WHY ARE ELECTRICITY PRICES SKYROCKETING ?
How is the price of electricity calculated ?
Normally, the price of electricity in France depends on the following factors :
› Production, storage, supply and marketing costs
› Delivery costs
› Gas prices (part of the produced and imported electricity comes from gas-fired power plants)
› Cost of CO2 allowances
› Taxes (e.g. Contribution au Service Public de l'Electricité (CSPE), Contribution Tarifaire d'Acheminement (CTA), Value Added Tax (VAT)).
In addition to these structural (and already variable) elements, new circomstances come into play. Today, the rise in the price of electricity is explained by the following factors :
› Rising gas prices (in particular due to the post-lockdown economic recovery, but also due to rising demand in Asia. China is currently seeking to switch from coal-fired to natural gas-fired power plants)
› Increase in the cost of European CO2 emission allowances
› Lower availability of French nuclear power plants due to more energy need during winter and various ongoing equipment shutdowns/maintenance.
› High dependance of European countries on Russian gas.
co2 EMISSION QUOTAS
The main reason for the increase in the electricity prices is the increase in the cost of CO2 emission allowances. The price of electricity is linked to the amount of carbon produced by power plants. When the price of quotas for the CO2 emission allowances increases (multiplied by 2.4 since January 2021), the price of electricity also increases. "In Europe, power plant operators - as well as manufacturers and airlines - must buy as many CO2 emission allowances as the amount of CO2 emissions they emit into the atmosphere. (1). By deciding to decrease the volume of quotas for CO2 emission allowances put on the market each year to reach its global CO2 emission reduction targets (by 55% in 2030 compared to 1990), the European Union paradoxically has favoured the rise of the the prices.
tHE GAST COST
The cost of the right to emit a ton of CO2 is not the only one which has increased recently. The gas price (increased fivefold within last year) also affects the price of electricity. This is increasing the production costs of gas-fired power stations. Add to this a cold winter stimulating European consumption and contributing to the drying up of the reserves, limiting Russian export to prepare the market for the launch of the Nordstream 2 pipeline passing through Germany.
The tariff shield
The French executive is seeking to limit the impact of rising energy prices on purchasing power (by setting the price increase cap at 4% for the regulated electricity prices). According to a press release from the Energy Regulation Commission, "an average 4% increase in the regulated electriciy prices, including tax, will represent an increase of around €38/year on the bill of a residential customer and around €60/year for a professional customer. In the absence of measures, the increase would be €330/year for a residential customer and €540/year for a business customer." (2). The current situation does not satisfy the actors of supported housing where the resident pays a fee/fixed price including all the costs related to the consumption of electricity, gas and water. On the 16th of February, the government announced the extension of the price shield to five million households living in condominiums or social housing.
TOWARDS A CATCH-up in 2023 ?
If the Finance Law for 2022 and the Prime Minister's announcements make it possible to limit the increase in gas prices, the legislator has also included a "remedial component to cover the loss of revenue experienced by suppliers." (4).
INCREASE IN ENERGY PRICES IS PUTTING A STRAIN ON HOUSEHOLD BUDGETS, particularly for the least wealthy
The increase in prices, the most important of which is energy prices (+41% for gas and +3% for electricity in 2021) can be seen through higher irreductuble expenses for all households. According to INSEE, the share of the irreductible expenses represents 40% for the least wealthy households, half of which are for rent and bills (electricity, heating, gas, water). (5)
As for electricity, a "large majority of households will benefit from government measures setting an increase cap on electricity prices. The price shield guaranteeing an increase limited to 4% will concern subscribers to the regulated price offer marketed by EDF (TRV) or those who have subscribed to an alternative supplier with a contract indexed to the EDF offer level. On the other hand, all those subscribed to a market price offer will not be concerned. This represents several million households. (6)
Today, the impact is real. Inflation is strongly felt, because it affects products consumed every day, such as electricity," emphasises Sandra Hoibien, director of the society unit at the « Research center for life conditions monitoring» (Crédoc). But these are also expenses over which people have very little control. They are not going to move because fuel is more expensive! (7).
HOW DO OGGA SOLUTIONS PROVE THEIR WORTH IN THIS CONTEXT ?
There has been a trend for several years for consumers to adopt the principle of reasonable economy and more conscious consumption practices to avoid mechanical overconsumption patterns, such as overheating one's home, letting water run unnecessarily, or keeping the heating on while the window of the room is open. These practices can have a negative impact on the budget. However, willing to do something and being able to do it are not exactly the same. Paying attention to one’s consumption habits is easier said than done. Relying on one’s self-control is not always enough.
Today, with our solutions we can efficiently operate the energy flows of a dwelling or even an entire building.
SOCIAL HOUSING ASSOCIATIONS : support your tenants
As we have seen, low-income households are much more affected by the inflation. Families living in social housing can also reduce their energy costs. We are also here to support you in raising awareness on how to control energy consumption among your tenants.
OGGA has developed the Eco-Touch solution with social landlords in order to meet their expectations and the needs of their tenants. Our solution has been implemented in numerous projects and has had conclusive results in terms of acceptability within the housing and, above all, has generated energy savings:
› The aim is to control and reduce the energy consumption expenditure in rental charges and increase the purchasing power of tenants.
› In some projects, 30% savings have been achieved (compared to the initial bill!)
› Easy to use for tenants, Eco-Touch is the best solution to accompany them on a daily basis
› Homes and buildings monitoring
› Support for tenants
Discover some of our solutions in specific projects :
property developers and builder : integrate our solutions into your real estate projects
Eco-Touch by OGGA helps optimise energy consumption!
Are you planning to build blocks of flats or detached houses? Do you want to stand out and offer new services to your customers while remaining competitive?
Developed to be accessible to as many users as possible, whether they are students or pensioners , Eco-Touch is easy to use and self-programs according to the users' habits for optimal comfort. It automates the heating, switches off the lights and devices in standby mode during absences and displays the energy consumption of a home.
Eco-Touch, an affordable solution that will enhance the value of your property for future buyers.
Improving energy related behavior is "everybody's business". With our Eco-Touch solution, improve the quality of your homes and pilote them with a simple gesture from a smartphone, a computer or a tablet. Its mobile application is intuitive, customisable and free.
Discover some of our achievements with property developers: