Ministry assures chemicals industry on Energiewende costs

The Federal Energy Ministry (BMWi) pledged in a joint statement with the German chemicals industry to defend power price privileges for energy intensive industries as well as to maintain the practice of free emission allowances for these businesses.

The ministry will work towards a “cost efficient implementation of the energy transition”, including competitive power prices and stable framework conditions for energy intensive industries, said the document signed by energy minister Sigmar Gabriel and leaders of the German Chemicals Industry Association (VCI), the Chemicals Industry Employer’s Association (BAVC) and trade union IG BCE.

The German chemicals industry has repeatedly voiced its concerns over high power prices in Europe and particularly in Germany as a consequence of the country's Energiewende, saying that they hampered its competitiveness. Referring to a study by Oxford Economics published in 2014, VCI president Marijn Dekkers said in a statement after the meeting that the quality of Germany as a business location for the chemicals industry had deteriorated compared to the US or China.

Dekkers stressed that security of supply and affordable power were essential to ensure that companies would continue to invest in Germany. “In return we will work on improving our energy efficiency by inter-connecting companies more closely," he said. The sector would also continue its efforts to develop energy-saving products, the joint agreement says.

The VCI reported in late February that production and employment in the industry rose by 1.5 percent in 2014, with revenues abroad rising by 1.1 percent. The association sees production growing by 1.5 percent this year.

“We will work together so that the chemicals industry in Germany will remain successful in the future and will strengthen and increase its competitiveness," Sigmar Gabriel said.

The joint statement gave an outline of priority actions and measures. The paper listed what either one of the parties is planning on doing or would like to see done, with regards to the power market reform, the reform of the European Emissions Trading System (EU ETS) and energy efficiency measures.

The industry would like to see an energy-only market plus a capacity reserve as a result of the upcoming reforms. The ministry will decide on the new power market design this summer (See CLEW Dossier The power market and the energy transition). Minister Gabriel as well as Chancellor Angela Merkel have indicated that they are against a full-fledged capacity market with payments to utilities for maintaining conventional power plants as back-up to fluctuating renewable power sources.

Concerning the EU ETS, the ministry is advocating a timely reform but wants to make sure that measures to prevent carbon leakage will include a system of free allocation of allowances and compensation of indirect costs for industry, the joint statement said.