High energy prices taking a toll on competition in Denmark

By Al Mayadeen English
Source: Agencies
27 Apr 2023 15:26
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Competitiveness in Denmark is being negatively affected by high energy prices as companies are struggling to make enough profit.

Wind turbines are seen in front of a coal power plant of German utility RWE Power near the western town of Neurath February 28, 2014 (Reuters)

The energy industry is making billions upon billions of dollars in profits as Danish companies are struggling to make enough profits to maintain their standing, as the Danish industry association is demanding compensation from the government to increase competitiveness.

The price hikes that affected gas and electricity have taken their toll on competitiveness in Denmark, with Danish companies bearing the brunt of the increases in question, making them less appealing than their rivals from neighboring countries, the Confederation of Danish Industry (DI) said.

The association estimated that the country's industry has amassed DKK 19Bln ($2.8Bln) in additional costs for the consumption of electricity and gas. For the sake of comparison, a calculation by consultancy Ea Energianalyse has placed the Danish energy industry's additional profits at well over DKK 20Bln.

"It is a bill that is difficult to pick up when you are competing with foreign countries," DI deputy director Troels Ranis told Danish media.

According to Ranis, many of Denmark's neighboring states gave struggling companies a helping hand with high energy bills, giving as an example Germany, which covered some 70% of the extra expenses. Sweden has taken similar measures, and Denmark's failure to do likewise put it at a disadvantage.

"We have lost competitiveness abroad. Asia and the US have not seen the energy prices that we have in Europe," Jorn Krogager, chief executive of MAT Dania - a foundry that deals in iron casting, machining, and assembly - said, stressing that his business's bill for electricity last year saw a five-fold increase.

Reverse Robin Hood

It is "particularly frustrating" that profits over the last year have ended up "in the wrong place", he said, noting that the energy industry's gains were "unheard of". "It's not money they've earned. In fact, it is the reverse Robin Hood, where the rich steal from the poor," Krogager said.

DI explained that Copenhagen had to provide compensation to companies in need, as did Berlin and Stockholm, in a bid to get the economy back on track.

In a bid to eliminate the risks of a state-supported spiral, he stressed that the help must only be temporary, targeted, and needs-driven.

A report published by SMVdanmark said in December that in the month of November, Denmark witnessed the highest number of bankruptcies filed in 13 years, with a total of 331 companies filing for insolvency amid the current inflation and energy crisis sweeping across Europe.

According to the agency, which represents 18,000 small and medium-sized enterprises across the country, companies have since the start of the summer been "hit hard by high inflation, soaring energy bills and, not least, fears about the future of the economy, which have sent consumers' appetite for buying into a tailspin."

Danish inflation in October was recorded at 10.1%. Overall, soaring energy prices are identified as the main culprit for inflation.

Though Denmark is estimated to be highly advanced in renewable energy sources, which include wind and solar energy that provide more than 50% of the country's electricity consumption, Denmark was not spared by the crisis that engulfed Europe as a result of the EU's reckless decision to sanction Russia.

Just like most of the other countries in the bloc, Denmark has encouraged its citizens to save up on energy and limit the use of hot water and electricity.