesn’t help.
When you bulk buy energy for the 65 million people in England for example, you’re going to get a better deal on the wholesale market compared to Ireland's five million.
The UK also has more banking providers, broadband providers, and mobile phone providers than we do, so there’s more competition and better prices in some markets.
We’re also a high wage economy.
All markets have elements that affect prices, take insurance for example.
Whether it’s car insurance, home insurance, or life insurance, high legal fees for multiple insurance cases, translate to higher insurance premiums.
That’s also why it’s important to look for ways to reduce your insurance costs.
There’s also a high level of VAT, at 23%, which is one of the highest in the world, whereas other countries will have VAT of 15 - 20%.
Another example is that there’s an excise duty on alcohol which makes it very expensive.
You say we live in a high wage society, but a lot of people might disagree
I think the issue is that the high wages don’t meet the high cost of living.
The minimum wage is now €10.50 per hour, as of the 2022 budget plan, which is among the highest minimum wages in Europe.
Despite the Government’s cost of living package, the cost of living remains among the highest, probably the second-highest behind Denmark.
I was in Denmark a few weeks ago and I was surprised by how normal prices were, not because Denmark is cheap but because Ireland is so expensive in comparison.
Over the past year or two, prices are definitely higher, particularly rent prices.
Even though our wages are good compared to other countries, when you factor in the cost of living they’re not nearly as high.
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