Vogon Today

Selected News from the Galaxy

StartMag

Renault, Volkswagen, Basf and more: Europe wants to save the industry from the energy crisis

Renault, Volkswagen, Basf and more: Europe wants to save the industry from the energy crisis

Europe is looking for ways to make its industry more competitive and counter the destabilization caused by soaring energy prices. The deepening of El Pais

Energy policy in Europe resembles the Queen of Hearts from “Alice in Wonderland” – we read in the El Pais article. Someone made a mistake, someone has to pay for it. Workers from the French materials company Saint-Gobain work in the Alpine town of Chambéry in polar gear. To save gas, they run at 8 degrees Celsius instead of the usual 15. French manufacturer Renault cuts its 'hot painting' time to cut its energy demand by 40%. Pharmaceutical giant Bayer has announced plans to switch its entire business to renewable energy in 2019. Now, “to be safe”, it has switched back to oil, and Volkswagen's Wolfsburg plant – the company's largest – will use coal to the next two winters.

Can Europe be competitive without cheap energy? The canary has identified the firedamp. A trill of red lights is heard. "We run an enormous risk of deindustrialization of the Old Continent," warned Alexander De Croo, prime minister of Belgium, a few weeks ago.

Thousands of people live on this phrase. European industry employs around 35 million workers. About 15% of the working population. Spain, according to the latest data from the National Institute of Statistics (INE), has just over 2,800,000 workers. Numbers that are counted with the same speed with which the Mad Hatter, from Alice and her wonders, discards the hours. The consultancy firm Rhodium – quoted by the Financial Times – estimates that only five sectors account for 81% of gas demand in Europe. Chemicals, basic materials (steel and iron), non-metallic minerals (cement and glass), refining and coking (conversion of heavy petroleum waste into coke), and paper and printing. In the last decade, up to 2020, according to the International Energy Agency (IEA), European gas was three times more expensive than US gas. Now the gap is 10 times wider since Russia closed its pipelines.

Of course, someone made a mistake and someone should pay for it. “Germany has taken advantage of cheap Russian gas for many years as a competitiveness multiplier in its industrial production and exports,” says José García Montalvo, professor of economics at Pompeu Fabra University (UPF). No one doubts that the German country will shield a sector that employs (according to data from Goldman Sachs) one million people.

Spain, unlike Poland or Germany, has closed its coal mines and renewable energies are becoming increasingly important. As the sun continues to shine on the photovoltaic panels, security of supply could be a spur for companies to set up. The country has one third of the EU's regasification infrastructure and two gas pipelines with Algeria. And if it manages to abandon the marginal system of pricing renewable energy and nuclear energy – as proposed by the government in Brussels – "the price of electricity would become enormously cheaper," reflects Carlos Martín, head of the economic cabinet of the CC OO. Spain would thus attract industrial production. In the first nine months of 2022 it was the third largest energy exporter in Europe (Rystad Energy Research), behind only Sweden and Germany. But it's not that simple. Volkswagen has advanced the possibility of relocating part of its production to the south of the Old Continent. And Germany was shaken by the Länder. He created a 265 billion euro public aid program "to manipulate competition in the internal market, as several European leaders have denounced," warns the chief economist.

North and South

Of course, German prosperity comes not from natural gas, but from a strong university system and major research centers. But something has changed in Europe. “We will see more and more state interventions,” predicts Gonzalo Escribano, director of the Energy and Climate program at the Royal Elcano Institute. And he adds: “It is a situation to which the countries of the North are not used to compared to those of the Mediterranean. It is one of the ways to avoid deindustrialization”. The government is constantly calling for a relaxation of EU rules that put limits on state aid to companies. Germany has demonstrated its ability to enforce its interests, just as it has with its misguided austerity policy. Spain is trying to circumvent German rule by moving closer to France.

As Volvo and Bayer stockpile if needed in the coming months, and BASF – the world's largest chemical plant – worries about its dependence on gas, the IMF doles out its urbi et orbi blessing of the usual prayers. “EU countries should improve vocational training programs and adapt them more to the needs of the economy, maintain strong safety nets, implement structural reforms to increase productivity (including low-carbon technologies), digitalisation, labor supply and the integration of immigrants”, summarizes Oya Celasun, deputy director of the organization for Europe. No one doubts – if Goldman Sachs is right – that the global economy will be heavily dependent on the fossil world. Demand will grow at least until 2030. “And whoever wants to shoot themselves in the foot. Between the energy transition and high energy costs, we have to find a place to protect our interests,” says Arturo Rojas, partner at Analistas Financieros Internacionales (AFI).

Because Europe is going through a centripetal movement. Gravity pushes towards the center. Businesses and supply chains are going home. However, the reception will be very different. The OECD estimates – according to the Financial Times – that the Czech Republic, Poland, Austria, Slovakia, Sweden, Slovenia, Finland and northern Italy have the economic sectors most vulnerable to gas. The theory is written, but it hasn't been set in stone yet. "The commitment to decarbonisation that the Old Continent has undertaken, with the increase in the weight of renewables, will mitigate the effect of the high prices of fossil fuels and their impact on the cost of electricity", predicts Carlos Solé, partner for the energy of KPMG Spain.

Like any prediction, it can reach the end of the mauve sky or get trapped in a dark horizon streak. Exports (data from Standard & Poor's) of petrochemical products – most of which depend on natural gas – have dropped between 6% and 8% in recent months. Furthermore. “The negative effects of high energy prices are already there. However, the impact of cheaper labor and a favorable exchange rate will come later,” S&P said in a recent report.

(Excerpt from the press release of eprcommunication)


This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/europa-industria-crisi-energia/ on Sun, 26 Feb 2023 06:42:24 +0000.