Bringing energy bills down is a top priority for Europeans. Ensuring energy affordability is unsurprising, given the price hikes that followed the gas crisis after Russia’s invasion of Ukraine, and the uncertainty in the Middle East as I write this post.
European industry is similarly concerned about high energy costs. While a recent business summit in Antwerp catapulted industrial energy costs up the political agenda, policymakers must keep in mind that energy affordability affects us all. Businesses of all sizes and households.
I write this as the EU rolls out its Affordable Energy Action Plan to better protect the bloc against price shocks. This plan made us at BEUC reflect on the many factors that determine energy affordability.
Your energy bill and affordability
Affordability in the energy sector is complex. Let’s take electricity bills. How electricity is generated, a supply and demand market, how governments tax it, the supplier business, and how different economic actors use energy on a day-to-day basis all play a role.
Fossil fuels…have been volatile energy sources
We are changing the way we generate electricity by weaning off fossil fuels. These have been volatile energy sources because of where we buy them, and their climate impact. We’re heading to a more cost-effective system based on renewables and electrification.
This is a transition that will help the planet and our geopolitical security. As Ukraine’s impressive energy transformation in extreme circumstances shows, “[a]ttacking decentralised solar power installations is not economically rational.”
Above: Europe is moving towards an energy system based on renewables and electrification
Counting the charges
In 2024, 27% of EU households’ electricity bills were made up of grid charges. Europe’s electricity grid needs to be modernised, which costs money. Grid charges might therefore go up. There are ways to manage this, though: from flexible charging of EVs to more technical “special tariff regimes for lower income households”. Whatever the case may be, households must not be disproportionately burdened compared to other grid users.
This has to be seen in a broader context where, the European Central Bank writes, “Euro area households pay around twice as much for electricity as energy-intensive industries, reflecting higher prices across all components of the electricity bill.”
Gas delivery costs will increase as they spread over a smaller user base
As we shift from gas to electricity, gas delivery costs will increase as they spread over a smaller user base. With many people still using gas and electricity, or risk being the last ones ‘stuck’ on the network, careful planning is needed. BEUC will issue policy recommendations about this in 2026.
Our governments add all sorts of taxes and costs to electricity bills, as shown by EKPIZO in Greece. This makes electricity over twice as expensive as gas, and runs diametrically against the need to decarbonise our economy through electrification.
The European Commission is developing guidance for countries to reduce such taxes, a move supported by civil society and industry alike.
Convincing finance ministries will be the challenge, though. One idea: What about using the revenues from the upcoming Emissions Trading System 2.0 to help balance state budgets?
Affordability beyond the bill
Bill components are only the tip of the affordability debate iceberg. Broader market dynamics and helping people act in the energy transition also impact affordability. Consumer organisations across Europe help people navigate this complexity every day.
The starting point is our energy contract. Just finding the best offer can be “mentally overwhelming,” our UK member Which? writes. Their research shows more can be done on policy implementation, including traditional consumer protection.
Above: even finding the right energy contract in a complex market can be overwhelming for consumers
For example, we advise regulators to ensure consumers benefit from trustworthy comparison tools that clearly communicate a range of contracts and their financial benefits. Every offer should provide a standardised summary of key contractual terms and conditions. The same for energy bills: A consistent national format could make them easier to understand, given that billing remains a top consumer complaint.
Consumer policy as an energy affordability lever
People cannot be consumers 24/7. We all have different lives, needs, means and abilities to act and, say, install solar panels on a roof. Effective consumer policy can be a lever though.
The sustainable energy choice, whether an LED light bulb or a heat pump, is the most cost-effective choice. The focus now is on policymakers to make it the easy and convenient choice.
The sustainable energy choice…is the most cost-effective choice
In that context: Will policymakers push for insulation and energy-efficient products? Can they replicate successful measures from other countries, such as Germany’s balcony solar boom? Are they developing lists of accredited heat pump installers? Is enough attention paid to EV infrastructure and alternatives to car use? Can the ‘polluter pays’-principle be applied in ways that limit distributional impacts? How to boost schemes like energy communities or energy sharing?
All of these measures combined could put downward pressure on bills.
Every affordability step counts
Energy affordability is complex. And the overall cost-of-living debate goes beyond energy. A particular wildcard is the lack of affordable housing in Europe.
We must keep in mind, always, that every step forward counts. This Friday (6 March), the head of the International Energy Agency will meet senior decision-makers at the Commission. The Commission will then publish its long-awaited Citizens Energy Package on 10 March. On March 19-20, EU leaders are also expected to discuss energy affordability.
Throughout this, we hope policymakers underline the need for cost relief for businesses and households. Because energy affordability affects us all.