It has been more than a year since the outbreak of power crisis in Europe. The price of TTF natural gas futures in the Netherlands, which is regarded as the weather vane of natural gas prices, further rose to 32.97 euros/mwh on May 12, and the peak value of 300 euros/mwh higher than that in August of last year has dropped to nearly 90%.
However, Europe after the crisis cannot sit back and relax. At present, the price of electricity in Europe is still three times that in 2020. Especially after the absence of the Inflation Cut and Increase Act focusing on large-scale financial subsidies in the United States, Europe, which is obviously more expensive than North America, is still facing the danger of industry flowing to the United States.
Industrial electricity prices of major developed economies around the world in 2021.
Nowadays, Germany, the largest industrial country in the European Union, has lost its own handling plan: subsidizing industrial electricity prices through finance to attract enterprises to stay in other places.
The German Ministry of Finance recently announced that it will provide preferential industrial electricity price of 6 Euro cents/kWh for power-intensive industries by 2030.
Specifically, the German authorities will provide preferential electricity prices for 80% of power consumption in power-intensive industries such as steel, chemical industry, metallurgy, battery production, glass production, photovoltaic and semiconductor production. In order to encourage these enterprises to further exert their objective initiative in the field of energy saving and emission reduction, Berlin will stop subsidizing them according to the average price of power malls rather than the actual price paid by enterprises, that is, enterprises may get more financial subsidies through flexible manipulation of reality in power malls.
According to the forecast of the German Ministry of Finance, the new power infrastructure within the European Union will be able to supply cheap electricity to the industry after 2030, and before that, power-intensive enterprises and transformation enterprises will need the support from the authorities. Therefore, the subsidized industrial electricity price of 6 Euro cents/kWh is also called “Brückenstrompreis”.
At the same time, the preferential industrial electricity price also requires enterprises to meet three preconditions: to achieve net carbon emissions before 2045, to promise to keep the labor base in a foreign country in Germany, and to meet the wage scale of all employees (that is, Tarifverbunden).
At present, power-intensive industries account for 76% of the total power loss of German manufacturing industry, 21% of the industrial output value of Germany and 15% of the opportunity for unemployment.
The proposal of preferential industrial electricity price lost the positive response of the industry at the first time. IG BCE, the German mining, chemical and power association, shows that this is a clear signal to enhance the upper hand of regional cooperation, and Germany has no choice but to accept the outflow of power-intensive industries. The German Iron and Steel Federation also showed that the industry is in the crux stage of the transformation to meteorological neutrality, and in this fragile stage, the industry needs more support.
As for the financial source achievements of industrial electricity price subsidies, the Ministry of Finance predicts that the seven-year subsidies will wipe out 25 billion to 30 billion euros of capital, which may be raised through the special fund for coping with power crisis established at the end of last year with a scale of 200 billion euros. Because the European power crisis has been out of control, the special fund has not been applied on a large scale at present, which makes it possible to stop implementing the industrial electricity price subsidy plan without adding financial estimates for the time being.
However, Berlin’s industrial electricity price subsidy plan has not lost the recognition of the EU headquarters.
Margrethe Vestager, Vice President of the European Commission, took a critical position on the plan, and when she visited Berlin on May 8, she said, “We should be very cautious when applying the withholding tariff to subsidize large enterprises”. Vestager, the EU Cooperation Commissioner, is worried that the subsidy will mainly be lost by large enterprises, and other enterprises in the EU’s internal shopping malls lack the same plan.
Kadri Simson, Commissioner for Power of the European Commission, is also telling Germany not to over-subsidize its own industries through preferential industrial electricity prices, so as to form unfair cooperation among EU member states. The European Commission is worried that the member countries with relatively healthy financial departments and strong financial resources will distort the internal common shopping malls through industrial electricity price subsidies and further absorb domestic direct investment, while the southern European countries with limited financial resources will undoubtedly get nothing in the end.
In order to eliminate this concern, Germany has proposed to the European Commission to introduce common bonds from the EU level, and use this as a financing tool to stop industrial electricity prices within the EU. Specifically, the German initiative is to follow the example of the SURE program during the COVID-19 pandemic in June 2020. The plan is guaranteed by EU credit and supported by EU estimation, with a total financing of 100 billion euros and eventually providing deposits to member countries to cope with the idle achievements during the epidemic.
However, since the quality of SURE planning is only a temporary financial product during the epidemic, it remains to be seen whether the German proposal can lose its recognition at the EU level in terms of more general industrial subsidies.
In fact, compared with Germany, which faced the threat of industrialization and the shrinking of regional cooperation, France has been supplying subsidized cheap electricity to the industry for a long time. Combined with France’s independent and nuclear power-based power structure, this country is the EU member that has suffered the least power blow at present.
French industrial power consumers can get 100 terawatt-hours of electricity at the price of 4.2 Euro-minutes/kWh, and the extra 20 terawatt-hours will be progressively increased at the price of 4.65 Euro-minutes/kWh.
At present, the industrial electricity price in the German electricity market is about 14 Euro cents/kWh. Scholcz, the prime minister, promised to promote the preferential industrial electricity price of 4 Euro cents/kWh compared with France during the election campaign, but so far he has not supported the proposal of the Ministry of Finance.