Entrepreneurs waiting for quick aid, long-term decisions in energy crisis

Meat industry.
Meat industry.

The energy crisis has mainly hit industrial companies, but the abrupt price increase has an impact on all entrepreneurs. Organizations are expecting quick aid and long-term decisions from the government so the situation does not repeat itself in the future.

Estonian Cell was forced to shut down its pulp mill on December 8 due to extremely high energy prices, as the sudden rise in electricity and gas prices has affected its competitiveness.

The company has had to pay €5 million more than planned in the budget for their electricity consumption in recent months.

This prompted the company to write a letter to Prime Minister Kaja Kallas (Reform) asking the government to develop quick relief measures. In addition to network charges, they expect energy-intensive companies to be exempted from the renewable energy charge or at least to have a lower tax ceiling.

The employers' union has also joined this proposal.

"We have suggested that the same renewable energy charges should not be raised by companies to offset them from CO2 revenues. It is such an alarm for market participants as well as for consumers and for the state. After ten years of waiting for miracles, that the green turn will come to us easily and cheaply, but it won't," CEO of the Confederation of Estonian Employers Arto Aas said.

"This year has been very extreme and next year will definitely be just as difficult. These energy prices, the very rapid rise in input prices, where we have usually seen perhaps five to ten percent price increases. When you talk to traders today, the prices have increased by 50-60 percent, this is something we haven't seen in Estonia in 10-20 years," Aas said.

Crisis compounded by wage pressure

"There are no good employees, wages are growing very fast, we don't want to let in foreign labor. So all this is huge pressure on companies' financial results. In the short term, it can cover profits, but it reduces investments and also makes Estonia unattractive for foreign investors," Aas said. "The state has to look in the mirror. In 10 years, no larger production volume has come to Estonia. We have counted on our neighbors, the neighbors have counted on someone else again, and this here is the result."

Exporting manufacturers are in the most difficult situation since they have to deal with companies from other production areas in foreign markets, which can consume excise-free energy for production.

However, the Chamber of Commerce and Industry does not see lowering excise duties and the renewable energy tax as a solution.

"Of today's total electricity price, most of the cost growth is still the stock exchange price of electricity. Of course, these components can be reviewed and reduced there, but it may not provide much relief, as the price of clean electricity has simply risen too much," said executive director of the chamber Mait Palts.

As a quick measure, the Chamber of Commerce and Industry proposed to the Minister of Enterprise Andres Sutt (Reform) that gas and electricity sellers could postpone the payment of bills issued to companies for a longer period of time, which would help them cope with the sharp increase in costs.

"It is necessary to look at the present moment because companies have bills and they need to pay. On the one hand, we understand that this is a business risk, but on the other hand, we also need to understand that no one normally considers that one of your most important input prices can increase as much in a short time," Palts stressed.

"The talk about it not lasting forever and there being some kind of normalization going on - at some point it's going to happen, but the question is, what is this new normality? Is it much higher electricity prices or another reality," Palts said. "We have to think about production capacity. If we block every subsequent wind farm here, it won't be good for us in the long run. Whatever we do, we have to talk about the need for more capacity, we need more connections."

However, energy prices are not the only prices that have increased - they are only one component in the series of increased input prices, all of which affect the competitiveness of companies, and to some extent, development has now become fatal for Estonian manufacturing companies.

"We have been waiting for this ourselves and pushing for us to electrify, automate our industry, digitalize so that there is a less stupid craft, more technology, more robots, and it all consumes electricity," Aas said.

However, he stressed that all short-term measures come from the taxpayer's wallet, so they are not sustainable in the long run: "But if we talk about a six-month period, there should be no taboos and all such regulatory changes, tax breaks could be on the government table today."

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Editor: Roberta Vaino

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