Between 2008 and 2014 the electricity bill rose 52% in Spain, well above the European average, which has the fourth most expensive electricity bills in the EU, behind Denmark, Germany and Ireland.
What are the reasons?
The intervention of various governments with renewable energy grants and taxes hinder the electrical industry and determine the electric bill to rise.
As listed in this article, among the most important factors are the increased taxes and the costs of support policies to fund renewable energy and cogeneration, as indicated by the research 'The scissors effect' and a comparative report between the prices of light in Europe and the US, prepared by David Robinson, a member of the Oxford Institute for Energy. Without this government burden, our electricity situated as the fourth most expensive in Europe would come down in this “honors list” to occupy the eleventh place.
Why is electricity so expensive in Spain?
This is one of the frequently asked questions by the Brits living in Spain. Since the crisis began, the electricity bill in Spain continues to grow at a much faster rate than in the rest of the European Union. And worst of all is that the high increase in electricity price, primarily affects the small consumer however the costs are linked to circumstances outside the power supply itself (generation and distribution of light). In fact, public charges account for 46% of the total electricity bill, according to research led by David Robinson. The same note is provided from the Spanish Electricity Industry Association (UNESA), they see the "political costs" the real problem for the high cost on electricity.
What are those political costs and how they affect us?
- Grants to renewable energy and cogeneration involve thousands of millions of euros annually. However, the Association of Renewable Energy Producers states that renewable, although subsidized, provides to the system more than they receive. Moreover, in their opinion, electricity is expensive by excessive remuneration allowed to the nuclear and hydroelectric plants.
- The resulting price due to the halt in nuclear energy production is very large. In 1984, Spain banned the construction of any new nuclear power plants and five of them were canceled just before construction started. To compensate the companies that had invested large sum of moneys compensation were agreed. And there are thousands of millions of euros of euros paid for this concept year after year in electricity bills by all consumers.
- We also pay compensation to the Spanish islands, for the additional costs of supplying electricity to them. Thus, not only the residents on the Spanish Balearic or Canary bear this expense.
- There are also subventions to the Spanish coal. To prevent the closure of coal mines (which cannot compete with other countries with cheaper and better quality coal), a special tax on electricity subsidizing the operation of these mines is charged.
- The electricity bill also pays the costs of transition to competition. They are a "compensation" (of 7.813.2 millions of euros) that companies receive to offset the drop in their profits due to the entry of new competitors in the market sector. The platform called “For a New Energy Model” estimates that it is overcompensation and if we were to end up with this assistance, the electricity bill would cheapen around 10%.
- And finally we have the general government tax. In Spain this utility is subject to a 21% VAT. This, in practice, means that this commodity has the same taxation applied as luxury goods.
The other major expenditure which increases the electricity bill is called tariff deficit. Is the difference between the cost of electricity supply and the price of electricity. In theory, it means that the amount charged by the companies is not enough to cover its costs and, therefore, a deficit is recognized, by the Spanish Government.
Guess who ends up paying?
Yes…The consumers; in particular, it is between 6% and 7% of the electricity bill. Well folks being Christmas I don’t want to end up this article on such a disagreeable note so here it is my contribution to the Christmas spirit…
After an electrician finished repairing some faulty wiring in an architect's studio he handed over the bill. ''Four hundred Euros! For an hour's work?'' cried the architect, ''That's ridiculous! Hell, I'm an architect and I don't charge that much.'' To which the electrician replied, ''Funny, when I was an architect I didn't either!''
Happy Christmas and all the best in 2016 for you and your families!!