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COST OF LIVING

How much will Danish energy bills go up this winter?

Energy prices are already high and gas supplies to Denmark are currently cut off with the Nordstream 1 gas pipe closed. How expensive could bills get this winter?

How much will Danish energy bills go up this winter?
Energy bills this winter are expected to eclipse those from last year, putting a severe dent in family budgets. File photo: Ida Marie Odgaard/Ritzau Scanpix

Gas prices on the European market shot up by around 25 percent on Monday following Russia’s move to indefinitely cut supplies to Europe via the Nordstream 1 gas pipeline last weekend.

The effects of that decision can be expected to be felt by for both gas and electricity customers in Denmark in one to two months, an analyst said earlier this week.

“Danish gas consumers will initially be hit hard by these increases, but so will electricity customers because gas is very important in electricity production,” senior economist with Sydbank, Søren Kristensen, told news wire Ritzau on Monday.

The extent by which energy bills are bloated this winter could come as a shock to people in Denmark because the seriousness of the situation is not fully understood, an expert analyst told newspaper Politiken.

“In countries like Germany, Switzerland and Austria, the public has been prepared for months for drastic price increases, and in Germany the debate has been made clear to everyone that gas may be rationed. But I am yet to hear a Danish politician say the equivalent,” independent economist Andreas Steno Larsen of Steno Research told Politiken.

Although Denmark supplies a comparatively large proportion of its own energy through wind power, it is not self-sufficient “every day”, Larsen said.

“And when we’re not, we’ll have a massive problem this winter. It will be a rude awakening for many people from October onwards,” he said.

In a written comment to Politiken, energy minister Dan Jørgensen said that an already serious situation has been made even more critical because no gas is coming to Europe from Russia.

“It can already be felt and will continue to hit Danish families hard,” Jørgensen said.

A draft 2023 budget presented last week by the government sets aside funding for cost of living relief but did not specify the recipients of such spending.

READ ALSO: Why energy prices worry rural Danes more than those in cities

While the exact numbers provided by different analysts vary, they all project a steep upturn in bills compared to last winter, when costs had already increased from earlier years.

According to calculations by bank Nykredit reported by Politiken and broadcaster DR, a family living in a house with independent gas heating could face a bill around 33,000 kroner (for one year, commencing in August) higher in 2022-23 than in 2021-22.

Electricity bills could go up by as much as 12,700 kroner for a family with two adults and two children which uses around 4,000 kilowatts per hour, according to Nykredit’s calculations. Such a household can expect to pay 22,324 kroner for the year compared to 9,269 kroner for the previous year.

The figures are based on the assumption that prices this winter will be the same as the average cost for gas and electricity in August. The current situation with the closure of the Nordstream 1 pipeline makes a fall in prices unlikely.

It should be noted that homes which are on district heating networks are less vulnerable to increased gas prices compared to houses with independent natural gas boilers. This is because power stations that produce district heating may not be fully dependent on gas.

But all homes will nevertheless be affected to some extent because electricity prices are also affected.

READ ALSO: What you need to know about Denmark’s housing ‘energimærke’

Similarly bleak estimates of energy bills were also made by Danske Bank.

In comments to financial publication Børsen, Danske Bank’s consumer economist Louise Aggerstrøm Hansen said the overall bill for the heating season – October 1st to April 30th next year – could be four times higher than usual for an “average family” defined as two adults and two children with standardised consumption.

“This will require major cutbacks in many families, first and foremost on their heating budgets but also in other areas,” Hansen said.

Figures provided by Hansen to DR show that a household which paid 10,200 kroner in bills for natural gas heating in the 2020/21 winter season and 22,500 kroner last year can expect costs of up to 37,200 kroner for the coming winter.

This corresponds to eye-watering extra costs of around 4,000 kroner per month or 27,000 kroner in total compared to two years ago.

The interest organisation for the energy sector, Green Power Denmark, provided a comparable prediction. An older house with an independent gas heater could see its heating bill go up by 7,500 for the months of October to December, the organisation told Politiken.

On Wednesday, the EU Commission presented five proposals to rein in gas prices amid the international shortage, including a cap on the purchase price of Russian gas. The plan is scheduled to be further discussed at EU level by energy ministers from member states on Friday.

Russian president Vladimir Putin vowed to completely cut off the flow of gas if a price cap is introduced.

READ ALSO: How people in Denmark are changing their energy use to keep bills down

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COST OF LIVING

How much will electricity tax cut save bill payers in Denmark?

Denmark is to reduce electricity tax to almost zero, in one of a number of measures announced on Friday to help households cope with soaring costs. How much do bill payers stand to save, and is the tax cut a good solution for the predicament?

How much will electricity tax cut save bill payers in Denmark?

A broad majority in the Danish parliament has agreed a new package of cost-saving measures for homes this winter, including sunk electricity taxes and increased family welfare.

Parliament has agreed the new measures to provide additional help to people, particularly families, who are struggling with energy costs.

A core component of the package includes lowering the electricity tax from 69.7 øre per kilowatt-hour to 0.8 øre – equivalent to the minimum rate permitted by the EU – for the first six months of 2023. An øre, literally translating to ‘ear,’ is a kroner-cent. 

This measure alone is estimated to cost the Danish state 3.5 billion kroner, while the total cost of the package to the government is around five billion kroner. The deal could be officially adopted by parliament as early as next week.

READ ALSO: Denmark announces new winter aid package for households

The decision is the latest in a number of measures taken by the Danish government in response to record energy prices.

As a result of supply stoppages for Russian gas, on top of inflation, energy prices in Denmark are at record levels, with high costs set to persist throughout the winter.

“Danes are hit hard by inflation. That can already be felt now. We can look ahead to a winter when it will be even more prominent,” Finance Minister Nicolai Wammen said at a press briefing on Friday at which the new package was presented.

“It’s important that we don’t provoke further inflation but we must also help Danes and keep Denmark on the right track. That is what we are doing with this agreement,” he said.

The cut to electricity taxes could save individual households between 1,000 and 2,000 kroner on their bills, according to an expert who spoke to Danish news wire Ritzau.

READ ALSO: How much will Danish energy bills go up this winter?

Despite this, the decision to cut energy tax may not prove to be the best fix for the issue, he said.

“With these initiatives a household will be able to spare between 1,000 and 2,000 kroner on their electricity bill,” Brian Vad Mathiesen, professor in energy planning at Aalborg University, told Ritzau.

“I think it would have been better to send a cheque to all households with a set amount and then keep the electricity tax,” he said.

The government has previously sent one-off payments to selected households in response to the energy crisis. In August, around 400,000 homes in Denmark received 6,000 kroner towards gas bills. To receive the money, the homes had to be primarily gas heated and under a specified total income level, among other criteria.

READ ALSO: Denmark’s state auditor to review potential errors in energy relief payments

But the government has said it wants to limit relief in the form of lump sums because this risks worsening inflation.

Mathiesen said that cutting the electricity tax could have the unwanted effect of removing the incentive for homes to save on electricity use.

More efficient use of energy is the most important tool in the current climate of extremely high energy prices, he said.

“What you risk is that people will take their foot off the brake on energy consumption and that could be harmful in relation to price setting – we could actually experience higher prices than expected,” he said.

The energy planning expert called for more government initiatives that would encourage the Danish public to restrict its energy consumption.

“I also note that there are some long-term initiatives to switch back to district heating [from individual gas heaters, thereby reducing gas consumption for heating, ed.]. I hope that there will be more of these savings initiatives. Both for households and businesses, because that is something that can reduce inflation,” he said.

READ ALSO: EXPLAINED: When should I turn on my heating in Denmark this year?

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