Expensive bills: why will prices rise?

2021-09-14T06:50:46.875Z

  The date to remember is October 1st: on that day we will know how much the price increases in our electricity and gas bills will be. The Arera, the Authority for Energy, will establish how much the increase will be: according to the alarm launched yesterday by the Minister for Ecological Transition Roberto Cingolani could reach 100 euros a year for light and 400 euros for gas. Why these increases? First of all, the energy market is registering an upward trend in gas and electricity prices which have reached record levels since last July. Among the causes, we must consider the rise in prices of raw materials due to the economic recovery on a global scale and reduced gas supplies, especially those from Russia. But among the reasons for this surge there isit is also the increase in the prices of CO2 emission permits, called with an acronym Ets (Emission Trading Scheme). But let's go into the details of the dynamics that will determine a 'hot' autumn in terms of energy tariffs. Large companies "pay" to be able to pollute The "emissions" system established by the EU is essentially based on a principle: large companies throughout Europe - in Italy there are 1,200 subjects - must pay to be able to pollute. In recent months there has been an increase in the cost of CO2 emissions permits. But the mechanism is such that it can give rise to speculations. This is the 'cap-and-trade' method, which allows emissions to be traded. That is to say, it is a system of permits to pollute for European companies, which buy,they receive and exchange these emission allowances. If a company pollutes more than expected, it is forced to buy more permits, thus adding a new cost, while those who manage to reduce emissions can sell them instead. As the EU's increasingly restrictive policies have increased the demand for permits, there is a boom in rights prices. Now they are at an all-time high and that is around 50 euros per tonne of CO2, a cost that companies must then recover and that ends up on the costs of the energy bill and therefore on consumer tariffs. According to Arera, the forward price of the third quarter of 2021 "is up by about 50% compared to that used for the update of the second quarter of 2021".A sharp increase in the bill is therefore expected. But why'? First of all, it should be considered that despite the growth in energy production in recent years and the spread of renewable energy plants, most of Italy's energy needs are covered with gas which, despite being one of the least polluting sources, remains one of the more expensive because of import. Added to this is the meteorological factor: we experienced a particularly cold spring, with lower than average temperatures until May, while the summer was very hot with record levels of mugginess. A perfect storm that raised the price of gas, the demand for which isincreased first for domestic heating and then to produce energy to compensate for the growing demand for electricity to power air conditioners as well as cooling systems in homes and offices. To this, we must also add the fact that Asia was the first to emerge from the emergency and to restart economically. And so the "gas carriers" left first for China, or Korea or Japan, and only then for Europe. In addition, Russia's exports to the EU dropped due to political difficulties in doubling the North Stream gas pipeline. In short, European gas prices grew by more than 30% in the second quarter of 2021 compared to the first. THE GOAL OF THE GOVERNMENT The government has already moved at the beginning of July by allocating 1,2 billion euros thanks to the sale of the Ets, to prevent the effects of the increases from hitting the pockets of consumers heavily. But now he is thinking of a complete reform of the general system charges precisely to lighten the burden of items weighing on the bill and with a view to transferring the charges for supporting renewable energy to general taxation. Bodies such as Arera have already indicated the need to eliminate in the bill 'the charges not directly connected to the objectives of environmentally sustainable development and those aimed at combating energy poverty'. These are items such as the costs related to the dismantling of decommissioned nuclear power plants or as the charges to cover the special tariff regime recognized to the company.RFI for electricity consumption relating to railway services on the traditional network. WHAT IS HAPPENING IN EUROPE The coming autumn sting does not only concern Italy, but all the main economies. For example, Spain is already running for cover: yesterday Prime Minister Pedro Sanchez announced a reduction in the tax on electricity from 5.1% to 0.5% to lighten the bill. According to a report by "El Pais", tariffs are also increasing dramatically in Germany, which also traditionally has the most expensive electricity in the EU. Moreover, Germany's energy mix is still heavily dependent on coal and natural gas, which have become more expensive in recent months and this, together with the increase in C02 costs, has caused the cost per megawatt hour to rise.But the costs are still not felt in the bill because in Germany the supply is contracted for periods of one or two years and at a fixed price. The same goes for France: here too energy costs are rising but consumers are not affected because most have a fixed rate with the giant EDF (more than 80% state-owned) which is regulated annually.

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September 14, 2021

The date to remember is October 1: on that day we will know how much the increases in our electricity and gas bills will be.

The Arera, the Authority for Energy, will establish how much the increase will be: increases that according to the alarm launched yesterday by the Minister for Ecological Transition Roberto Cingolani could reach 100 euros a year for light and 400 euros for gas.

Why these increases? First of all, the energy market is registering an upward trend in gas and electricity prices which have reached record levels since last July. Among the causes, we must consider the rise in prices of raw materials due to the economic recovery on a global scale and reduced gas supplies, especially those from Russia. But among the reasons for this surge there is also the increase in the prices of CO2 emission permits, called with an acronym Ets (Emission Trading Scheme). But let's go into the details of the dynamics that will determine a 'hot' autumn in terms of energy tariffs.

