European Energy Consumers Warned to Invest in Solar or Pay the Price

With European domestic gas prices expected to climb by another 10% in 2013, a senior energy consultant from research and consulting firm GlobalData has issued advice to energy consumers across the continent – spend on solar PV now or lose money in the long term. Gas prices are continuing to cause concern across Europe, with gas markets still unable to break the indexation to oil long-term, due to oil-indexed import contracts from Russia, Norway and North Africa. Even in the UK, where gas-on-gas pricing is in operation, this oil correlation remains.

“Twenty-thirteen looks pretty grim for both energy consumers and utilities,” says Jonathan Lane, GlobalData’s Head of Consulting for Power and Utilities. “Prices are sure to rise again for energy consumers, as both renewable subsidies and higher oil prices push electricity and gas prices higher across the continent.”

He continues: “Renewable subsidies represent a cost and an opportunity for domestic energy consumers. Those that can fund the installation of solar PV, or borrow the money to do so, should invest. Those that can’t will have to pay.”

GlobalData’s energy expert identifies the UK and Italy as countries particularly susceptible to price increases in the future.

“In the UK, the government has introduced a new policy looking to simplify tariffs amongst the major utilities and a programme to ensure that consumers are always on the best tariff. Exactly how the latter will work is open to question and will probably prove impossible,” states Jonathan Lane. “In Italy, the government’s focus is the better integration of Italian wholesale electricity and gas with the wider European markets in the expectation that this will reduce Italian wholesale energy prices to the levels found in other European countries.”

GlobalData forecasts electricity prices to climb in Italy as a steadily growing oil price feeds through toItaly’s oil-indexed gas price, and ultimately its electricity price via gas-fired generation. Accordingly, Jonathan Lane believes a large-scale shift in focus to solar power generation would release the country from the stranglehold of gas and benefit the entire country: “Now is the time to invest in Italian solar, and utilities should be engaging with customers to fit and manage the panels alongside supply contracts. Indeed, it is possible that solar PV starts to lower electricity prices in Italy post-2014.”

Jonathan Lane expects governments across Europe to come under greater pressure to improve the safety nets available for the fuel poor, as more and more households slip into this category due to increasingly unaffordable prices.

“Policy makers may have to be radical as energy prices grow as a political issue,” he explains. “Utilities will also be in the firing line as consumers smell profiteering at their expense. They will need to consider how to make money out of energy efficiency rather than selling kWh’s, and will need to do this more quickly than they might have anticipated. A move to energy services, where utilities make money saving energy rather than selling energy, is the key transition that utilities need to make this year.”

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