Rising electricity costs a ‘big concern’ for Germany’s chemicals industry – VCI

November 30, 2018

Germany’s position as the second-most expensive country in the EU for electricity prices is a “big concern” for the chemical industry, a spokesperson for the country’s trade group VCI said to ICIS on Thursday.

Earlier this week, the European statistical agency Eurostat said that average household electricity prices in Germany stood at €29.50 per 100 kilowatt hours (kWh) in the first half of 2018, only behind Denmark’s €31.30 per 100 kWh.

The EU average stood at €20 per 100 kWh.

Germany’s chemical industry is the largest consumer of industrial electricity, said VCI, with about one tenth of total consumption.

Energy prices are, therefore, of utmost importance to the industry’s global competitiveness, the trade group added.

While high electricity prices in Germany is not news to VCI, it has been worried by the further rise of prices throughout the last year, adding that measures to “stop” increasing prices should be implemented.

“In the past, there was still a small gap between German and Italian energy prices, so Germany was in the top tier, but not at the very top, as the latest Eurostat statistics show,” the VCI spokesperson said.

“This development is a big concern for us.”

VCI pointed out two critical factors that are likely to cause further price hikes, and how they should be avoided.

Firstly, the German government’s continues to promote new renewables capacities, which will lead to an increase in a renewable energies levy, also known as EEG Umlage.

“German chemistry companies, with significant contribution from the Mittelstand [the German word for small- and medium-sized enterprises, or SMEs], already pay more than €1.2bn annually for these Umlage subsidies,” said VCI.

“This is why we are in favour of changing the funding system for new renewables capacities. New capacities should be paid for by the federal budget, not be electricity consumers through the mentioned levy.”

The second issue that will likely increase electricity prices is Germany’s planned phasing out of coal-based electricity generation entirely in order to meet EU climate targets, by reducing carbon dioxide (CO2) emissions.

Coal is one of the most polluting fossil fuels used to produce electricity.

VCI said that, although a timeframe for this has not yet been determined, it is likely that it will have an effect on electricity prices and therefore the chemical industry.

“A premature coal exit leads to higher electricity prices, due to the shift of the marginal fuel from coal to natural gas. Every cent per kWh more in the electricity price costs the German chemical industry €500m,” said the trade group.

“These are costs that our competitors abroad do not have. This is why we demand that there is a compensation for these additional costs.”

VCI concluded arguing that it would not enter into the political discussion about a fixed price for electricity, although it said it is in favour of a “working” energy market.

“This is why we need political action to turn the tide and come up with measures to strengthen competitiveness of energy intensive industries instead of risking a loss in competitiveness by installing measures that lead to further price hikes.”

The question of the impact of electricity costs on the chemicals industry is one that is also being discussed at length in Spain.

According to Eurostat figures, the country had the fourth most-expensive electricity prices in the EU during the first half of this year, at €23.8 per 100 kWh.

The new government which took office in June suspended a tax on electricity generation that is already saving Spanish corporates and final consumers up to 5%, or around €2.8bn/year, on their electricity bills, according to the country’s chemicals trade group FEIQUE.

The government is due to decide whether to extend the tax’s suspension in February.

FEIQUE is particularly hopeful that the suspension will be renewed, its director general Juan Antonio Labat told ICIS earlier this month, arguing that the savings have proved to be “very beneficial” for chemicals.

Meanwhile, the head of chemicals at Spain’s largest trade union Comisiones Obreras (CCOO) Daniel Martinez also said to ICIS that the country has a “big problem” with electricity costs.

“We have a big problem with the electricity costs, and the government says that they want to help energy-intensive industries like chemicals,” said the trade union leader.

“However, the roadmap to achieve a more self-sufficient industry has not been agreed with the affected sectors.”

A full list of EU countries’ electricity prices can be found on this Eurostat page.

Pictured: A coal-fired power station in Hamm, in the industrious German state of North Rhine-Westphalia. Phasing out coal prematurely could increase electricity prices for chemicals, trade group VCI said
Picture source: Hans Blossey/imageBROKER/REX/Shutterstock

By Niall Swan

Source: ICIS News