Interview for the German state channel ZDF, given by Mr. Panos Lolos, General Manager of the Copper Segment at ElvalHalcor S.A., on the energy crisis and its impact on the Greek industry.
The industry’s dependence on natural gas and the reduction in its consumption, alternative energy sources, as well as the energy policy in the EU, are some of the points touched upon. Read the whole interview here:
Read the Q&A:
- What is the impact of the increase in energy prices on the Greek industry so far?
The production costs -if we speak about a metallurgical company that is part of high voltage- has increased over 30% in one year. This percentage is particularly high for industrial products, also taking into account the additional charges resulting from the increase in packaging materials, freight charges and other expenses that ultimately add to the total cost of product processing and marketing and which, according to the current data, consists 50% in energy, both directly and indirectly. The total additional cost is passed on, wherever possible, to the sales prices but also, in several cases, this further expands the deficit in competitivity which characterizes the Greek industry over time, due to the particularly high energy prices compared to the European average.
- How much does the Greek industry depend on natural gas, especially from Russia? Are you preparing for a potential interruption in the supply of natural gas from Russia?
Electricity generation covers 68.5-70.0 % of Natural Gas consumption in Greece. The total Natural Gas consumption is 70 mil. MWH. Major industries only make up 12.7% (see fertilizers, refineries and aluminium). In addition, part of the industry (see steel industry, glass industry, pottery, etc.) consists in distribution networks. Therefore, we can basically assume that 15% of the total Natural Gas consumption in Greece is absorbed by the industry. The Russian Natural Gas in 2021 amounted to 40% of total imports in Greece. Based on practised calculations, if the imports of Natural Gas from Russia are fully interrupted for the time period 08/22- 03/23, Greece will show a deficit of 26 TWH (and another 24 ΤWH for exports to Bulgaria if this continues). This is an exceptionally unfavourable scenario that will certainly affect the Greek industry and the potential to operate particularly in sectors where there are no alternatives or the energy is an extremely important cost parameter. The return to the use of lignite for the generation of electricity after the gradual decrease as part of delignitization, together with the respective decrease in Natural Gas generation, are not enough to ensure sufficiency directly.
- How do the industries that depend on natural gas address the situation? Is it possible for them to turn to other energy sources?
Natural Gas is a relatively clean fuel. The energy saving systems that are adopted and can be further adopted by the industry cannot fully replace the need for energy consumption, particularly in the most energy-consuming industry sectors and under the present conditions. Moreover, there are existing production systems and technologies where the Natural Gas is a one-way street due to the high thermal efficiency or because it simply is the only available source of thermal energy generation. Therefore, other energy sources, such as LPG, require investments in order to be fully utilized or they are, in terms of technology and infrastructures, non-utilizable (e.g. hydrogen). The change in the mix in favour of electricity (wherever this is feasible in terms of technology and quality) is also up against the fact that approx. 40% of electricity generation in our country is based on Natural Gas consumption. The use of electricity from Renewable Energy Sources constantly increases in our country, but its availability is somewhat theoretical, so that it might not be utilizable at any time.
- What do you think about the European plan to reduce natural gas consumption by 15%? Can it be applied in the industry without affecting production?
If this reduction is imposed in regulatory terms, it is certain that it will lead to further inertia for a significant part of the industry and, finally, to deindustrialization, with heavy consequences for the total economy. In recent years, the European Union has developed a front-loaded industrial strategy, which it refutes in practice, creating a further deficit in competitiveness towards third parties and higher dependence, which we need to decrease for obvious political and financial reasons. In any case, the European and Greek industry have been trying to reduce the overall energy consumption in order to preserve their competitiveness and do not need external interventions with disastrous consequences.
- Do you think that the EU’s response to the energy crisis is sufficient?
The EU’s reaction is definitely a result of the crisis that has occurred and for which there was no preparation on a cultural and financial level. The lack of cohesion in the energy policy of the EU member states, the delay in the adoption of new measures based on general and not special interests, as well as the ad hoc adoption of measures from the toolbox that the European Commission proposed to the member states last year, show that there has not been a suitable preparation in order to address such a major crisis with multiple consequences not only for the industry but for the overall economy and society. The consequences from the sharp rise in electricity prices for the countries in the European South are much higher than for the rest of Europe, due to the large dependence on the Natural Gas in the electricity generation mix. The European South has urgently asked to adjust the current market model, so that Natural Gas prices do not define the wholesale market for electricity but, to date, this has not been adopted as an actual proposal.
Click to watch the ZDF broadcast here.