Solar rooftops in demand as average European household utility bill powers to €1,850

In 2020, eurozone households spent an average of €1,200 on electricity and gas. That figure is set to swell to €1,850 this year, according to Bank of America.

Households across Europe are taking steps to slash their energy use on concern the unprecedented squeeze on supply will keep prices high way beyond winter.

Energy bills are climbing across the continent, with homes set to pay on average 54% more than they did two years ago, Bank of America data show. 

That cost surge is driving demand for solar panels and extra insulation as people seek to ease the pressure on their wallets.

Rooftop solar is “going to grow quite substantially all over Europe,” said Vegard Wiik Vollset at researcher Rystad Energy. 

“The potential of reducing your electricity bill with these sort of installations is now suddenly a lot more attractive” amid higher energy prices.

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France saw the biggest expansion in rooftop solar in Europe last year, with new installations jumping almost fourfold, according to Mr Rystad.

Germany was still first in terms of volume, adding more than 1,600 megawatts of capacity. 

The growth in both countries builds on an existing trend, with more and more residents opting to “green” their homes in recent years. 

The takeup of such technologies varies widely across the continent. 

In Britain, whose housing stock is older than any EU country’s, improving insulation is a major challenge. 

Homes there lose heat faster than anywhere else in western Europe. 

Yet a survey late last year showed less than a fifth of Britons were considering improvements to home energy efficiency. 

Among those not contemplating changes, more than a quarter said they cost too much.

For European households that do have the cash or incentives to make modifications, the impact on bills can come quickly. 

But it could take years for those actions to become sufficiently widespread to cut national energy demand significantly.

In 2020, eurozone households spent an average of €1,200 on electricity and gas. That figure is set to swell to €1,850 this year, according to Bank of America, as geopolitical tensions push up natural gas prices which the scarce supply of energy from renewable sources cannot offset.

This year was meant to see consumer spending drive growth after two years of Covid-19 lockdowns and layoffs. 

The ECB said in December it expected the eurozone economy to expand by 4.2% in 2022, driven by a surge in private consumption.

But higher energy costs hitting households at home and at the petrol pumps — with oil rising by half and wholesale prices for natural gas quadrupling in a year — are throwing those forecasts into question.

Energy typically accounts for slightly more than 6% of private consumption in the eurozone but this could rise to as much as 10% as a result of higher prices, according to ING's estimates, reducing what is available to spend on other goods.

"This would also be in line with previous episodes of higher energy prices, in which almost all countries saw other expenditures dropping," ING's economist Carsten Brzeski said. The hit to growth is likely to be significant.

In Italy, for example, gas and electricity prices will shave almost 3% off household consumption this year and 1.1% off GDP if they stay close to their current levels, according to consultancy firm Nomisma Energia.

The picture is even more severe in Spain. "If price increases come from higher demand, they are less damaging," Miguel Cardoso of BBVA Research said. 

"The current situation is not like that. We are seeing a negative supply shock."

In Germany, the RWI Institute estimated consumer spending would probably not exceed pre-crisis levels again until the second quarter of 2022 and said rising prices were likely to deter people from making major purchases.

France was a partial exception as the government of president Emmanuel Macron, who is seeking re-election in May, has capped electricity price increases at 4%. 

But these will offset only about a quarter of the 54% increase in energy bills from 2020, according to Bank of America.