Energy prices: Rising ancillary costs for homeowners
Articles

Soaring energy prices causing homeowners to rethink

High energy prices were already a cause for concern for homeowners last year. The latest price increases are now likely to cause many to rethink their use of fossil fuels for heating. The current Real Estate Monitor from Credit Suisse shows how higher energy prices are impacting ancillary costs and the demand for energy renovations in the Swiss real estate market.

Energy prices continuing to rise

The sharp upward spikes in wholesale prices for fossil fuels and electricity are continuing to cause alarm. The price of natural gas in Europe has increased almost fivefold in the course of a year. Electricity supplies for the first quarter of 2023 will be around ten times more expensive than in fall 2021.

This trend is also affecting the prices paid by consumers, even if they are slightly lower in comparison. The average price for heating oil in the first eight months of 2022 was around 60% higher than in 2021. The price increase for gas was 43%. It was only for electricity that prices for consumers remained more or less stable, at only 3% higher this year than last.

However, this trend is growing. The Swiss federal electricity commission (ElCom) recently announced the new electricity tariffs for private households in 2023, which will see prices for consumers rise by an average of 27%. However, tariffs vary greatly from region to region and between suppliers. In some municipalities, electricity will cost twice or even four times as much next year; while in municipalities where electric power plants have their own non-fossil systems, the price of electricity will hardly change at all.

Higher ancillary costs – especially for fossil fuels

What does this mean for households? Credit Suisse analyses show the following results for an average Swiss household with 2.2 members and 99 m2 of living space: In the first analysis performed in spring 2022, the heating energy costs of households using fossil fuels to heat their home were around 38% higher than in 2021. Owing to the further increase in raw material prices, these households are now likely to incur ancillary costs that are 51% higher on average than in 2021 (as of August 2022).

Ancillary costs for oil and gas heating are increasing the most

Ancillary costs increasing the most for oil and gas heating

Source: Swiss Federal Statistical Office, Prognos, EnergieSchweiz, energie.ch, Credit Suisse
Last data point: 2021

Cost benefits of alternative energies for homeowners

Households that are heated using electric heat pumps benefit from their high energy efficiency, paying 65% less for heating energy than households that use fossil fuels (as of August 2022). As regulated electricity prices have increased very little in the current year, the benefit in ancillary costs has become even greater compared to the previous year.

However, with the increase in consumer electricity prices now announced for 2023, the heating energy costs of heat pumps will also rise significantly. As a result, the advantage over fossil-powered heating systems is likely to decline slightly again to 54% – as long as the prices for gas and heating oil do not rise even further.

Avoid high energy prices with heat pumps and photovoltaic systems

Given that the cost calculations of non-fossil heating systems are clearly more advantageous, it's hardly surprising that the demand for heat pumps and solar systems has risen sharply. According to industry estimates, the number of heat pumps sold in Switzerland is set to rise to 40,000 units this year, which would be an increase of 19% on the previous year.

Growth in photovoltaics is likely to be even more pronounced, with a conservative estimate of 32%. The reasons for this are clear: Photovoltaic systems provide electricity for electromobility, while heat pumps help to safeguard supplies and protect against record-high electricity prices – not to mention that the cost of producing electricity using photovoltaics has fallen massively in recent years.

Energy prices: High demand for photovoltaic systems

Counteract energy prices: High demand for photovoltaic systems

Source: Swiss Federal Office of Energy, Swissolar
Last data point: 2022

Rise in renovations and alterations among homeowners

In the last six months, the volume of applications for building conversions was 22% higher overall than the ten-year average. There are many reasons for this. Together with the run on heat pumps and solar installations, the demand for energy renovations has also increased, since taking suitable measures on the building envelope can make alternative heating systems more efficient.

Reduce ancillary costs: Renovation volume up 22%

Cutting ancillary costs: Renovation volume 22% above longer-term average

Source: Baublatt, Credit Suisse, Geostat
Last data point: 05/ 2022