Spain occupies a privileged place in the inflation rankings. According to Eurostat data, it is the Community country where prices grew the least in November and December. The improvement has come thanks to the fact that electricity and fuel are becoming more expensive at a much lower rate than they did in summer, when the CPI peaked. But while this evolution represents an important relief for sectors such as transport or tourism —truck drivers refuel for less money, and a cheaper country is more attractive to visitors, who are encouraged to consume more—, from the industry they complain about that they continue to lose competitiveness compared to their European rivals because they are receiving much higher aid.

Pedro González, general director of the electro-intensive employers’ association (AEGE), warns that wholesale prices are not a mirror of what is happening on the ground. “If the rules were the same and we had access to energy only in the markets, Spain would be in a better position, but the reality is that European countries are adopting more measures to support their industry, and that leads us to a competitive disadvantage ”, he maintains.

Spanish companies point especially to France, where the State subsidizes part of the electricity through the EDF company. In 2022, the annual amount that it offers increased from 100 TWh to 120 TWh to only 42 euros per megawatt hour through the ARENH mechanism (acronym for Regulated Access to Historical Nuclear Energy), a price outside the market if one takes into account that The average price of electricity in the Spanish wholesale market closed 2022 at 209 euros per megawatt hour (MWh).

José Antonio Jainaga, president of the Spanish steel company Sidenor, is outraged by this situation. “French industry has enjoyed a huge amount of energy at unbeatable prices for years. To locate the magnitude of the problem, this volume of energy is equivalent to approximately 50% of the total consumption in Spain, and to illustrate the price advantage, electrical energy in France is trading at above 400 euros per MWh by the year 2023. EDF is 100% owned by the French State, is there room for higher-calibre State aid? We have repeatedly denounced, without any success, this unfair situation that jeopardizes the competitiveness of the Spanish industry, and therefore its future”, he laments.

The problem comes from afar. This fixed price has been active in France since 2011, and the mechanism is expected to expire in 2025. But it is more harmful for Spanish firms the higher the price of electricity, because the cost gap with the neighboring country widens, which which may also result in more industries choosing to settle in France to enjoy this advantage. There are examples of affected companies: Ferroglobe has put the 400 workers of its three factories in Galicia, Cantabria and Aragón in ERTE until the end of 2024 due to high energy prices. Alcoa has taken similar steps. And ArcelorMittal keeps its 8,300 workers in Spain in ERTE and is considering extending the downtime until the end of this year.

The Spanish industry has lagged even further behind after Germany’s decision to launch a multimillion-dollar aid plan. “The German government has decided, with the approval of the European Commission, to compensate its industry with 27.5 billion euros over the next 10 years. Spain has to defend its industry”, insists Jainaga, who calls for reforms in the system. “The most important point is the very structure of the wholesale electricity market in Spain. It trades more than three quarters of the energy consumed in the country, while in France and Germany it works as an adjustment market to buy shortfalls and sell excess energy, and its importance does not exceed 20% of energy negotiated. In other words, in France and Germany most of the electrical energy,

The Secretary of State for the Economy, Gonzalo García Andrés, explains that “massive aid can distort the internal market, as well as being onerous for the public treasury.” And he defends the actions of the Executive. “The Government has focused its response on lowering the price of energy, which is the center of the problem. New measures have been adopted in the royal decree-law for those companies most affected. In addition, the decarbonization PERTE has been approved so that the aid is allocated to investments in energy efficiency and sustainability. Among the measures taken, the Government will extend the reduction of the special electricity tax, and will extend until June 30 the suspension of the tax on electricity generation. In addition, the 80% drop in tolls for the electro-intensive industry is maintained until the second semester.

Level the ground

AEGE’s González believes, however, that the Spanish government should expand its aid packages, as they still do not match those of its main rivals. “We propose measures to balance the playing field with European competitors. If the French, Italians and Germans can adopt them, they would also be adoptable here. We do not ask for more, only conditions similar to those of our competitors”. The manager of the employers’ association points out that in Europe each country is doing its own thing, in a kind of Wild West that depends to a large extent on the financial muscle of each country, and that leaves winners and losers. “I understand the vision of the Spanish Government that tax competition between States is a disaster, but there are countries that are applying it, and if with that they manage to make their industry survive…”.

According to their data, the more than 2,000 electro-intensive companies account for 20% of the electricity demand in Spain. And 10% of all Spanish consumption is accounted for by the 27 member companies of AEGE with their 76 factories in sectors such as the steel, chemical, paper and pharmaceutical sectors, which gives an idea of ​​the enormous expense that this item generates.

In the case of gas, Verónica Riviere, president of the Gas Industrial employers’ association, perceives equally pernicious dynamics for the competitiveness of Spanish companies. “All European countries are not in the same conditions. There are some who have showered aid and distort the market. And they are not only the largest: for example, Portugal discounts 40 euros on the bill, which means that we pay twice as much here”. Riviere draws attention to less industrial activity. “An indicator is the consumption of gas to make your final product: if we compare ourselves with last year, it has been reduced by 30%. We are producing less due to stops and relocations”.

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