EU must develop long-term power plan for chemicals to remain competitive – Cefic

Jonathan Lopez

07-Dec-2022

MADRID (ICIS)–The EU must adopt a joined-up policy response to the energy crisis and unlock existing opportunities for a more abundant and affordable electricity supply so that energy-intensive sectors such as chemicals can remain competitive globally, European chemicals trade group Cefic said on Wednesday.

Cefic said the EU “has so far failed to propose a joined-up policy response” to the crisis, leading to fragmented and uncoordinated interventions.

“Electrically-heated steam crackers, electrolysers, heat pumps: many of the technologies that we need to create a carbon-neutral chemical industry depend on the access to abundant and cheap renewable energy,” said Marco Mensink, director general of Cefic.

His recommendations for the electricity market were made together with Giles Dickson, CEO of European trade group WindEurope, in a joint open letter to the European Commission, the EU’s executive body.

“This is why the chemicals industry joins wind energy producers in a call for a fully integrated and future proof electricity market. Short-term measures to solve the current energy crisis and increase availability of supply are important but they are not enough. Only thought-through long-term EU electricity market design can deliver a strong, sustainable, and competitive Europe.”

Among other measures proposed in the open letter, Mensink and Dickson suggested keeping “separate emergency measures” aimed at tackling geopolitical-driven supply shocks – such as the one seen in Europe currently – from long-term structural measures, and focusing on delivering competitive and sustainable carbon-neutral power.

“Accelerating the deployment of new, and the strengthening of, electricity grids is an absolute priority. Over the last decade, Europe has underinvested in its electricity grids. There is an urgent need to remove regulatory and permitting bottlenecks that are preventing the free flows of electrons across Europe and delaying the optimised use of infrastructure,” said the joint letter.

“Moreover, to accelerate grid development, system operators, asset developers, technology suppliers and end users need deeper cooperation since the early design stages.”

The two trade groups also said long-term contracts between electricity producers and consumers should be promoted.

In the chemicals industry, companies aiming to power their operations with renewable energy have signed power purchase agreements (PPAs).

Earlier on Wednesday, Austrian polymers major Borealis announced the signing of a second 10-year PPA with Eneco of the Netherlands to supply its operations in Belgium with wind power-generated electricity.

“They [PPAs] are helpful tools to unlock the investments needed to accelerate new power capacity buildout, while mitigating risks on both sides,” said the joint letter.

“Ultimately, long-term contracts provide certainty to energy consumers, asset developers and investors. Increasing shares of variable renewable energy supplies will require more demand flexibility next to better storage or exchange to other energy carriers.”

In an interview with ICIS earlier this month, Mensink said that given the current extraordinary circumstances, extraordinary measures such as government direct support were justified, although he said the market would need “to take over” again.

Mensink also urged the EU to follow in the steps of the US and build a green business case for chemical companies after it passed the Inflation Reduction Act (IRA) – which looks at multi-billion tax breaks for green energy and chemical projects.

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