ZVO demands adjustment of framework conditions for gas and electricity price brake

In a letter to the German Federal Minister of Economics and Climate Protection, Dr. Robert Habeck, the German Surface Technology Association (Zentralverband Oberflächentechnik e.V. - ZVO) sets out the threatening situation of the electroplating and surface technology industry and makes a number of demands in connection with the planned gas and electricity price brake.

On behalf of 1,200 industry companies, the ZVO again expresses its opinion on the planned gas and electricity price brake. The ZVO expressly welcomes the decision to implement the gas and electricity price brake from January 1, 2023. However, it considers some of the framework conditions envisaged so far to be critical from the point of view of an energy-intensive industry. According to the ZVO, electroplating and surface technology is a key technology whose services are a prerequisite for the functionality of components, devices and machines in almost every industry, from the automotive and mechanical engineering industries to defense, medical, electrical, communications and information technology, aviation, sanitary and construction, and technology for renewable energies. These industries are elementary dependent on the services of the German electroplating and surface technology, a standstill of the industry means standstill in many other industries. The industry is characterized by medium-sized companies, predominantly family/owner-managed companies, and employs around 440,000 people across Europe, 62,000 of them in Germany. For 2022, the ZVO expects a return to the pre-Corona industry volume of 8.6 billion euros in sales.

It considers the following framework conditions to be critical for the energy-intensive industry (see KUEBLL - Guidelines on State Aid for Climate, Environmental and Energy Protection 2022 /Official Journal of the European Commission 2022/C 80/01):

1. assessment limit for annual electricity consumption or annual gas consumption.

The assessment year 2021 was a difficult year for many companies in the surface industry, many of which were affected by short-time work. Consumption was correspondingly much lower than the average of previous years. Capacity utilization is higher in 2022 and therefore the assessment year 2021 is disadvantageous for the industry companies.

The ZVO therefore suggests that the assessment limit for energy-intensive companies, for which electricity and gas are ONE RAW MATERIAL, should be set as a function of the share of energy expenditure in sales or on the basis of average consumption over the last five years.

2. capping the electricity price for RLM customers at 13 ct/kWh (net).

The cap of 13 cents for electricity still means at least a tripling of the price for energy-intensive companies, with a previous cost share of 12 to 20 percent. This is an extreme burden with which the companies are not competitive in the international arena.

3. capping the price of gas

Industry companies use gas not only for heating, but also as a production factor within their coating processes and are often dependent on gas to maintain these coating processes. Despite capping, costs will still be at least three times the previous year's costs. Neither the electricity nor the gas prices achievable through the respective caps are sustainable for the companies in international competition.

The ZVO suggests a renewed review to support energy-intensive companies with a lower and more competitive work price.

4. implementation of the Energy Cost Reduction Act (EKDG)

The energy cost curbing program helps only to a very limited extent, as the associated bureaucratic expenses, tight deadlines and high costs are not manageable by most SMEs. The aid is going nowhere. The companies that have cleared the hurdle and submitted an application have not yet received any feedback from Bafa.

5. bureaucracy brake

The entire economy urgently needs a reduction in additional bureaucratic burdens.

6. problem electricity contracts and security of supply

ZVO member companies increasingly complain about not being able to obtain connection contracts for the supply of electricity. Electricity suppliers are withdrawing from the market because the risks are incalculable for themselves. If a company has a poor rating, the chances of finding a supplier are almost hopeless. Unlike private individuals, however, companies are not entitled to basic supply. There is an urgent need for action on the part of policymakers in the short term, as many electricity contracts expire at the end of the year.

7. increasing problem of payment defaults

Reports from the major credit insurers confirm that payment morale has deteriorated significantly in recent weeks. This may soon become a major problem, particularly for the German electroplating industry, which consists purely of contract services: Bad debts, which in many cases are not insurable, will drag the companies into insolvency.

8. problem from the point of view of our foreign customers

Customers from abroad show a lack of understanding for the situation in Germany and do not recognize volatile inflation surcharges for gas and electricity. They demand a serious and predictable calculation basis, otherwise orders will be withdrawn. However, the industry is currently finding it difficult to provide this calculation basis.

9. problem of long-term supply contracts

Many of our sector companies, especially suppliers to the automotive industry, are bound by long-term supply contracts without being able to pass on increased and rising energy prices to these customers.

10. problem of chemical shortages, severe shortages and price explosions

The gas crisis has led to extreme shortages of basic chemicals in recent months. As a result of the shortages, prices have exploded. These "on top" additional costs are unbearable for the industry.

The ZVO therefore demands:

• a reduction of taxes and duties to the European minimum,
• an acceleration of approval procedures,
• an additional dampening of cost increases in network charges,
• the reduction of bureaucratic hurdles and the restoration of international competitiveness for Germany as an industrial location,
• the introduction of a uniform industrial electricity price throughout Europe.

He also maintains the demand, already made on September 6, 2022, for an extension of the operating lives of the last remaining nuclear power plants on the grid.

The basis for Germany's former economic miracle and its rise to become the world's leading exporter was energy, and safe, cheap energy at that. Today, Germany has the highest energy prices in the world, has lost security of supply and increased its dependence on imports. The ZVO therefore calls on the Federal Ministry to commit itself to the goal of ensuring that Germany remains the fourth largest industrial nation. After all, only economically successful countries have the means to manage the conversion of a national economy to climate neutrality. (OM-11/22)