The new state aid framework, CISAF, supports energy-intensive industries to compensate for high electricity costs. But an analysis shows that only certain countries have the possibility to fully utilise the price relief state aid measure.
One of the European Commission’s late additions to the new state aid framework, CISAF, is support for energy-intensive industries to compensate for high electricity costs. The level of electricity prices is one of the fundamental factors that companies consider when deciding where to locate their production. Aid that reduces such costs, introduced in certain Member States, may therefore lead to both distorted competition between existing companies and influence investment decisions.
Confederation of Swedish Enterprise have therefore carried out an initial analysis of how the new opportunities to provide state aid for reducing electricity costs might be applied in practice, and what effects they could have on electricity prices.
– We have provided examples from several countries but have chosen to focus on Germany and Sweden, says Stefan Sagebro, expert in industrial policy, competition and state aid.
– We have run the numbers, and it shows what we expected – that only certain countries have the possibility to utilise the price relief state aid measure. Some Member States like Sweden cannot use it at all, says Stefan Sagebro.
It also demonstrates that the potential reduction in electricity prices could be significant, and may alter existing differences between certain countries.
– But the reduction will not be so high that it will eliminate gaps between countries with the highest and lowest prices, unless the countries concerned also implement changes to the levies and taxation of electricity infrastructure and consumption, says Stefan Sagebro.
– There is also concern that using this kind of short-term measure could risk diverting attention away from more important structural reforms in the medium to long term for the electricity market, he adds.
Fossil fuelled power plants, and in particular gas, play an outsized role in setting EU wholesale power prices as they are needed as dispatchable power, both currently and at least to the mid-2030:s.
– The future competitiveness of the EU’s electricity market relies heavily on the ability to replace the expensive dispatchable fossil power with dispatchable fossil free alternatives like e.g. nuclear or renewables with storage, says Stefan Kvarfordt, Expert on Energy and Climate policies, says Stefan Kvarfordt, expert in energy- och climatepolicies.
EU Industrial StrategyEnergy