Energy. ‘Closing centers was premature’

Energia. "Fechar centrais foi prematuro"

By Daniela Soares Ferreira and Sonia Peres Pinto

The government announced the “biggest intervention ever” in energy. This is a €3 billion package to minimize the impact of rising energy costs. An intervention that mainly benefits business customers. But this is the bill to be paid as the government has pushed forward the closure of the two coal plants.

This is the view of Clemente Pedro Nunes, professor at the Instituto Superior Técnico. “We are paying the price for the massive blunder committed by the government in closing the two factories prematurely. The early closure of the Sines plant in July last year and of Pego in November have cost us more than EUR 2,100 million so far, 900 million less compared to the amount announced by management.

Although the support for natural gas is not directly related to electricity or the closure of the Pego plant, it does have an indirect effect, according to the official. “With the closure of the Pego plant and the Sines plant, we are more dependent on natural gas and therefore we have to buy more natural gas to produce electricity and with that we go to the market to buy more and more we buy from the market, but it raises the price. We have to pay the price that is being asked. It’s the basic principle of supply and demand, and we’re helping the market rise because we’re consuming more natural gas than we should,” he emphasizes.

Mira Amaral also assures our newspaper that if the Pego power plant worked, we would have more natural gas to produce electricity and would not have to import so much electricity from Spain.

What’s on the table

According to Duarte Cordeiro, the government aims with this package to save 30% to 31% on electricity and 23% to 42% on gas. And this intervention will have two components: 1 billion euros in surpluses from public accounts 2022 will be channeled to reduce natural gas costs for business consumers in 2023. On the other hand, 2 billion euros will be injected into the electrical system, also for the benefit of business customers.

With regard to natural gas, the Minister of the Environment predicts that this injection of one billion euros, spread over business consumption estimated at 24 terawatt hours (TWh), will reduce gas costs for companies by 42 euros per megawatt hour (MWh). ).

A discount that allows companies to save 23% to 42% from what they would pay in 2023 with the prices the government estimates for gas next year. According to the Minister of the Environment, the college outlined two scenarios, one in which companies’ gas costs could rise to 4.9 billion euros in 2023 and another in which they could rise to 2.75 billion euros. According to the government, companies in Portugal bore natural gas costs of EUR 745 million in 2021.

With regard to electricity, the two billion euros could be broken down into 500 million euros in ‘policy measures’ (such as the allocation of revenues from the auctions of CO2 allowances and the Energy Sector’s Extraordinary Contribution to the electricity) and 1,500 million euros in « regulatory measures» (including channeling to industrial customers the benefits of the Tapada do Outeiro gas plant with its long-term natural gas contracts).

An amount that the official says could enable companies to save nearly 30% compared to what they would pay in 2023 according to government projections, based on a forecast of a wholesale electricity price of 258 euros per MWh for 2023 .

Duarte Cordeiro said that “this intervention is essential for an obvious reason: it was from energy that the effects of inflation began, which we feel all over Europe and in Portugal, it is through intervention in the energy market that we also were able to spread energy price increases across society’.

For Duarte Cordeiro: “when we meddle with gas and electricity, we naturally meddle with bread, milk, in all areas related to the production of services and products of our society”. Therefore, he has no doubts: “We have to prepare for scenarios with higher prices, if not much better”.

Is there enough money?

For Clemente Pedro Nunes, no one knows whether this amount will be enough. «As for gas, as said by the social partners, there are billions that come from the state budget and that is new money that aims to ‘subsidize’ the price for industrialists». And remember, this value is mostly for businesses. In principle, the multi-billion dollar package is mainly for companies that cannot enter the regulated market. And as an example he gives the textile, glass, ceramics, chemical industry, where a lot is consumed.

The same argument is used by Luís Mira Amaral. “This figure is clearly insufficient for companies. And that is visible in the complaints from the textile, ceramics and glass sector. I am talking about industries that consume natural gas directly».

Inflation could have been lower

One of the experts who heard our paper acknowledges that these are important measures to mitigate the current high inflation, but they come late. “If the Executive had implemented these measures earlier, inflation would not be so high today. And if it had taken these measures late last year, when electricity prices began to rise and prices for fossil fuels, from oil to natural gas, began to rise, companies would not have passed on some of those costs. prices to customers and consumers and increased inflation’.

But recognizing that “it is an important measure to mitigate the significant economic slowdown projected by the government for the coming year,” he defends that, through the implementation of these measures, “businesses are also expected, in light of This relief in energy costs may slow the transfer of costs to consumers, culminating in a slowdown in inflation».

And even if companies are the biggest beneficiaries, he recalls that these measures will also have an impact on the bills that households have to pay, “particularly if the prices of goods and services start to fall, thus helping to restore the lost disposable income by households in recent years. quarters’.

Another expert argues that government intervention plays a key role in managing the impact of rising prices (inflation) on energy, which then translates into increases in all other sectors, both for goods and services. Regarding the measures announced, he says that “they have left a feeling that the government could go much further in the measures initially presented”.

And he leaves a warning: «It is important that the government looks at the other categories in addition to energy products. While inflation was initially fueled primarily by energy products and food, inflationary effects are also putting pressure on other sectors worthy of government attention, so action in this area is not limited to gas and electricity.”

However, he acknowledges that the measures “should have a greater impact on businesses, but which in turn will also have an impact on consumers, as businesses will thus have to reduce their costs and avoid passing them on to the final consumer”.

Regarding this government intervention, he emphasizes that “it is important to remember that this is the role of the state: to reduce inequalities between social classes, through the redistribution of income and support to the most vulnerable social classes”.

And as for the amount he acknowledges, it would be possible to go further, “if the state were to revise fuel taxes again (downwards)”, recalling that “fuel prices continue to rob families of purchasing power and disadvantage businesses, and in this case could frankly be greater the intervention of the state».

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