ECONOMY

Manufacturers’ Achilles heel

Energy hikes threaten the sustainability of industries that don’t enjoy government support

manufacturers-achilles-heel

Greek manufacturing is bracing for a huge blow from power rate hikes. As of December, when the wholesale power price clause comes into effect for medium-voltage customers, these electricity bills will rise by 164% annually as things stand.

The reason for the hikes may be external, but the cause of their unhindered transfer to the domestic industry, threatening its sustainability, is internal – the immaturity of the Greek energy market: Manufacturing companies purchase power based on the going wholesale market rates, while in Northern Europe industries sign long-term bilateral contracts.

In Greece there is power insufficiency, as the coal-powered units are unreliable, mines are being abandoned and interconnections are limited; all this means natural gas-fired plants typically secure favorable rates for their output and don’t need to resort to bilateral contracts with manufacturers. Consequently consumers – domestic or corporate – are extremely dependent on market rates, which were the highest in Europe before the energy crisis. 

The 40% dependence of power production on natural gas saw wholesale electricity rates leap 211% from April to October. Suppliers, including Public Power Corporation, pass on the burden to consumption on a monthly basis.

The government has set aside €400 million to subsidize domestic bills, offsetting part of the hikes; however, there aren’t any protection measures for medium-voltage industries, most of which are export-minded. They are suffering from the energy hikes on top of the delays and the soaring costs of shipping, not to mention shortages and price rises in raw materials.

Worries in the Greek manufacturing sector have recently grown, as PPC has sent its corporate clients letters informing them that, as of December, their rates will be associated with market clauses: This means that a company that until recently paid €87.81 per megawatt-hour will next month pay €232/MWh, a 164% hike, based on the wholesale market rate of €200/MWh in October.