Czech industry looks askance as Berlin prolongs aid for heavy energy users

The target of rounding off Europe’s internal energy market by the end of the year is a no hoper. More worrying, some moves suggest that a completely piecemeal not than completed market might be the more likely outcome with prolonged German low electricity prices for its industry one of the signs.

Photo: archive of Radio PraguePhoto: archive of Radio Prague There are some ideas which almost seem laughable from the start and others which quickly become so on the way.

In the former category could come the European Commission’s ambitions of a few years ago to make the continent the knowledge based economic and competitive world leader by 2010. That one, fuelled more on hopes than facts, sunk on the rocks of the economic crisis almost before the ink was dry.

In the latter category could come the Commission’s hopes of completing the European energy market by the end of this year. Add a few more years to the target, the likelihood that maybe at best more coherent regional markets will evolve, and add the proviso that the big goal might never happen and the whole process might go into reverse, and you probably have as good a grasp of the big picture as you’re likely to get.

The main man behind the Czech Republic’s energy policy, deputy minister Pavel Šolc, at a conference this week gave a 10 percent chance that the EU’s single energy market would emerge as the Brussels planners hope. He gave a 50 percent chance that two types of electricity market will evolve: one where different types of national support are given to companies based on the type of fuel they are using, so-called capacity support, with the power produced being sold on open market. And he gave a 40 percent chance that no real European energy market will happen but at best a series of better coordinated regional markets with lots of different national programmes muddying the picture.

One signal that the two latter scenarios are moving ahead according to the minister’s predictions has come in the last days out of Berlin and, perhaps surprisingly, Brussels itself. Germany had protected vast swathes of its industry from paying the cost of support by renewable power by putting the burden on households. Not such a big problem from a domestic point of view given the comparative wealth of German households, but a problem for Germany’s industrial competitors since they were in effect getting massive power subsidies. Czech industry, which shares the heavy renewables support burden with households, felt particular aggrieved.

The European Commission launched proceedings against the illicit German aid but has now signalled that it is prepared to accept a pared down version of the original aid covering around a third of the industrial companies. Big Czech companies are crying out loud that Germany is breaking the rules but the government wants to foster friendly relations with Berlin and no official protests can be expected according to State Secretary for European Affairs, Tomáš Prouza.

In a sort of poor man’s response though, Prague is now drawing up its own support for heavy energy using companies. Basically, really big consumers such as steel companies should be burdened with lower levels of renewables support on the grounds that their high and regular offtake of electricity helps prevent the sort of disruptive power flows that can blow the fuse on the whole electricity distribution network.

Multiply, that reaction another 26 times and you can get an impression how piecemeal the so-called internal market could go. So, take your own bet on how the energy market will evolve but don’t count on any celebrations at the end of this year for a piece of work well done.