Pricing of Energy Overall Scope Energy sources & carriers used - - PowerPoint PPT Presentation

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Pricing of Energy Overall Scope Energy sources & carriers used - - PowerPoint PPT Presentation

Oct 16, 2022 37 likes •571 views

Pricing of Energy Overall Scope Energy sources & carriers used by end-consumers o Oil products Gasoline, diesel, heating oil o Natural gas o Electricity Final price paid by end-consumers o Energy component o Other: transmission,

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SLIDE 1

Pricing of Energy

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SLIDE 2

Overall Scope

  • Energy sources & carriers used by end-consumers
  • Oil products
  • Gasoline, diesel, heating oil
  • Natural gas
  • Electricity
  • Final price paid by end-consumers
  • Energy component
  • Other: transmission, distribution, levies, taxes and VAT

2

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SLIDE 3
  • Outline
  • General principles of pricing energy
  • Primary fuels (oil, natural gas)
  • Electricity (wholesale market)
  • Decomposition of energy retail prices (Belgium)
  • International positioning
  • Final reflections

3

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General principles of pricing of energy

  • Primary fuels
  • Supply-demand fundamentals

4

  • Supply
  • Cost of extraction
  • Transport costs
  • Limited resource stocks
  • Cartels
  • Policy
  • Etc.
  • Demand
  • Economic growth
  • Availability of

substitutes

  • Policy
  • Etc.
  • Expectations on both sides
  • Prospects on new - undiscovered – reserves
  • Political unrest
  • Speculation
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SLIDE 5

General principles of pricing of energy Oil

  • Can be transported relatively easily
  • Pipelines, tankers
  • Global market
  • Quality (e.g., gravity ‘API’ and sulfur content) and costs of

delivery affect price

  • West Texas Intermediate (WTI) and Brent

5

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SLIDE 6
  • Transport through pipelines, liquefied to be transported by

ship (LNG)

  • Long term contracts
  • When dedicated infrastructure still being developed
  • Indexed on oil price
  • To guarantee pay-back
  • Hub-based prices
  • E.g., NBP, Zeebrugge, Henry hub

6

General principles of pricing of energy Natural Gas

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  • Significant differences between regions globally
  • US < EU < Asia
  • Dependent on market structure and transport costs
  • Good convergence among European hub’s
  • Gas-to-gas competition
  • Liquid markets
  • Good physical interconnections
  • Also renegotiation of long-term contracts
  • More to hub-based
  • Availability of LNG infrastructure

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General principles of pricing of energy Natural Gas

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SLIDE 8

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General principles of pricing of energy Natural Gas

Source: ACER, 2013

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SLIDE 9

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General principles of pricing of energy Natural Gas

Source: CREG, 2014

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SLIDE 10
  • Wholesale markets
  • Price set by supply – demand intersection
  • Instantaneous balance  continuously changing price
  • Peak, off-peak, specific profiles
  • National character
  • Interconnections and market coupling

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General principles of pricing of energy Electricity

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SLIDE 11

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General principles of pricing of energy Electricity

Source: ACER, 2013

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SLIDE 12

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General principles of pricing of energy Electricity

Source: ACER, 2013

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General principles of pricing of energy Electricity

Source: CREG, 2014

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SLIDE 14

General principles of pricing of energy

  • Outlook
  • Global politics and economic developments
  • Reserves?
  • Unconventional hydrocarbons
  • Impact on prices for fossil fuels worldwide
  • Coal, LNG
  • International climate agreement?

