Simson: Germany's high energy subsidies not a problem

European Commissioner for Energy Kadri Simson (Center).
European Commissioner for Energy Kadri Simson (Center). Source: Christophe Licoppe/European Commission

European Commissioner for Energy Kadri Simson (Center) does not see Germany's high energy subsidies as a major problem for German companies. The fact that Estonia paid less in subsidies than Germany was down to domestic political decisions, Simson said, adding that the European Commission has recommended abandoning energy subsidies.

Commenting on German economics minister Robert Habeck's wishes to provide German energy-intensive companies with subsidized electricity rates of 6 cents per kilowatt-hour (kWh) until 2030, Simson said, "Germany's proposal to guarantee regulated prices for large consumers until the end of this decade is a political idea that has not yet been agreed at the European level. In practice, it will probably be adapted to avoid creating unequal competition in Europe."

Arp Müller, the host of the program, pointed out, that in an interview in May, former Estonian President Kersti Kaljulaid also raised the issue of how badly the EU's single market continues to be disrupted by energy subsidies.

Kaljulaid asked why Simson, as European Commissioner for Energy, had still not taken the initiative to resolve the issue of energy subsidies distorting the single market.

"First of all, it is in all of our interests for the European electricity market to be more interconnected, meaning that if there is a lot of low-cost renewable energy available somewhere in Europe, a larger part of the market will benefit from it. Today, price levels in Europe fluctuate significantly and anyone who looks at the statistics from last year will also see that those countries in which more electricity was produced from renewable sources, businesses and homes were getting a better deal. Those who were very dependent on gas had higher prices. So, it is true that last year, German companies paid one of the highest prices in Europe," explained Simson.

"But if a country wants to give specific aid to its companies, that has to be justified and it has to go through a very serious state aid process with the European Commission, which is in no way made overly easy. It is true that during the crisis last year we shortened this process because our aim was to prevent businesses in Europe from disappearing and to stop unemployment skyrocketing," Simson said.

Simson added, that we need to consider Europe as a single market, which faces competition on the global market. "At the same time, there are also a lot of opportunities for Estonia to support its businesses. Many of these derogations, which are perfectly permissible in Europe, have simply not been used and this is a domestic political decision. Just as taxation is a domestic policy decision, and if choices are made in favor of less supportive policies, then that is the right of a sovereign state and its government," Simson said.

Simson then recalled, that it was already clear in the fall of 2021 that Estonia's electricity prices were going to rise because Russia was manipulating its gas supplies to Europe. "Last spring, [Russia] completely cut off gas supplies to countries, one by one. Russia's actions drove up energy prices in Europe. The European Commission's first advice was to use the legal possibilities available, support your consumers, create support schemes for your domestic consumers, create support schemes for your companies and, as I remember, all the governments reacted [to that] at that time," Simson said.

"The Estonian state then introduced support schemes for domestic consumers, which was the only way, because the crisis was created precisely to foster discontent in our societies. It was probably hoped that the discontent would be so great that governments would no longer have time to look beyond their domestic concerns and focus on the military attack against another country's sovereignty. But, it didn't work," she said.

Simson said, that we are now back in situation where, despite the fact that 90 percent of Russian gas has disappeared from the market, Europe's underground gas storage facilities are full and prices have returned to the levels of two years ago. "This also means that many of the emergency measures served us well, helped us to get out of this situation. However, they do not now need to be prolonged further," she said.

"If the question now is how we can help our businesses, then the Commission has come out with very clear proposals. In the long term, what will help us bring electricity prices down is reducing our dependence on imported fossil fuels and instead securing our electricity supplies from domestic renewable sources. Domestic renewables at any given hour also offer the best prices. Companies will then have the certainty that comes with such long contracts if they sign one-to-one agreements with electricity producers for a longer period on top of that," Simson said.

"Indeed, many countries have needed these kinds of large-scale, multi-billion euro subsidies for their businesses to ensure that there is not a total collapse. Of course, we don't want to just stand by and watch the steel industry or the fertilizer industry in Europe shut down. Because then we will be even more dependent on third countries somewhere to supply the resources we need. However, all these numbers that the analyses show have not worked out like that in real life, because these payouts were not really necessary in such volumes," Simson said.

Kadri Simson and Arp Müller. Source: Jaan Männik (European Commission)

Simson: State must help domestic consumers

Simson was then asked whether the European Commission could take the initiative when it comes to energy by propose a discussion on introducing similar regulations to those for agriculture.

Simson replied, that the Commission has not been given the mandate to take Member States' budgets into its own hands and then divide the money up accordingly.

"But we do indeed distribute billions from the EU budget in this way, and Estonia has been one of the biggest beneficiaries of the Single European Infrastructure projects, receiving more than ten percent of the funds that were allocated from this budget to connect Estonia, Latvia, Lithuania, Belarus and Russia to the electricity market and to connect to Europe."

"Now, when it comes to governments being able to support their industries, Estonia has certainly not taken advantage of all the opportunities that Europe provides," Simson stressed.

She went on to point out, that before any decisions are made regarding state support, the European Commission has to be approached for approval. "Not all proposals will always be supported. Germany's proposal to guarantee regulated prices for large consumers until the end of this decade is a political idea that has not yet been agreed at the European level. In practice, it will probably be adapted to avoid creating unequal competition in Europe," Simson said.

Simson reiterated that, with electricity prices as they are today, there is no need to continue with subsidies. "Our electricity prices have reached negative levels in so many periods, so we are now focusing on how we can get more renewable capacity to give us affordable prices for a longer amount of time. So that we don't have to sustain ourselves on subsidies alone," Simson said.

She added, that subsidies are necessary when domestic consumers require support. "I think that Estonia needs to be more courageous and support its people and not say that it is up to everyone, who is drowning, to save themselves. I think it was very important that for the first time Estonia also took the courageous decision to support domestic consumers when prices were very high. There have been times when, even in such situations, it has been said that others in Europe are doing that, but not us," Simson said.


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Editor: Michael Cole

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