Presentation given to the Hungarian energy regulator MEKH in May 2014

1. Overview of European residential markets
A focus on the CEE countries
Christophe Dromacque, VaasaETT
Budapest, Hungary
May 12th 2014

2. Outline
• Introducing VaasaETT
• HEPI – Media and market professionals
• Household Energy Price Index developments
• Retail Vs. wholesale prices in European markets
• Overview of European electricity and gas prices
• Insights into energy affordability indicators
• Market competition indicators
• Relationship between energy prices and market competition
• Discussions

3. Best Practice, Data, Analysis &
Expertise from around the World
Customer Psychology & Behaviour
Customer Lifetime Value
(Switching and Loyalty, Prices/Savings/Margins, Billing/CRM, Branding, New Offerings
Smart Energy Issues
(smart grid, demand response, dynamic pricing, feedback, smart billing energy efficiency, smart home, distributed generation)
Our Key Focus

4. VaasaETT 4
‘DSM program database’
• About 140 residential and I&C pilot
programs
• Over 500 sample groups
• 630,000+ participants
• 75% organised after 2005
• Results measured: energy
conservation, peak clipping and
financial savings
Uncover the potential of residential
demand response through a mass
pilot comparison
http://esmig.eu/resource/empower-demand-report-phase-i

5. €4.5 EU funded project to provide best
practice for smart grid technology,
regulation and consumer engagement in
smart grid. Partners include ENEL,
Iberdrola, ENEL, EDF and others.
More info at: http://www.advancedfp7.eu/
Smart Energy Projects
A major European Union funded project for
the EU Director General of Energy to
develop a cross border balancing market
platform (Virtual Power Plant).
More info at: http://www.ebadge-fp7.eu/
Equal partners in €4.1m EU funded project
to build a platform for the realistic DR and
Energy Efficiency modeling of energy
market stakeholders and consumer
behaviour.
More info at: http://www.cassandra-fp7.eu/
Energy efficiency trials - University of Coventry - UK
Energy efficiency and TOD trials – Residential
building - Sweden
Energy efficiency and TOD trials – Shopping
center - Milan, Italy

6. Smart Energy Research
• A project for the European Commission’s Information Society
and Media Directorate General.
• Measured the potential of the Smart Grid to lower Green House
Gas emissions around Europe.
• Analysis of the potential impact of residential, commercial and
industrial demand response, feedback and informative billing.
• The report is available at:
http://www.capgemini.com/sites/default/files/resource/pdf/Dema
nd_Response__a_decisive_breakthrough_for_Europe.pdf
• Partnered with Capgemini and Enerdata.
• Explored the current development of Demand Response
throughout the EU-15, to quantify its future potential, and to
identify the pre-requisites for the efficient fulfillment of its
potential by 2020.
• The report is available at: http://ec.europa.eu/digital-
agenda/en/news/methodologies-measure-potential-smart-grids-
green-house-gas-reductions

7. Smart Grid Global Impact Project
Annual Report and Global Road-show, Powered by VaasaETT
www.smartgridimpact.com

8. Market data and monitoring
Energy prices
HEPI
Competition
UCSRP
Energy affordability

9. HEPI in figures
23 countries
500 million people
97% of the EU-28 population
200 subscribers to the monthly update
1,400 people downloaded the annual report
652 visits to the HEPI website over the past 30
days (UK, USA, Netherlands, Germany, Belgium)

10. HEPI in the media: BBC
BBC

11. HEPI in the media: FT

12. HEPI in the media: Platts power in
Europe

13. HEPI used for market monitoring: DG
ENER
COMMISSION STAFF WORKING DOCUMENT
Energy prices and costs report

14. HEPI used for market monitoring:
ACER/CEER
Annual Report on the Results of Monitoring
the Internal Electricity and Natural Gas
Markets in 2011

15. Abstract from call for tender by DG
SANCO

16. Household Energy Price Index
developments

17. Evolution of residential energy and distribution
prices excluding taxes in the EU

18. Evolution of residential energy and distribution
prices excluding taxes in the EU

19. Evolution of residential energy and distribution
prices excluding taxes in the EU

20. Evolution of residential energy and distribution
prices excluding taxes in the EU

21. Evolution of residential energy and distribution
prices excluding taxes in the EU

22. Evolution of residential energy and distribution
prices excluding taxes in the EU

23. Evolution of residential energy and distribution
prices excluding taxes in the EU

24. Evolution of residential energy and distribution
prices excluding taxes in the EU
EU-15 (Jan
2009=100)
Electricity Gas
Latest 117 107
Highest 118 110
Lowest 96 81

