Germany: Renewable Energy Sources Act feared by cement sector

The Renewable Energy Sources Act (EEG) is expected to be detrimental to the production of the German cement industry as well as presenting considerable risks to the sector's competitiveness, according to a recent study of the Münster-based EEFA Research Institute on behalf of the German cement association VDZ.

The report entitled: ‘Wettbewerbsfähige Stromkosten. Voraussetzung für die Zementherstellung am Standort Deutschland’ [Competitive Electricity Costs. Requirements for the cement production in Germany.] analyses the impact of the RESA on the competitiveness of the German cement industry. The act is expected to lead to a hike in power prices for energy-intensive industries.

"Where will the money for such electricity price increases because come from," the VDZ-President Gerhard Hirth asks. "Excess capacity in neighbouring countries means there are enough cement producers who can deliver to Germany at a cost advantage," argues Hirth.

Particularly plants located in border and coastal areas would be affected by the act as production costs will rise as their European neighbours will not be exposed to comparable national additional charges related to the act. The study anticipates that around 20,000 highly-skilled jobs would be lost in the cement industry due to short-term closure of these plants as well as in upstream and downstream sectors.

Power costs, currently totalling EUR250m, represent the largest cost factor for the German cement industry. As EEG comes into force, costs are forecasted to rise by EUR220m, effectively nearly doubling in 2014. "Such a current cost shock would not be manageable for our company. A more investment-unfriendly environment is hardly conceivable for the capital-intensive cement industry," fears Hirth. "If the cost of production in Germany on a permanent basis is significantly higher than the cost at locations that are not subject to the EEG, the majority of our industry in Germany is close to collapse. As long as there is no harmonised promotion of renewable energies, such purely national burden can not be shifted to the energy-intensive companies. "