The high cost of energy
march 22 19

Paulo Nunes de Almeida

AEP’s (Portuguese Entrepreneurial Association) President

n a globalized world, the companies’ competitiveness is a decisive factor. I underline this aspect regarding the high cost of the electricity paid by Portugal’s companies, above the European average. This situation, in itself worrying, is now aggravating. When the time to renegotiate the contracts comes, the companies are confronted with very significant increases, in double-digits, compared to their previous contracts.

This aggravation has an enormous negative impact on the companies’ internal and external competitiveness, especially in an internationalization context. I have made known that our corporate sector cannot withstand such increases, therefore, should they be confirmed at a general level, it would result in serious setbacks to the country’s economic growth.

A substantial portion of the companies’ energy bill has little or nothing to do with their real use. As efficient as enterprises might be from the standpoint of energy consumption, it proves very difficult to “combat” the portion that is exogenous to their activity, which includes access rates, general economic interest charges, fees, taxes and contributions.

The Textile and Clothing Industry, a sector I know well, is one of the main energy consumers. In 2016, it stood at 11th place in the consumption ranking (championed by “Domestic Use”, followed by the “Pulp and Paper Industry”) and at 7th in the high-voltage ranking. In the manufacturing segment, it takes the 6th place in consumption and the 2nd in the low-voltage ranking.

The fact of the matter is this! When we are dealing with sectors that are heavy consumers of electricity, the loss of competitiveness is overwhelming.

In the specific case of Textile and Clothing, we are facing a sector that plays a considerable role in the Portuguese economy: 20% of employment and 11% of GVA of the manufacturing industry. Additionally, the sector is vital in maintaining the Portuguese trade balance given its commercial surplus, which in 2017 was over one billion euros and in the first eight months of 2018 reached 826 million euros.

2017 was the best year on record in terms of the sector’s exported value, above 5,2 billion euros, or in other words, approximately 10% of the global goods exporting, demonstrating a strong competitive ability. By August 2018 that value surpassed 3,6 billion euros.

I reaffirm that Portugal must continue betting on tradable goods production and services in order to promote economic growth.

There are reasons, more than enough, to realize that we cannot risk losing competitiveness, jeopardizing the goal of reaching the 50% export intensity that we aspire for Portugal.