The NUS Consulting Group’s 2009-2010 International Electricity Report and Cost Survey provides an annual update on what is happening in this industry, as well as comparative movements in worldwide prices.
This year’s benchmark reveals interesting developments in the world’s electricity industry as all countries in the survey, other than the USA, have reported pricing increases. This survey focuses on delivered prices, which include commodity price, transmission and distribution costs, standing charges and other taxes and imposts that a user has to pay in the delivered price.
Much of the world community has embraced the concept of deregulating electricity supplies which has led to increasing price volatility as the cost of commodity inputs to generation – i.e. coal, oil and natural gas – has risen.
Italy maintains its top position in a pricing comparison as the country with the most expensive delivered electricity price.
During the period under review there was a weak rebound in underlying demand for electricity as the fiscal stimuli took effect in Western economies but the high level of demand destruction witnessed during the preceding 12 months has provided some spare generation capacity to absorb the increasing activity.
Rising oil prices lifting power prices
Since the last survey, the price of Brent crude – the benchmark for European oil prices – rose from the low $50s per barrel in May 2009 to the high $80s per barrel in May 2010, which partly reflected a recovery to an equilibrium pricing from the lows experienced in January 2009, as well as reflecting the weakness of the US dollar during this period. In addition, the €/$ cross rate from January to May 2010 fell from around 1.45 to 1.22 in response to the European Union (EU) credit crisis. These factors explain the lift in electricity baseload prices across Europe from April 2010 after they had generally drifted down through most of the previous year.
One of the more interesting points to arise from the study is that of the 15 countries surveyed the rankings of the top nine (most expensive) and bottom three (least expensive) stayed the same, with only marginal jostling for position between Finland, Sweden and France.
Table 4- Survey of top 15 countries based on prices as of 1 June 2010
(Source: The NUS Consulting Group International Electricity Report and Cost Survey 2009/2010)
The survey is based on prices as of 1 June 2010 for the supply of 1000kW with 450 hours use. For deregulated supplies, 1 June contract pricing was obtained during the week of 26 April 2010. All prices are is US cents per kWh and exclude VAT. Where there is more than a single supplier, an unweighted average of available prices was used. Where available in each country and widely used by the consuming public, deregulated or liberalized contract pricing was used in this survey. The percentage change is calculated using the local currency in order to eliminate currency movement distortion.
In Europe, Finland experienced the largest single-year increase in electricity at over 20 per cent, while Italy had the second largest year-on-year increase at 8.7 per cent, guaranteeing its position as the most expensive surveyed country. Of interest is that most countries in Europe reported lower commodity prices for electricity, but recorded overall increases mainly because increased costs for transmission/distribution, or increased taxation for supply.
South Africa reported a 32.8 per cent rise in its electricity pricing over the past year. While their country retained its position as the lowest-cost nation in terms of electricity pricing, South Africans are now reeling from two consecutive years of rises, topping over 30 per cent per year. Most analysts, including NUS Consulting, expect this trend of price increases to continue for many years to come.
In North America, Canada remains one of the lowest cost surveyed countries in terms of electricity pricing, with only Australia and South Africa recording lower costs. The United States witnessed a slight decrease in pricing over the survey year making this the second consecutive year electricity prices have declined.
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