High taxes and levies on electricity undermine the business case for electrification, according to a new WindEurope report.
The EU Clean Industrial Deal aims to boost electrification and renewables deployment as a driver for industrial competitiveness.
But WindEurope’s new report Revamping electricity bills for a competitive and secure Europe found that taxes and levies put Europe at a disadvantage compared to the US and China.
European industry pays significantly more in electricity taxes and levies than in the US and China, according to the report.
Country-by-country analysis shows that regulated electricity charges for industry are four times higher in Europe than in China.
And despite the urgent need to shift away from imported fossil fuels, electricity is taxed more than gas across Europe. In Poland, for example, industrial electricity charges are twice as high as for industrial gas.
Vasiliki Klonari, WindEurope director for energy system integration, said: “Renewables have helped cut wholesale electricity prices across Europe.
“But households and businesses still pay too much. That’s due to high taxes and extra regulated charges that remain part of our bills. Many of these should not be tied to electricity use but move to general taxation.”
A cost-neutral shift of electricity taxes and levies would boost competitiveness and energy security, the representative organisation said.
Wind energy is set to become the leading source of electricity in the EU before 2030. The EU wants wind to cover 35% of electricity consumption by 2030 and more than 50% by 2050.
Despite the clear benefits of renewable electricity over fossil fuels, Europe’s electrification efforts are stalling. In the EU only 31% of industrial energy use comes from electricity, the report states.
Electricity could deliver much more. 74% of industrial energy use could be electric with technologies already available on the market such as electric arc furnaces for steel, the report continues.
Another 14% could be electrified by 2030 and 5% more by 2035 leaving just 7% of processes that remain for now non-electrifiable.
Europe needs to ramp up electrification. Many industrial processes are ready to be electrified, especially those that run on low process heat, according to the report.
This includes paper, pulp, food & beverage and chemicals. But also more energy-intensive processes like steel manufacturing.
Europe can make big changes here quickly – and give a real boost to its industrial competitiveness, it argues.
In many countries, energy-intensive sectors that are typically hard to electrify benefit from lower regulated charges and exemptions from network costs.
But the complexity of getting these exemptions often outweighs the benefits of paying lower charges, WindEurope said.
Those industries that are ready to electrify typically face much higher regulated charges than energy-intensive sectors.
WindEurope chief policy officer Pierre Tardieu, (pictured) said: “European industry wants to run on electricity.
“Making the necessary investments happen isn’t just about Government support, we need to fix the electricity bills too, so industry pays the right price. Right now, the deck is stacked against electrification: it’s simply not right that charges on electricity are higher than on gas.”
The report recommends reducing regulated charges on electricity to a minimum; removing non-energy-related charges; shifting renewable support and capacity charges to general taxation for better oversight of energy spending on energy security, affordability and decarbonisation.
It also recommends reducing regulated charges for ready-to-electrify industries – even if non-energy intensive, and keeping on the electricity bills the grid development and operation charges tied to consumption to promote efficient electricity system use.