Energy transition also affects SMEs and service providers

28.11.20.25

Source: E & M powernews

Rising energy and transformation costs no longer only affect industrial companies. Medium-sized companies are also coming under pressure, according to a study by Frontier Economics.

According to the consultancy firm Frontier Economics, Germany is facing a double challenge: the energy transition is intended to achieve climate targets and at the same time maintain the competitiveness of companies. However, the current political framework conditions are jeopardizing both, as a study commissioned by the German Chamber of Industry and Commerce (DIHK) shows.

The study supplements the main study "New paths for the energy transition", which was published in September. It comes to the conclusion that rising energy and transformation costs no longer only affect energy-intensive industries. They affect the entire German economy - including mechanical engineering, construction, trade and services.

Broad burden on the economy and SMEs

According to calculations by Frontier Economics, energy costs have almost doubled between 2019 and 2024. Even without further political tightening, the London-based consultancy expects energy prices to continue to rise sharply. In addition to the direct costs for electricity and gas, there would be additional burdens due to more expensive primary products, transportation, personnel and administration. As a result, there is a threat of losses in value creation and employment far beyond the energy-intensive sectors.

According to the study, the burden is particularly high in the chemical and basic materials industries. However, medium-sized companies in the food and beverage industry, consumer goods production and electrical engineering are also under increasing pressure. Although sectors such as construction, retail and hospitality are less threatened by migration, price increases have a direct impact on purchasing power and therefore on domestic demand.

Grid fees as a key cost driver

One of the main reasons for the rising costs is the electricity and gas grid fees, as Frontier Economics explains. In order to finance the expansion of grids for renewable energies, electricity grid fees will increase by up to 70 percent by 2045, and by almost 130 percent for large industrial consumers, according to the consultants. For households, they will increase by around 50 percent. At the same time, gas consumption will fall, meaning that gas grid costs will be spread across fewer and fewer customers. In the commercial sector, the fees will therefore rise from 1.6 cents per kWh in 2024 to 4.3 cents in 2040; in industry almost from 0.6 to 1.7 cents per kWh.

Achim Dercks, Deputy Managing Director of the DIHK, warns with regard to the study: "Almost all companies are dependent on affordable energy prices, but also on affordable primary products, transportation options and stable wages in order to keep their products and services competitive." According to Dercks, if the current political course continues, there is a risk of further reduction in value creation in Germany.

Proposal: flexible CO2 price

Frontier Economics advocates making the energy transition more cost-efficient. The "Plan B" developed by the company envisages a simpler, market-based framework with comprehensive, cross-sector emissions trading. This so-called "breathing cap-and-trade" is intended to flexibly adjust the CO2 price: if the demand for emissions certificates increases, the supply automatically increases. According to the consultants, this would avoid price peaks without abandoning the emissions target. This model should enable technological openness and dampen price peaks. According to calculations by Frontier Economics, this could reduce system costs by up to one trillion euros by 2050 - without abandoning the goal of climate neutrality.

As structural cost reductions take time, the authors of the study recommend temporary, targeted support measures to cushion transition phases for companies. However, this aid should be simple, unbureaucratic and clearly limited in time.

The DIHK is also calling for a reorientation of energy policy. In addition to a change of course for the market economy, faster planning and approval procedures, reliable regulation and the expansion of modern infrastructures are required. Only if energy, grid and system costs fall permanently will Germany remain a competitive industrial location.

The 47-page study "New paths for the energy transition (Plan B)" is available on the website.

Author: Davina Spohn