14

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SLIDE 15

Decomposition of energy retail prices

  • Oil products
  • Natural gas
  • Electricity

15

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SLIDE 16

Oil

16

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SLIDE 17

Decomposition of energy retail prices Oil

  • Program agreement between the Belgian government and

the Belgian Petroleum Federation on maximum prices for

  • il products (end use)
  • Most common fuels: gasoline, diesel, LPG and heating oil
  • Components
  • Price ex-refinery
  • Maximum gross margin on distribution
  • Public levies
  • Taxes and VAT

17

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SLIDE 18
  • Components
  • Price ex-refinery
  • Energy component
  • Linked to price quotes of finished products on Rotterdam market
  • Influenced by international price for crude, exchange rate €/$, the

supply/demand for finished products (e.g., affected by refinery capacity)

  • Maximum gross margin on distribution
  • Chain from refinery to end-user

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Decomposition of energy retail prices Oil

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SLIDE 19
  • Components (cntd)
  • Public levies
  • APERTA levy
  • Contribution for agency for petrol  maintain strategic oil reserves
  • BOFAS levy
  • Fund for soil remediation
  • Taxes and VAT
  • Excise tax [€/l]
  • 21% VAT on sum of all the above (including excise tax)

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Decomposition of energy retail prices Oil

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SLIDE 20
  • Composition

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Decomposition of energy retail prices Oil

Source: BFP, 2014

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SLIDE 21

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Decomposition of energy retail prices Oil

Source: BFP, 2014

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SLIDE 22

Natural Gas

23

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  • Consider following consumers (following CREG report)
  • Household (“T2”)
  • Natural gas 23,260 kWh/y
  • Professional consumers (“T4”)
  • Natural gas 2,300,000 kWh/y
  • Evolution of price from January 2007 till May 2013

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Decomposition of energy retail prices Natural Gas

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SLIDE 24
  • Evolution of final price – domestic consumer

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Decomposition of energy retail prices Natural Gas

Source: CREG, 2013

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  • Composition of final price
  • Energy price
  • Transmission
  • Distribution
  • Public levies
  • Energy taxes and VAT

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Decomposition of energy retail prices Natural Gas

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SLIDE 26
  • Composition of final price – domestic consumer

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Decomposition of energy retail prices Natural Gas

Source: CREG, 2013

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SLIDE 27
  • Composition of final price – domestic consumer

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Decomposition of energy retail prices Natural Gas

Source: CREG, 2013

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SLIDE 28
  • Energy component
  • Component based on index parameters
  • Oil-indexation phasing out
  • Indexation formula changes not frequently
  • Prize ‘freeze’ between April 2012 – December 2012
  • As from 2013, changes (indexation) in variable pricing

contracts require approval regulator CREG (ex-post)

  • +9.74 €/MWh (+229.86 €/y; +36.29%)
  • Due to evolution index parameters

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Decomposition of energy retail prices Natural Gas

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  • Transmission tariff
  • Fluxys transmission tariff
  • Uniform (T2 and T4)
  • Rather stable

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Decomposition of energy retail prices Natural Gas

Source: CREG, 2013

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  • Distribution tariff
  • Covering distribution costs
  • Some new tariffication elements
  • Price evolution:
  • Flanders +3.75 €/MWh (+37.71%)
  • Walloon region: +5.34 €/MWh (+32.42%)
  • Brussels: +2.56 €/MWh (+23.34%)

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Decomposition of energy retail prices Natural Gas

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SLIDE 31
  • Public levies
  • Minor component
  • Strongly dependent on region and DSO
  • Energy tax and VAT
  • Energy tax: 0.99 €/MWh
  • VAT of 21% on sum of all components (incl. tax)

36

Decomposition of energy retail prices Natural Gas

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SLIDE 32

Electricity

37

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  • Consider following consumers (following CREG report)
  • Household (“Dc”)
  • Electricity 3,500 kWh/y
  • Professional consumers
  • Electricity 160,000 kWh/y, low voltage (“Ic”)
  • Electricity 160,000 kWh/y, medium voltage (“Ic1”)
  • Evolution of price from January 2007 till May 2013

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Decomposition of energy retail prices Electricity

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SLIDE 34
  • Evolution of final price – domestic consumer

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Decomposition of energy retail prices Electricity

Source: CREG, 2013

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SLIDE 35
  • Composition of final price
  • Energy price
  • Transmission
  • Distribution
  • Public levies
  • Contribution RES and CHP
  • Energy taxes and VAT

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Decomposition of energy retail prices Electricity

