Energy Support for Business: – Everything can go wrong

It seems very easy to provide electricity subsidies to companies. We already have electricity subsidies for families. Isn’t it just doing the same for business?

It could be very costly, as it was estimated that Dagbladet had a central player.

And difficult.

The connected faces of government representatives, bureaucrats, the NHO and the LO who were at a press conference on electricity prices on Monday at the Prime Minister’s Office spoke their language clearly. Wrinkles of anxiety deepened as soon as we started asking about electricity subsidies for businesses.

How should you actually design?

It’s turbulent, to put it mildly. We can start with the whole:

The starting point for all parties collected in Støre, it seems that subsidizing electricity for businesses is not really a good idea. The principle in the Norwegian economy is that the owners enjoy making profits when operations are going well, but they also have to cover losses if operations are not going well. A prerequisite for the continuous restructuring of the economy is that companies must at all times adapt to existing conditions.

Electricity is now suddenly much more expensive for many businesses. The cost of energy is still expected to increase, in the transition to zero-emissions energy supplies – regardless.

So companies must adapt to the future with higher electricity costs.

The generous electricity subsidy system can now send signals that Norwegian companies do not need to take this into account. This means that companies do not adapt to the conditions in which they live. Over time, this could be very negative for the Norwegian economy. At the same time, the state may risk incurring a significant additional cost by subsidizing electricity costs. becomes a double burden.

High prices may also last for a long time. There is no possibility of an end to the war in Ukraine. Gas supplies from Russia may continue to shrink, and may even stop altogether. Europe will in any case be in a very stressful situation, with energy shortages and thus high costs as long as the continent depends on Russian gas. It may take several years.

If it still happens Power support, problems identified in the queue.

First, the government must decide whether it should be a major master plan, as is the case for families, as well as, among other things, the request of Rødt and Frp.

In such an arrangement, “everyone” receives support. Everything from the local baker to the data center mining cryptocurrency.

An evil Ministry of Finance bureaucrat (who would be against such an arrangement) could, of course, design a subsidy for electricity which means he would be one of the cryptocurrency producers who would end up at the top of the list of electricity subsidy recipients.

The overall arrangement will include both those who can pass the extraordinary electricity costs on to customers (and thus get paid twice), and those who do not have this option.

And it can be crazy expensive for the state.

make my source Three cost estimates. The assumption is that it applies to all companies, including large and energy-intensive companies, with annual consumption as it was in 2021.

1: With 80% offset above 70 øre, the price would be NOK 2.5 billion per month if the electricity price was NOK 1.5. It would be NOK 5.5 billion per month if the price of electricity was NOK 2.5.

Over the course of the whole year, the electricity subsidy scheme could cost between 30 and 66 billion NOK.

It is the “cheaper” alternative.

2: With 100% compensation above 70 øre, the price would be 3 billion NOK per month if the electricity price was 1.5 NOK. It would be NOK 6.5 billion per month if the electricity price was NOK 2.5.

Over the course of the whole year, the electricity subsidy scheme could cost between 36 and 78 billion NOK.

The latest invoice estimate shows the preferred solution of Rødt and Frp, with a maximum of €50.

Then the sums start to become astronomical:

3: With 100% compensation above 50 øre, the price would be NOK 3.5 billion per month if the electricity price was NOK 1.5. It would be NOK 7.5 billion per month if the electricity price was NOK 2.5.

Over the course of the whole year, the electricity subsidy scheme could cost between 42 and 90 billion NOK.

force support For families this year It costs the state 22 billion NOK. If the state is to inject more money to support businesses, the government must make corresponding cuts elsewhere in public budgets. In an economic situation with higher inflation and higher interest rates, the effect could be that both inflation and interest rates go up more.

In this case, those who receive power support may be at a distance. Additionally, it can affect the rest of the economy as well.

Therefore, the government will and Other contributors spend the next two weeks searching for a more accurate arrangement.

But such an arrangement will also be associated with binding. If it were to include application standards and control functions, it could become cumbersome and bureaucratic to manage.

One solution could be to offer favorable loan plans, which can be converted into subsidies according to certain criteria.

one general point Also important: Generous support schemes like this one should also take into account distribution considerations. Business energy subsidies are in principle significant transfers from taxpayers to private owners.

The strange thing now is that the far right and the far left of the political spectrum agree on one thing:

They would like to have the most expensive option for this money transfer.