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Security of supply and energy prices are of primary importance

The German Association of the Industrial Energy and Power Industry e. V. (VIK), Berlin, sees a turning point in terms of foreign and security policy with Vladimir Putin leading Russia into war against Ukraine. In a recently published policy paper, the VIK has therefore called for a full assessment of every possible option to ensure an uninterruptible power supply in Germany. In addition to the increased development of renewable energies, which will only bring significant additional capacity to the market in the medium to long term, it must be possible to fall back on conventional production in the short term and temporarily to a greater extent. If required for securing the supply, coal-fired power plants should be taken out of reserve and standby for the duration of the crisis only. Other closures of conventional capacities must be verified and possible recommissionings are to be considered. According to the VIK, the necessary regulatory requirements should be modified or temporarily adjusted here, for political reasons.

Energy prices may also require urgent action, as they are moving towards a record high. In view of state sponsored price components and costs, urgent steps must be taken to provide significant relief to private and industrial consumers, and to calm the markets. The VIK therefore suggests a reduction in electricity tax to the European minimum rate, with retroactive effect from 1st January 2022, exemption for industrial electricity consumers from other levies (KWK/Offshore), extension of the Regulation on Interruptible Loads beyond 30th June 2022 and an increase of the tender volume, the legal guarantee for compensation of the price of electricity until 2030 and suspension of the Fuel Emissions Trading Act (BEHG) for the duration of the crisis. A temporary, conditioned extension of the withdrawal from conventional power generation could also have a dampening effect on prices, as power generation capacities remaining in the market increase the offer. This is also countered with an increased demand for natural gas.

At European level, the VIK also calls to suspend the Market Stability Reserve (MSR), extract 400 Mt from the MSR and auction it all off by the end of 2022. A minimum and maximum price for CO2 certificates (price corridor) would also counteract immediately disruptive price developments and secure the competitive advantage and trend for climate-friendly technologies. The VIK also suggests the withdrawal of restrictions from the new Climate, Energy and Environmental Aid Guidelines (CEEAG) and expansion of the group and scope of beneficiaries, the waiver of escalations as part of other ETS reforms, the generous formulation of criteria to create “green” hydrogen, a CBAM introduction for test purposes (on a voluntary basis only) and an audit for the implementation of a European industrial electricity price to transform and guarantee international competitiveness.

Lastly, to ensure the industry is supplied with natural gas, the VIK suggests a short-term update to the gas contingency plan. Providing a supply to the population and major infrastructures, e. g. hospitals, is the priority and is therefore already regulated. But the industry also requires an emergency supply of natural gas, otherwise it could face massive, possibly irreparable damage with grave consequences for production and added value in Germany. A Task Force could be drafted in immediately to help arrange compensation, together with the industry, for the possible lack of gas supplies from Russia and the mobilisation of new natural gas capacities. (VIK/Si.)