Rising energy prices: how to limit the impact on your bill?

9 October 2022
Rising energy prices in Luxembourg: what impact on your gas or electricity bill?

Since the war in Ukraine and the decrease in Russian gas supplies, energy prices are steadily increasing in European markets. In some countries, consumers have seen their gas or electricity bills double or even triple.

However, some European countries such as France and Luxembourg have decided to intervene massively in order to limit the increase in tariffs. Here is the situation in Luxembourg.

Gas, electricity: rate increases in Luxembourg

In Luxembourg, some suppliers had announced large increases in gas bills, ranging from 70% to 110%. This is equivalent to a doubling of the gas bill for individuals. But at the last moment, a tripartite agreement between the Luxembourg government and the trade unions the decision to provide further public support, in order to limit the impact on consumers.

This is what was decided in the agreement:

  • Electricity prices to be frozen in 2023to their 2022 level
  • Gas prices will continue to risebut their increase will be limited to a maximum of +15%until December 2023
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Energy Price Comparison in Luxembourg

Why are energy prices rising?

A sharp decrease in market supply

Several factors explain the sharp rise in energy prices in Europe. As supply has decreased, tariffs are becoming more expensive.

The main trends that have led to a decrease in supply are

  1. The post-Covid recovery created a strong recovery in gas, oil and electricity consumption
  2. The decrease in Russian gas deliveries (due to Western sanctions following the war in Ukraine) caused a sharp drop in gas supply on the European market
  3. OPEC+ countries (major oil producing countries) have decided on a sharp reduction in oil production for the year 2023. This has a strong impact on the cost of energy in Europe.

All this means that the tariffs are on a sustainable growth trajectory over the next few years.

Electricity prices following the rise in gas prices

The cost of electricity has risen sharply on the markets since the winter of 2021-2022 for the following reasons:

  1. Some countries are experiencing a sharp decline in production (as is the case in France, where half of the nuclear power plants are shut down for maintenance). As all European countries are interconnected, every drop in production in one country affects the entire European market.
  2. The final price of electricity is determined by the most expensive unit of production (this is the so-calledmarginal cost of electricity production"). As these are gas-fired plants, and gas is rising sharply, electricity prices are also rising.
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Comparison of electricity prices in Luxembourg

Trends for the next few years

In the medium term, gas and electricity prices are expected to continue to rise, partly because of the war in Ukraine and the OPEC+ countries' decision to cut oil production.

However, in the long term, energy prices could stabilise thanks to :

  1. Energy efficiency efforts by European countries (lower consumption by administrations, use of teleworking, lower temperatures among consumers, etc.). This energy sobriety could create new sustainable reflexes that are part of time. It would lead us to reduce our consumption over the long term.
  2. More massive development of renewable electricity production units (offshore wind farms, solar panel farms). This renewable production would make Europeans less dependent on fossil fuels (gas, oil) imported from abroad. By guaranteeing stable production on its own territory, Europe could thus ensure price stability.
  3. Thermal renovation plans for housing. Most European countries heavily subsidise the energy renovation of old houses and buildings (or "thermal flats"). Heating poorly insulated homes is one of the most energy-intensive activities. By insulating your home, you can greatly reduce your heating consumption and thus reduce your overall energy consumption.

How to reduce your energy bill in Luxembourg?

1. Find a cheaper supplier

The quickest and most effective way to save money on your energy bill is to find a cheaper supplier. There is a price difference between suppliers in Luxembourg.

To find out if you could save money, see this offer comparator. You can then take out a new contract online. The supplier will take care of

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Rising energy prices in Luxembourg: what impact on your gas or electricity bill?

2. Reduce daily consumption

Here are some tips for reducing energy consumption:

  • Reducing heating at home. By lowering the temperature in your home by one degree, you can save 7% on your energy bill. Scientists recommend maintaining a temperature of 19°C when a room is occupied, and turning off the heating in rooms that are not occupied.
  • Reduce hot water consumption. You can lower the temperature of your water heater to 55°C, and reduce the time you spend in the shower. This way, you will have to heat much less water (and heat it less). You will easily save money on your bill.
  • Shifting energy-consuming uses. It is strongly recommended that you program your dishwasher or washing machine to run during off-peak hours. This helps to relieve the electricity network and to save money on your bill if you have a "peak - off-peak" contract.
  • Avoid unnecessary consumption. Do not hesitate to switch off any electrical appliance on standby (television, console, computer, etc.). You can also switch off your Internet box at night, and turn off the lights as soon as you leave a room.

3. Improving the thermal insulation of your home

In the long term, the best way to save money is to insulate your home better. There are many efficient materials available to keep the heat in during the winter, and to keep your home cool in the summer.

Here are the benefits of better insulating your home:

  • This greatly improves your comfort (you won't be cold in winter, and not hot in summer)
  • This greatly reduces your energy bill (some perfectly insulated houses or flats consume as little as €20 or €30 per month in heating!) Your home will maintain its temperature for several hours, without you needing to heat it further.

In addition, you can benefit frompublic aids and loans at preferential rates to carry out your thermal insulation work.

Frequently Asked Questions (FAQ)

What is the increase in gas prices in Luxembourg?

The increase in gas tariffs will be capped at a maximum of +15% in 2023, compared to the level in 2022. This decision follows a tripartite agreement between the Luxembourg government and the unions. The agreement commits the government to increase its level of public support for consumers in order to limit the impact of rising energy prices on its economy.

What is the increase in electricity prices in Luxembourg?

In 2023, electricity tariffs will be frozen at their 2022 level. This measure was decided by the Luxembourg government in an agreement with the unions in September 2022.

How can I reduce my gas consumption?

The easiest way to reduce gas consumption is to turn down the heating in your home. Every degree less can save up to 7% on your gas bill. Experts recommend maintaining an average temperature of 19°C in occupied rooms. You can also choose a cheaper supplier by consulting this comparison of gas contracts in Luxembourg.

How can I reduce my electricity consumption?

To reduce electricity consumption, it is advisable to turn off appliances on standby (television, computer, console), to turn off the light when leaving a room, and to shift energy-consuming uses (dishwasher, washing machine) and program them in off-peak hours. You can also find a cheaper electricity subscription and change supplier.

Why are energy prices rising?

The decrease in Russian gas supplies has created a shortage of gas on the European market. Gas has become scarcer and therefore more expensive. As the gas price also determines the electricity price, all energy prices are rising.

Will energy prices rise in 2023?

The Luxembourg government has decided to cap the increase in gas tariffs and to freeze electricity tariffs in 2023. However, energy prices on the markets are expected to continue to rise. It seems unlikely that Europe will start importing Russian gas again. Also, the OPEC+ countries (major oil producers) have decided on a significant production cut for 2023. All these elements may lead us to believe that energy prices will continue to rise, due to a sustainable decrease in supply.

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