High electricity prices hinder EU decarbonization and competitiveness

Electricity prices for end users are primarily composed of energy and supply costs, network costs, VAT, and other taxes.

Energy and supply represent the largest share, accounting for around 50 percent of household bills and 63 percent for energy-intensive industries in 2024. Network costs, however, show a significant disparity, making up 27 percent of household bills but only 12 percent for large industrial consumers who benefit from reduced charges.

Consequently, euro area households pay approximately twice as much for electricity as energy-intensive industries, a gap even more pronounced in countries like Germany, Spain, and Italy where household prices are around 100 percent higher.

Since 2019, electricity prices have increased more sharply for energy-intensive industries (53 percent) than for households (33 percent), largely driven by higher fuel costs.

Despite rising prices, total electricity expenditure has increased due to price hikes, even as consumption declined.

Between 2019 and 2023, electricity consumption by energy-intensive industries in the euro area fell by about 14.5 percent, while household consumption decreased by 1.5 percent.

The impact of the EU Emissions Trading System (ETS) on electricity prices varies significantly across countries.

It is less pronounced in nations with low-carbon generation, such as France, which relies heavily on nuclear power.

In contrast, countries with higher carbon intensity experience greater ETS cost pressures, with contributions to electricity prices reaching up to 9 percent.

Further cross-country disparities arise from diverse national energy mixes, reliance on imported fossil fuels, limited market interconnectivity, and varied national taxes and network charge regulations.