Large companies "pay" to be able to pollute

The "emissions" system established by the EU is essentially based on a principle: large companies across Europe - in Italy there are 1,200 subjects - must pay to be able to pollute. In recent months there has been an increase in the cost of CO2 emissions permits. But the mechanism is such that it can give rise to speculations. This is the 'cap-and-trade' method, which allows emissions to be traded. That is to say, it is a system of permits to pollute for European companies, which buy, receive and exchange these emission allowances. If a company pollutes more than expected, it is forced to buy more permits, thus adding a new cost, while those who manage to reduce emissions can sell them instead.As the EU's increasingly restrictive policies have increased the demand for permits, there is a boom in rights prices. Now they are at an all-time high and that is around 50 euros per tonne of CO2, a cost that companies must then recover and that ends up on the costs of the energy bill and therefore on consumer tariffs.

According to Arera, the forward price of the third quarter of 2021 "is up by about 50% compared to that used for the update of the second quarter of 2021". A sharp increase in the bill is therefore expected. But why'? First of all, it should be considered that despite the growth in energy production in recent years and the spread of renewable energy plants, most of Italy's energy needs are covered with gas which, despite being one of the least polluting sources, remains one of the more expensive because of import. Added to this is the meteorological factor: we experienced a particularly cold spring, with lower than average temperatures until May, while the summer was very hot with record levels of mugginess.A perfect storm that raised the price of gas, the demand for which increased first for domestic heating and then to produce energy to compensate for the growing demand for electricity to power air conditioners as well as cooling systems for homes and offices. To this, we must also add the fact that Asia was the first to emerge from the emergency and to restart economically. And so the "gas carriers" left first for China, or Korea or Japan, and only then for Europe. In addition, Russia's exports to the EU dropped due to political difficulties in doubling the North Stream gas pipeline. In short, European gas prices grew by more than 30% in the second quarter of 2021 compared to the first.increased first for domestic heating and then to produce energy to compensate for the growing demand for electricity to power air conditioners as well as cooling systems in homes and offices. To this, we must also add the fact that Asia was the first to emerge from the emergency and to restart economically. And so the "gas carriers" left first for China, or Korea or Japan, and only then for Europe. In addition, Russia's exports to the EU dropped due to political difficulties in doubling the North Stream gas pipeline. In short, European gas prices grew by more than 30% in the second quarter of 2021 compared to the first.increased first for domestic heating and then to produce energy to compensate for the growing demand for electricity to power air conditioners as well as cooling systems in homes and offices. To this, we must also add the fact that Asia was the first to emerge from the emergency and to restart economically. And so the "gas carriers" left first for China, or Korea or Japan, and only then for Europe. In addition, Russia's exports to the EU dropped due to political difficulties in doubling the North Stream gas pipeline. In short, European gas prices grew by more than 30% in the second quarter of 2021 compared to the first.To this, we must also add the fact that Asia was the first to emerge from the emergency and to restart economically. And so the "gas carriers" left first for China, or Korea or Japan, and only then for Europe. In addition, Russia's exports to the EU dropped due to political difficulties in doubling the North Stream gas pipeline. In short, European gas prices grew by more than 30% in the second quarter of 2021 compared to the first.To this, we must also add the fact that Asia was the first to emerge from the emergency and to restart economically. And so the "gas carriers" left first for China, or Korea or Japan, and only then for Europe. In addition, Russia's exports to the EU dropped due to political difficulties in doubling the North Stream gas pipeline. In short, European gas prices grew by more than 30% in the second quarter of 2021 compared to the first.Russia's exports to the EU fell due to political difficulties in doubling the North Stream gas pipeline. In short, European gas prices grew by more than 30% in the second quarter of 2021 compared to the first.Russia's exports to the EU fell due to political difficulties in doubling the North Stream gas pipeline. In short, European gas prices grew by more than 30% in the second quarter of 2021 compared to the first.

THE GOAL OF THE GOVERNMENT

The government has already moved in early July by allocating 1.2 billion euros thanks to the sale of the Ets, to prevent the effects of the increases from hitting consumers' pockets heavily. But now he is thinking of a complete reform of the general system charges precisely to lighten the burden of items weighing on the bill and with a view to transferring the charges for supporting renewable energy to general taxation. Bodies such as Arera have already indicated the need to eliminate in the bill 'the charges not directly connected to the objectives of environmentally sustainable development and those aimed at combating energy poverty'.These are items such as the costs relating to the dismantling of disused nuclear power plants or the charges to cover the special tariff regime recognized to the Rfi company for electricity consumption relating to railway services on the traditional network.

WHAT HAPPENS IN EUROPE

The incoming autumn sting does not concern only Italy, but all the main economies. For example, Spain is already running for cover: yesterday Prime Minister Pedro Sanchez announced a reduction in the tax on electricity from 5.1% to 0.5% to lighten the bill. According to a report by "El Pais", tariffs are also increasing dramatically in Germany, which also traditionally has the most expensive electricity in the EU. Moreover, Germany's energy mix is still heavily dependent on coal and natural gas, which have become more expensive in recent months and this, together with the increase in C02 costs, has caused the cost per megawatt hour to rise. But the costs are still not felt in the bill because in Germany the supply iscontracted for periods of one or two years and at a fixed price. The same goes for France: here too energy costs are rising but consumers are not affected because most have a fixed rate with the giant EDF (more than 80% state-owned) which is regulated annually.

Source: rainews

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Expensive bills: why will prices rise?

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