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Europe must cut taxes on electricity if it wants to help struggling industries become more competitive, the heads of two of the continent’s largest power companies have said.
Ignacio Galán, the chief executive of Spanish power group Iberdrola, said the EU needed to “urgently” move to remove the various taxes and levies on electricity that have built up over time.
“In the US, these costs amount to 10 per cent of consumer bills,” he noted, adding that in Iberdrola’s home market of Spain, taxes can make up closer to 40 per cent of bills.
He said the EU should find a way of making taxes “level” in the bloc compared with the US.
Separately, Miguel Stilwell d’Andrade, chief executive of the Portuguese energy company EDP, said that the EU needed to “simplify what goes into the energy bill for customers”.
He added that electricity bills were a convenient way for governments to raise tax because they were impossible to evade without being cut off from power.
“It’s a sure thing that you can collect very easily,” he said, adding that the extras tacked on to the price of electricity can be “in many places the biggest part of the bill”.
The two men spoke ahead of the launch of the EU’s Clean Industrial Deal policy on February 26, a package of measures designed to help the bloc’s under-pressure industries cope with the costs of the energy transition.
Dan Jørgensen, EU energy commissioner, said at a Financial Times event in Brussels earlier this month that the policy would look at reducing the “non-energy” component of bills.
In a joint article for the FT last month, Ursula von der Leyen and Christine Lagarde, the presidents of the European Commission and European Central Bank respectively, promised measures to reduce energy taxes.
Electricity prices in the EU were two to three times higher than in the US, said Mario Draghi, the former head of the European Central Bank, in a report on EU competitiveness last year, and must come down if companies have any hope of rivalling their peers in the US and Asia.
A large chunk of the bill is made up of various taxes and levies imposed by national governments, which in the first half of last year rose from 18.5 per cent to 24.3 per cent of bills, compared with the previous year, according to Eurostat.
These taxes are a key source of revenue for national governments, amounting to 4.2 per cent of their total tax revenues in 2021, according to the European Commission. Long-running negotiations among EU countries to rejig energy taxes have so far made little progress.
Kristian Ruby, secretary-general of industry group Eurelectric, said electricity is still taxed “more than gas” in the EU and that removing electricity taxes “is a no-brainer to ensure more affordable prices”.
Galán said that the EU also needed to speed up its planning and permitting process and to encourage companies to invest more in electricity grids.
He contrasted Iberdrola’s business in the US and the UK, where it plans to invest £24bn between 2024 and 2028 in improvements to the electricity grid, with Spain, where he said there was a cap on investment in networks.
“So look at the difference. In Britain they are asking for more and more, and in Spain we are capped, we cannot invest more. That’s why the money is going there (to the UK).”