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SLIDE 36
  • Composition of final price – domestic consumer

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Decomposition of energy retail prices Electricity

Source: CREG, 2013

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SLIDE 37
  • Composition of final price – domestic consumer

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Decomposition of energy retail prices Electricity

Source: CREG, 2013

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SLIDE 38
  • Energy component
  • Component based on index parameters
  • Indexation formula changes not frequently
  • Prize ‘freeze’ between April 2012 – December 2012
  • As from 2013, changes (indexation) in variable pricing

contracts require approval regulator CREG (ex-post)

  • Dc: Flanders -1.53 €/MWh (-2.83%)
  • Dc: Walloon region & Brussels: +2.72 €/MWh (+3.63%)
  • Due to evolution index parameters

47

Decomposition of energy retail prices Electricity

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SLIDE 39
  • Transmission tariff
  • Elia’s transmission grid tariff
  • Corrected with loss-percentage of DSO
  • Minor component
  • Same for Dc and Ic; Ic1 different

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Decomposition of energy retail prices Electricity

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  • Distribution tariff
  • Introduction of multi-year tariff
  • Public service
  • Flanders: “Free electricity”, public lighting, green certificates and

actions for rational energy use

  • Consumers on MV face lower tariff
  • Cascade principle  do not bear costs of infrastructure

downstream

  • Price evolution: Overall +71.7%
  • Flanders +41.64 €/MWh (+99.96%)
  • Walloon region: +13.80 €/MWh (+32.42%)
  • Brussels: +19.28 €/MWh (+47.81%)

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Decomposition of energy retail prices Electricity

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SLIDE 41
  • Evolution and composition distribution tariff

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Decomposition of energy retail prices Electricity

Source: CREG, 2013

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SLIDE 42
  • Public levies
  • Federal contribution (2.98 €/MWh)
  • E.g., denuclearization of BP1 and BP2 Mol-Dessel
  • Connection off-shore wind (0.14 €/MWh)
  • Green certificates (2.2 €/MWh)
  • Off-shore wind
  • Costs +99.57%

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Decomposition of energy retail prices Electricity

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SLIDE 43
  • Contribution RES and CHP
  • Obligations supplier
  • Costs +119.67%

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Decomposition of energy retail prices Electricity

Source: CREG, 2013

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SLIDE 44
  • Energy tax and VAT
  • Energy tax: 1.9 €/MWh
  • VAT on sum of all components (including tax)
  • 21% till March 2014
  • 6% as of April 2014

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Decomposition of energy retail prices Electricity

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SLIDE 45

International positioning

  • Natural gas
  • Electricity

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International positioning Natural Gas

  • Comparison neighboring countries – domestic consumer

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Source: CREG, 2014

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SLIDE 47
  • EU comparison – domestic consumer

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International positioning Natural Gas

Source: ACER, 2013

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SLIDE 48
  • Comparison neighboring countries – domestic consumer

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International positioning Electricity

Source: CREG, 2014

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SLIDE 49
  • EU comparison – domestic consumer

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International positioning Electricity

Source: ACER, 2013

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Some final reflections

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SLIDE 51

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Long run energy price ~[€/MWh] Energy Intensity ~[MWh/GDP-€]

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Final reflections

  • Final price – domestic consumer
  • Natural gas: 60-70 €/MWh
  • Electricity: 200-230 €/MWh
  • Gasoline (36 MJ/l): 1.712 €/l = 171 €/MWh
  • Diesel (36 MJ/l): 1.451 €/l = 145 €/MWh
  • LPG (26 MJ/l): 0.599 €/l = 83 €/MWh
  • Heating oil (36 MJ/l): 0.813 €/l = 81 €/MWh

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SLIDE 53

energy 31% renewables and cogeneration 5% transmission 5% distribution 50% public levies 3% taxes and VAT 6%

retail electricity price

energy 56% transmission 2% distribution 19% public levies 4% taxes and VAT 19%

retail natural gas price

energy 36% distribution 10% public levies 1% taxes and VAT 53%

retail gasoline price

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Final reflections