Price refers to a key component of the electricity market, encompassing various costs associated with its generation, transmission, distribution, and sale.
Components of the Energy Price
- Active Energy Price - refers to the actual energy consumption measured in kilowatt-hours (kWh). Determined in wholesale (e.g., Polish Power Exchange - TGE) and retail markets based on supply and demand dynamics.
- Transmission and Distribution Fees - costs of delivering energy from producers to end-users, including the maintenance of infrastructure (lines, transformers). Governed by tariffs approved by the energy market regulator (in Poland: Energy Regulatory Office, URE).
Taxes and Additional Charges
- Excise Tax - levied in accordance with national regulations.
- RES Fee - supports the development of renewable energy sources.
- Capacity Fee - iIntroduced as part of the capacity market to ensure the reliability of power supply.
- VAT - added to the final energy bill.
- Supplier Margin - a portion of the price allocated to the energy supplier for providing sales services.
Factors Affecting Energy Prices:
- Fuel Costs - prices of coal, gas, or oil—key inputs for energy production in many countries—directly impact generation costs.
- Renewable Energy Production - a high share of renewable energy sources (RES) can lower wholesale prices due to the low marginal costs of these technologies. Variability in RES generation (e.g., wind, solar) can lead to price fluctuations.
- CO₂ Emission Costs - rising prices of CO₂ allowances in the EU ETS system increase the costs of fossil fuel-based energy production.
Energy Demand:
- Seasonal changes (e.g., higher demand in winter) and fluctuations in energy consumption by industries and households.
- Energy Policy - regulations on decarbonization, subsidies for renewable energy, or the implementation of capacity markets influence energy prices.
Market Price Dynamics:
- Wholesale Market - forms the baseline energy price through an auction mechanism. Market participants (e.g., producers, suppliers) submit price bids, which are then balanced by the market operator.
- Retail Market - prices for consumers are higher due to additional distribution costs, taxes, and fees.
Contemporary Challenges:
- Rising energy costs driven by the energy crisis (e.g., gas prices in Europe).
- Balancing affordable energy prices with investments in decarbonization and energy security.
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- Increased consumer interest in dynamic tariff models and the development of local energy generation (prosumers).
