Electricity and industrial competitiveness
Industrial competitiveness is at the centre of the Polish debate about the future (and the logic) of climate and energy policy. There is a widely held opinion that low prices are the most important condition for a thriving industry.
The study determined that electricity makes up around 2.2 percent of general costs for companies. For around 10 percent of companies, power prices are very important. These are energy intensive industries, which already profit today from exceptions, so-called carbon leakage instruments, regulated by national governments. The study also showed that electricity prices are not the most important factor for competitiveness and that they are not equally important for all branches. The reliability of the power supply and the connection to the network are more important. The study also analysed which industry branches in Poland are well positioned for the future and will therefore further advance the Polish economy.
- A fast economic growth of Poland is inextricably coupled with the process of building an advanced industry. In the past decade, a process of a quiet albeit very intensive industrialisation took place in Poland. This is a result of the economic transformation, which began already in the 1990s, and of a strong development impulse which the EU accession gave to the country. Despite an increase in the electricity prices in excess of 80% in 2003-2013, the value added of the manufacturing industry went up by 115% and productivity by 97%. Thus, the statement that higher energy prices make the Polish manufacturing less competitive cannot be corroborated by the historical data.
- We may expect that further growth in the volume and complexity of manufactured goods, which is essential to attain the Western European level of development, will have a significant impact on electricity consumption. As a result, the demand for energy from the Polish industry will be growing in the coming decades despite the improved energy efficiency.
- The reason for a limited impact of the electricity cost on competitiveness of the manu-facturing at large is the fact that the cost of electricity is of marginal significance in the balance sheets of most of the enterprises. The average share of energy in the expenses structure of the industrial enterprises in Poland is 2.2%. For only 10% of the industrial plants does that share exceed 5%.
- From the viewpoint of many enterprises, quality and stability of electricity supply is essential. That holds true especially for the machinery and metalworking as well as transport equipment, which have been primary growth drivers of the industrial activity in Poland over the past decade.
- For about 10% of the Polish industry, the cost of energy has a great impact on competi-tiveness. These are mainly large consumers who take advantage of relatively low prices which result from lower transmission costs and a bigger bargaining clout that they wield compared with smaller consumers. In Poland, there has been a significant yet unused room for improvement of their cost competitiveness. Even though the average price of electricity for industrial use is still among the lowest in Europe, the most sensitive high energy-intensive sectors are paying the price of flat tax rates and other levies (excise tax, “coloured” certificates) which are not diversified for various categories of consumers.
- The impact of ETS on the electricity cost is not a significant factor for the competitive-ness of most of the industrial sectors. It is, however, quite important for some production processes. These processes have been quite well identified by the European Com-mission and put on the so-called carbon leakage list. The European law does allow for the protection of electricity-intensive enterprises against increasing electricity prices but such measures require a decision to be taken at the domestic level, i.e. by the Polish government.
Title of the analysis: "Electricity and industrial competitiveness"
Date of publication: Naovember 2014
Authors: Dr Maciej Bukowski, Aleksander Śniegocki (WiseEuropa)