25. Evolution of residential energy and distribution
prices excluding taxes in the EU
EU-15 (Jan
2009=100)
Electricity Gas
Latest 117 107
Highest 118 110
Lowest 96 81

26. Evolution of residential energy and distribution
prices excluding taxes in the EU-22

27. Evolution of residential energy and distribution
prices excluding taxes in the EU-22
EU-22 (Jul
2013=100)
Electricity Gas
Latest 103 100
Highest 103 101
Lowest 100 99

28. Retail Vs. wholesale prices in European
markets
Please note that the following information relate to State capital cities unless specified otherwise

29. Average monthly end-user electricity prices excluding taxes
in EU-15 countries vs. average monthly wholesale price on
key European power exchanges (2009-2013)

30. Two examples of the evolution end-user Vs. wholesale
prices – electricity
Sweden Austria

31. Average monthly end-user gas prices excluding
taxes in EU-15 countries vs. average monthly
wholesale price on key European exchanges
(2009-2013)

32. Two examples of the evolution end-user Vs. wholesale
prices - gas

33. Overview of European electricity prices
Please note that the following information relate to State capital cities unless specified otherwise

34. Residential end-user electricity price (includes all taxes)
Average

35. Residential end-user electricity price (includes all taxes)
Average

36. Residential end-user electricity price at PPS
Average

37. Residential end-user electricity price at PPS
Average

38. Residential electricity price evolution adjusted for inflation
(2013/2012)
Average

39. Residential end-user electricity price breakdown (H2 2013)

40. Residential end-user electricity price breakdown (H2 2013)

41. Residential end-user electricity price breakdown (H2 2013)

42. Overview of European gas prices
Please note that the following information relate to State capital cities unless specified otherwise

43. Residential end-user gas price (includes all taxes)
Average

44. Residential end-user gas price (includes all taxes)
Average

45. Residential end-user gas price at PPS
Average

46. Residential gas price evolution adjusted for
inflation (2013/2012)
Average

47. Residential end-user gas price breakdown (H2 2013)

48. Insights into energy affordability indicators
Please note that the following information relate to State capital cities unless specified otherwise

49. Electricity expenditures as a share of disposable
income (H2 2013)
Average

50. Electricity expenditures as a share of disposable
income (H2 2013)
Average

51. Gas expenditures as a share of disposable
income (H2 2013)
Average

52. Gas expenditures as a share of disposable
income (H2 2013)
Average

53. Market competition indicators

56. Electricity: Residential customer choice as of December 2013

57. Gas: Residential customer choice as of December 2013

58. Number of electricity suppliers

59. Number of gas suppliers

60. Relationship between energy prices and
market competition

61. Potential savings from switching electricity supplier (2013)

62. Potential savings from switching gas supplier (2013)

63. R²=0.2155

64. R²=0.1096

65. R² = 0.00001

66. R² = 0.1146

67. THANK YOU
Christophe DROMACQUE
Head of Research
christophe.dromacque@vaasaett.com
www.vaasaett.com

68. Discussions
Next year?
SME prices?

69. Aims of HEPI
VaasaETT 69
Aims
• Reflect the prices typically paid by residential customers in Member
States;
• Comparable prices for household energy consumption (both
electricity and gas);
• In relatively short time intervals (monthly);
• Taking into account different national consumption patterns (typical
consumption levels);
• Reflecting different emerging tariff schemes, such as fixed tariffs,
variables tariffs, green tariffs offered by incumbents and competitors;
• Clearly separating out between the price for energy as a commodity,
distribution and transmission charges, associated taxes and VAT.

70. Data characteristics
VaasaETT 70
Data characteristics
All prices and other statistics relate to:
• The first day of the month the data is collected;
• Customers in the State capital city area of the state considered;
• To ensure comparability, sign in and other temporary bonuses and
other forms of non-monetary benefits are not taken into account
since they can distort the overall tariff offered, especially in cases
where they are offered on a “one-off” basis;
• Standing fees are added to the price per kWh so that the entire end-
user cost is taken into account;
• Exchange rate = 3-month moving average
• 97% rule.

71. Step 1: Background market data
1 Typical residential customer consumption level
2
Proportion of residential customers who have never changed contact (who are still on their
by-default contract)
3
Proportion of residential customers who have never changed supplier (who are still supplied
by their local incumbent supplier)
4 Incumbent or historical supplier for state capital city
5 Main competitor to the incumbent or historical supplier for state capital city
VaasaETT 71
Current methodology