Chapter 9 - Inequality and renewable electricity support in the European Union

Abstract

Electricity pricing has always been slightly regressive, since fossil and nuclear-based electricity providers impose fixed charges to cover the costs of their generators and transmission systems, plus charges per kilowatt-hour of electricity consumed to cover the cost of fuel. But the recent, rapid growth in renewable electricity generation using wind turbines and photovoltaic panels has exacerbated this regressive pricing structure considerably. This is partly because governments support renewables development by adding the costs of subsidies and support directly to consumers' electricity bills—an issue that is already well-researched. But the problem goes much deeper. Almost all the costs of wind and photovoltaic power lie with the fixed costs of generators and networks, while each extra kilowatt-hour costs virtually nothing to produce. To recoup their investments, producers increase their fixed charges and reduce the charge per kilowatt-hour. Ironically, therefore, the less a household consumes, the more it effectively pays per kilowatt-hour, thus penalizing poorer, low-consuming households—and even more so for those using electricity for heating. In this chapter I analyze electricity pricing structures across the EU. I show how this regressiveness of pricing structure is evident in almost all EU countries and has deepened over time. Although as a society we benefit from reducing dependence upon fossil fuels, the burden of this transition falls disproportionately upon lower income population cohorts, raising questions of fairness and equity.