Industry needs competitive energy prices

The announcements of the last few weeks clearly show how serious the situation is for energy-intensive industry in Germany: production at domestic sites in Europe is being reduced, investments in new plants are taking place in North America or in Asia. “If industrial electricity prices of 120 to 140 €/MWh become the “new normal”, creeping deindustrialisation is inevitable. The lack of competitiveness with locations with significantly lower energy costs will lead to further relocations,” says Christian Seyfert, Chief Executive of the VIK Verband der Industriellen Energie- und Kraftwirtschaft e.V., Berlin/Germany. In view of the high energy prices, especially for electricity, the conditions for competitive domestic production are becoming increasingly difficult. It is expected to take at least another six years until the planned “green” industrial electricity price is reached – six years in which the production costs of many German goods will exceed the possible revenue in international competition. That is far too long. In this debate, the VIK expressly welcomes the fact that the Federal Ministry of Economics and Climate Change is considering a national and European interim model. However, it is still unclear what this should look like and when at least the proposals are to be published. Although energy prices have recently fallen again, they remain at a very high level in international comparison and in comparison to the pre-crisis year 2019. Before 2019, electricity prices were in the range of 20 to 50 €/MWh, but today companies still face prices of 120 to 140 €/­MWh. “Profit margins are getting lower, companies’ equity ratios are decreasing and depreciation will exceed investments in the future,” warns Seyfert. Investments will still be made in maintenance and preservation, but less and less beyond that. Without these necessary new investments, expenditure on industrial transformation and more climate-friendly technologies will also fail to materialise. Time is pressing for a solution here, because when long-term electricity supply contracts expire in 2025 and the current market electricity prices have to be paid, basic production is often simply no longer profitable. In recent weeks, there have already been the first prominent case studies of this development from the chemical, metal and automotive industries, which have been widely reported. Production cutbacks, production stops, staff reductions, new investments in other regions of the world with more attractive location conditions – this is how Germany is eroding as an industrial location. The situation is particularly problematic for energy-intensive basic industries and export-oriented companies. Globally offered products compete with those from China, the USA and other regions, which have considerable competitive advantages in view of significantly lower energy prices and other locational advantages. Many of these products are also actually urgently needed in the energy transition and the industrial transformation to climate neutrality in Germany. The high level of electricity prices also makes the location of new industries less likely, both in international and European comparison. “With these electricity prices, it is not possible to bring back essential parts of the value chains or attract battery cell as well as photovoltaic module producers. At present, it is simply unprofitable to invest in Germany. If the industrial transformation to climate neutrality does not take place in Germany because of the too high energy prices, but elsewhere, nothing will be gained for our location,” says Seyfert.(VIK/Si.)