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Cost of the energy transition

Austrian power provider lowers prices by 10%

Austria's largest lower provider has announced it will be reducing power rates by a whopping 10 percent on September 1. Will the falling cost of wholesale power finally be passed on to consumers?

Is this the news we have been waiting for? For the past year, Renewables International has been pointing out the fall in wholesale power prices. According to Photon’s estimate (from its German email newsletter), a kilowatt-hour went for 3.764 cents on the exchange in Germany/Austria in July on average, 18 percent lower than two years ago (4.640 cents in July 2011). Industry power prices are down by roughly a quarter since May 2011 according to the VIK Index (PDF). The chart shows that prices have not been this low for eight years.

So why are retail prices rising? Possibly because a lot of power is not sold on the exchange, but in long-term contracts (such as 18 months), whose prices have not changed. Also, power providers may be shifting profits between divisions from power generation to retail sales.

 - The average price of power paid by industry in Germany continues to drop.
The average price of power paid by industry in Germany continues to drop.

Now, Austria, which has a more ambitious nuclear phaseout than Germany, may be leading the way once again. While German (and Swiss) households wait for lower wholesale prices to reach retail markets, Austria’s biggest power provider has announced it will be lowering retail rates by 10 percent at the end of this month.

Will it be the start of a new age as other power providers are forced to react? Market onlookers were skeptical last week (see this report in German), and of course the announcement does not affect German customers, who cannot switch to Austrian providers on the same power exchange. But power prices have been expected to peak around now for several years. If we are lucky, the news from Austria may be remembered as the beginning of the new age of affordable, increasingly renewable power. (Craig Morris)

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