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ENERGY

Why are electricity prices increasing in Denmark?

A combination of factors are causing energy prices to increase markedly across Europe. Denmark is no exception to the trend.

A newly-installed electricity meter in Copenhagen. Denmark has not avoided the trend of rising energy costs currently seen in much of Europe.
A newly-installed electricity meter in Copenhagen. Denmark has not avoided the trend of rising energy costs currently seen in much of Europe. File photo: Kristian Djurhuus/Ritzau Scanpix

Electricity prices hit their lowest levels for years last spring, at the beginning of the coronavirus crisis, exacerbating the sense that prices are on the up now.

Dramatic hike in natural gas prices

According to Dansk Energi, an interest organisation for the energy sector in Denmark, the biggest cause of expensive electricity bills is a six-fold increase in natural fossil gas in the last six years.

Prices on the international energy market follow that of the most expensive energy producer – so if, for example, an expensive gas-powered energy plant is needed to ensure enough supply, that will set the market price.

European countries normally try to favour natural gas reserves global prices heat up and consumption peaks during winter. But stores are already low due to unusually demand during the summer.

Meanwhile, Russia has reduced some of its gas supply to Europe, impacting prices on the continent.

This means that people in Denmark who use gas heating systems are likely to be hit by price hikes more than those with electricity-powered pumps, because gas prices have risen twice as much as electricity prices. The electric pumps are also more efficient than the gas-powered heating systems.

Economic upswing after Covid-19 restrictions eased 

The coronavirus crisis is not yet over, but it can certainly seem that way in Denmark, which is enjoying a post-restrictions economic boom resulting in low unemployment, a labour shortage and strong currency.

Denmark is not alone in seeing an economic surge after the low ebb in 2020 caused by the pandemic. According to the EU Commission, global GDP is now expected to rise by 5.9 percent from 2020-2021, an increase on an earlier projection of 4.7 percent.

The economic booms in various countries mean an increase in energy use, and thereby higher demand and higher costs, because markets are behind on supply of coal, oil and gas.

Higher CO2 costs in the EU

The cost for businesses with high CO2 emissions has increased significantly since 2017, when the EU ratified its Market Stability Reserve. In short, this meant that the cost of quotas which must be purchased by companies to offset large CO2 emissions – including electricity producers – has shot up from 8 euros per tonne to 60 euros per ton, according to Dansk Energi.

Wind and rain 

Reservoirs in parts of Scandinavia which are used to produce electricity are lower than usual. For example, Norway’s reservoirs were 15 percent less full than usual in September, according to Energi Norge. As such, less energy is produced by hydroplants.

Meanwhile, the wind has been blowing a bit less than expected in northern Europe in the autumn. That means there is less cheap electricity available from wind turbine farms.

When energy is not available from green sources, it must be procured elsewhere – such as from fossil fuel plants, where costs are currently higher than normal as outlined above.

What can I do to limit the damage on my own bills? 

Website Elpris.dk enables consumers in Denmark to compare the price of electricity from different suppliers. Prices from the various suppliers can be searched on the website, as can information on, for example, whether the energy you buy comes from sustainable sources.

The resource website is aimed at consumers and companies with consumption of up to 100,000 kroner annually.

Consumers can also try to cut down on their use of electricity, of course, with techniques such as using timers on appliances, closing doors to unused rooms, and switching off appliances at sockets when not at home. It’s arguable that this could also apply when prices are low.

Is there any good news?

Forward markets – set prices paid for future delivery of electricity – are set to fall after the coming winter and continue to drop next year, Dansk Energi writes in its analysis of the situation.

The interest organisation for the energy sector also writes that an improvement in sustainable energy production in coming years could see electricity become both cheaper and greener.

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For members

EUROPEAN UNION

Pensions in the EU: What you need to know if you’re moving country

Have you ever wondered what to do with your private pension plan when moving to another European country?

Pensions in the EU: What you need to know if you're moving country

This question will probably have caused some headaches. Fortunately a new private pension product meant to make things easier should soon become available under a new EU regulation that came into effect this week. 

The new pan-European personal pension product (PEPP) will allow savers to take their private pension with them if they move within the European Union.

EU rules so far allowed the aggregation of state pensions and the possibility to carry across borders occupational pensions, which are paid by employers. But the market of private pensions remained fragmented.

The new product is expected to benefit especially young people, who tend to move more frequently across borders, and the self-employed, who might not be covered by other pension schemes. 

According to a survey conducted in 16 countries by Insurance Europe, the organisation representing insurers in Brussels, 38 percent of Europeans do not save for retirement, with a proportion as high as 60 percent in Finland, 57 percent in Spain, 56 percent in France and 55 percent in Italy. 

The groups least likely to have a pension plan are women (42% versus 34% of men), unemployed people (67%), self-employed and part-time workers in the private sector (38%), divorced and singles (44% and 43% respectively), and 18-35 year olds (40%).

“As a complement to public pensions, PEPP caters for the needs of today’s younger generation and allows people to better plan and make provisions for the future,” EU Commissioner for Financial Services Mairead McGuinness said on March 22nd, when new EU rules came into effect. 

The scheme will also allow savers to sign up to a personal pension plan offered by a provider based in another EU country.

Who can sign up?

Under the EU regulation, anyone can sign up to a pan-European personal pension, regardless of their nationality or employment status. 

The scheme is open to people who are employed part-time or full-time, self-employed, in any form of “modern employment”, unemployed or in education. 

The condition is that they are resident in a country of the European Union, Norway, Iceland or Liechtenstein (the European Economic Area). The PEPP will not be available outside these countries, for instance in Switzerland. 

How does it work?

PEPP providers can offer a maximum of six investment options, including a basic one that is low-risk and safeguards the amount invested. The basic PEPP is the default option. Its fees are capped at 1 percent of the accumulated capital per year.

People who move to another EU country can continue to contribute to the same PEPP. Whenever a consumer changes the country of residence, the provider will open a new sub-account for that country. If the provider cannot offer such option, savers have the right to switch provider free of charge.  

As pension products are taxed differently in each state, the applicable taxation will be that of the country of residence and possible tax incentives will only apply to the relevant sub-account. 

Savers who move residence outside the EU cannot continue saving on their PEPP, but they can resume contributions if they return. They would also need to ask advice about the consequences of the move on the way their savings are taxed. 

Pensions can then be paid out in a different location from where the product was purchased. 

Where to start?

Pan-European personal pension products can be offered by authorised banks, insurance companies, pension funds and wealth management firms. 

They are regulated products that can be sold to consumers only after being approved by supervisory authorities. 

As the legislation came into effect this week, only now eligible providers can submit the application for the authorisation of their products. National authorities have then three months to make a decision. So it will still take some time before PEPPs become available on the market. 

When this will happen, the products and their features will be listed in the public register of the European Insurance and Occupational Pensions Authority (EIOPA). 

For more information:

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp/consumer-oriented-faqs-pan_en 

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp_en 

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK. 

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