The Ingredients for Economic Prosperity: Energy & Growth

One of the most important costs for the operation of a business and the entire market is the cost of energy, which together with other factors e.g., such as labor costs, etc., largely shape the final prices of the product and service produced respectively. The increased energy costs today, the global trend is to increase the wholesale price of energy. In countries where there is a high degree of competition, any increases in energy prices occur at a very limited rate.

However, in countries where there is a significant lack of competition, energy prices are rising at a faster rate, burdening both businesses and consumers (households) as the increased energy costs are passed on to the end user.

Energy costs are a cornerstone for business survival, as as a fixed cost if it is high, it is a significant operating burden for the business affecting both its long-term viability and whatever jobs a business offers.

Factors affecting competition

Factors affecting energy costs through a lack of competition in a market could be summarized in:

• The significant energy dependence of a country on lignite.

• The slow adaptation of a monopoly or oligopoly power supply market to a completely free market.

• The low degree of energy production from RES.

• Lack of serious or modernized infrastructure in the electricity transmission network and transmission of electricity from RES to the national network.

• Slow interconnection of the electricity network of a country (market) with corresponding networks of foreign countries (markets).

All these factors must be optimized to the maximum extent so that the competition can work beneficially by reducing energy costs.

Good governmental actions

To optimize the above factors to function to the maximum benefit, the governments of the countries will have to design a new national energy portfolio strategy, to increase / modernize their infrastructure and at the same time enter dynamically into the increase of energy production from ΑΠΕ.

This is achieved by attracting new investments while giving the appropriate incentives (e.g., generous tax exemptions, etc.) for the creation of new companies that will enter the energy sector through their investments in RES to further increase competition.

There is no business activity in an economy that is not based on the use of energy. For this reason, state governments should grant tax exemptions to gradually reduce the burden of energy use and consumption, even when it comes from RES.

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TRUST ECONOMICS

Trust Economics is a specialized independent economic research, analysis and consultancy business. Our team provides ingenious analysis in the macro & micro economic field, in the field of financial market, regional and sectoral analysis equally, forecasts, consultancy, specialized studies-research/projects from its headquarters in Athens, Greece.

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