(Montel) Germany may need to develop further measures to shield its industry from high energy costs, the Greens’ parliamentary speaker on energy affairs told Montel in an interview.
Ingrid Nestle – whose party controls the economy ministry – saw a “gap” emerging between the immediate relief of price controls due to expire next year and the distant benefits of a plan to tie industrial power prices to the cost of offshore wind.
The former reimburse businesses for a portion of their power and gas bills after Russia`s war on Ukraine shocked energy markets in 2022.
The latter aims to secure affordable, 20-year supply deals for industrial consumers, though only by the end of the decade.
“I do hope we can get it done earlier – nevertheless, earlier will still be too late. I agree we need an additional answer in the short term,” Nestle said.
While benchmark European gas prices have tumbled from last year’s record above EUR 340/MWh to around EUR 56/MWh, they remain historically high and the main reason electricity is also expensive.
The BNA network regulator continues to see the supply outlook for next winter as critical, while industry groups warn Europe is pushing manufacturers abroad to North America and Asia.
Imports outweigh exports
Following decades of generating trade surpluses of up to EUR 50bn, European chemical makers were importing more than they were exporting by the end of last year, said the head of German chemicals giant BASF.
“Energy costs are the real driver,” Martin Brudermueller told investment analysts in October.
“No one really talks about competitiveness in Brussels.”
The economy ministry recently began working with consultancies to develop a system of contracts for difference (CFD) that would match the country’s clean energy goals to its industry’s need to remain competitive.
CFDs involve one party paying the other the difference between an agreed price and wholesale levels, depending upon whether the market strays above or below the parties’ contracted price.
This had three advantages, Nestle said.
First, it would avoid subsidies. Secondly, it would provide industry with long-term security, reducing its exposure to price fluctuations. Finally, it would encourage markets to discover flexible responses to variations in wind and solar output.
“At the moment, there is a lack of a clear market for this flexibility that would encourage its use,” Nestle said.
“This [mechanism] would encourage it. It's a very, very market-oriented instrument.”
‘Break with markets’
Yet critics – like Mark Helfrich, an energy spokesman for the Christian Democratic Union (CDU), the country’s main opposition party – regard the plans as “too late, too little, too complicated”.
Germany faced deindustrialisation and rapid job losses unless it urgently secured energy for industry in a way that was “unbureaucratic and internationally competitive”, Helfrich said.
“The model proposed by the economy ministry could hardly be further from this.”
Germany should instead focus on growing supply and curbing demand as swiftly as possible without preference for one technology over another, said the European Federation of Energy Traders (Efet).
“Power purchase agreements already provide this linkage, market-based and without state involvement,” said the head of Efet’s German chapter, Barbara Lempp.
“The break with markets began a while ago and would be perpetuated with industrial electricity prices via CFDs. Basically, the market is not being trusted to balance supply and demand.”
Yesterday, Montel reported that Nestle had urged Germans to use gas “sensibly”, since the volatile energy situation caused by the Ukraine war still persisted.
The former reimburse businesses for a portion of their power and gas bills after Russia`s war on Ukraine shocked energy markets in 2022.
The latter aims to secure affordable, 20-year supply deals for industrial consumers, though only by the end of the decade.
“I do hope we can get it done earlier – nevertheless, earlier will still be too late. I agree we need an additional answer in the short term,” Nestle said.
While benchmark European gas prices have tumbled from last year’s record above EUR 340/MWh to around EUR 56/MWh, they remain historically high and the main reason electricity is also expensive.
The BNA network regulator continues to see the supply outlook for next winter as critical, while industry groups warn Europe is pushing manufacturers abroad to North America and Asia.
Imports outweigh exports
Following decades of generating trade surpluses of up to EUR 50bn, European chemical makers were importing more than they were exporting by the end of last year, said the head of German chemicals giant BASF.
“Energy costs are the real driver,” Martin Brudermueller told investment analysts in October.
“No one really talks about competitiveness in Brussels.”
The economy ministry recently began working with consultancies to develop a system of contracts for difference (CFD) that would match the country’s clean energy goals to its industry’s need to remain competitive.
CFDs involve one party paying the other the difference between an agreed price and wholesale levels, depending upon whether the market strays above or below the parties’ contracted price.
This had three advantages, Nestle said.
First, it would avoid subsidies. Secondly, it would provide industry with long-term security, reducing its exposure to price fluctuations. Finally, it would encourage markets to discover flexible responses to variations in wind and solar output.
“At the moment, there is a lack of a clear market for this flexibility that would encourage its use,” Nestle said.
“This [mechanism] would encourage it. It's a very, very market-oriented instrument.”
‘Break with markets’
Yet critics – like Mark Helfrich, an energy spokesman for the Christian Democratic Union (CDU), the country’s main opposition party – regard the plans as “too late, too little, too complicated”.
Germany faced deindustrialisation and rapid job losses unless it urgently secured energy for industry in a way that was “unbureaucratic and internationally competitive”, Helfrich said.
“The model proposed by the economy ministry could hardly be further from this.”
Germany should instead focus on growing supply and curbing demand as swiftly as possible without preference for one technology over another, said the European Federation of Energy Traders (Efet).
“Power purchase agreements already provide this linkage, market-based and without state involvement,” said the head of Efet’s German chapter, Barbara Lempp.
“The break with markets began a while ago and would be perpetuated with industrial electricity prices via CFDs. Basically, the market is not being trusted to balance supply and demand.”
Yesterday, Montel reported that Nestle had urged Germans to use gas “sensibly”, since the volatile energy situation caused by the Ukraine war still persisted.
