Angjushev for MIA: We will no longer see electricity prices below 80 euros per megawatt hour

Kocho Angjushev
Kocho Angjushev / Photo: MIA / Frosina Naskovic

The price of electricity on the stock exchanges will stabilize in the long run from 80 to 120 euros per megawatt hour, but I think that we will not spend the whole of 2022 with a lower average of 150 euros, maybe it will stabilize a little in 2023 and fall to 120 or 130 euros, but we will no longer see prices below 80 euros per megawatt hour, he said former Deputy Prime Minister for Economic Affairs Kocho Angjushev in an interview with MIA.

As a former Deputy Prime Minister for Economic Affairs and Electricity Trader, what is your comment on the price of electricity and the way the Government is dealing with the energy and health crisis?

- If we talk about the price of electricity, it is very important to say first where it comes from and what is happening - whether what is happening is in Macedonia or something wider. What we have today is called by everyone as an energy crisis, and I do not call it an energy crisis, but a financial crisis, because it would be an energy crisis if someone did not have electricity in Europe. As we see, no one complains that there is no electricity, everyone has electricity, which means that the crisis is not that there is no energy, but the crisis is that energy is expensive. Now, how did energy become expensive are four factors that generate the price of electricity.

First of all, the biggest factor is the price of natural gas. Where did the gas price problem come from? Basically, this crisis is European and not global, and the main quantities of gas in Europe come from Russia, a small part of Norway - meaning the North Sea, some small production has certain countries and a part of Africa, from Algeria, but it is for southern part, say Spain etc. But predominantly gas comes from Russia. Gas can be bought in two ways. One way is to buy according to the formula related to the price of oil, and the second is to buy at a spot market. Europe decided to buy gas in the spot market, but unfortunately, the European economy was moving and recovering a little slower, and at the same time it happened that China and Asian countries dramatically increased gas consumption for two reasons. First, because China has decided to shut down coal-fired power plants and switch to gas-fired electricity, and their economies have recovered faster since the KOVID crisis and increased the amount of gas they consume directly in industry. Thus, it happened that a good part of the Russian gas went to those markets and when the demand grows, and the gas is still with limited quantities of production, of course the price rises. There are also geopolitical problems around North Stream 2, etc., but in short, if we have to simplify, it means that the high gas consumption in China has made large quantities of gas go to China and that has increased the price of gas in Europe and in European countries. it reached record levels. And if you assume that a good portion of electricity is produced on gas, then it generates or pushes the price of electricity up.

The second reason is the green certificates which have grown drastically and from some 20 euros they went to 60, 70 euros. They directly affect the price of electricity, but it is the policy of transition or energy transition from polluting industries or polluting forms of electricity production to renewable electricity sources. In other words, that's the price of ecology that we pay. We all want to have a healthier environment, but we need to be aware that it costs. And that price today partly generates it.

The third component is the reduced yields of renewable energy sources. Europe has relied heavily on renewables, most of it perhaps on wind farms in the northern seas, but there has been a period of shortages. Renewables in all respects are environmentally friendly, but on the other hand, they provide electricity only when nature provides it - photovoltaics when there is sun, wind farms when there is wind, hydropower plants when there is water, and a period of time they all sources to be reduced compared to some averages from previous years. This is the third factor that generated the price of electricity, because there was less supply from those sources and normally when there is less supply the price rises.

And the fourth component is the component of real inflation. A lot of money has been printed in the world. That money has increased the basic resource prices, because it is a closed circle. For example, metals have grown 100 percent. All spare parts in hydro, thermal power plants or any plants are made of metal, which means that the parts became more expensive, their investment more expensive, their maintenance more expensive. Furthermore, inflation has led to wage increases. It made labor more expensive and it all made a generation of inflation that we can not say does not exist. It exists. It exists everywhere in the world, and the source of that inflation is exactly the crisis that we have been living for two years, and we do not even know when it will end. So, inflation is a component that affects the price of electricity, probably at least at the moment, but it also affects. And when you take a sum of all these four components it is practically the total increase in the price of electricity.

Now how do we deal with that? Like all other countries that do not have enough own production. So, those countries that have enough of their own production do the best, and all those countries that are predominantly import dependent unfortunately have to pay the market price of electricity and that normally generates the price of electricity. What can the Government do? In fact what it does. I first think that the problem or the issue of energy should be taken out of the daily political issue or the daily political quarrel, because in energy nothing is done in one, two, three years. You should have a plan for everything in 10, 20 years. We have, but unfortunately, that plan is little read. It is called Energy Strategy, it was adopted in 2018. Everything is beautifully written there and it should only be read and respected. I think that is the direction to go. But in short, what can the government do? It can withdraw money from the Budget and subsidize. In fact, it does, and it does so mainly in households, not in the economy. Probably in the part of the economy and it is difficult to do it, although there are measures that can be taken, but it protects the households to the maximum. The increase in the price of electricity by about 10 percent, compared to what the market prices of electricity are, is a small increase, which means that the Government will allocate serious funds to subsidize them. But that is not a solution in the long run because it can not subsidize non-stop. Maybe, the hope is that this crisis will pass. It is true here I am not convinced that this crisis will pass and that prices will quickly return to the old level. If we take into account that last year the prices this period of the year were 50-60 euros per megawatt hour, etc., I think that we will not see such prices for a long time. Why? Because even if the gas problem is solved and the gas price is reduced, the other three components that affect the price of electricity will remain.

As a person who has 20 years of experience in this field, my personal opinion is that prices in the long run will stabilize between 80 and 120 euros per megawatt hour. Here today I just looked at the stock market, today it is 261 euros. There were days when he went up to 400 and up to 500 euros. I think it was a deception during the holidays that the stock market stabilized. No. So, consumption decreased, because the industry did not work, and it is the main consumer of energy and therefore prices during the New Year holidays fell, but if you look at the assumptions and the stock markets and what is traded daily on the stock exchanges you will see that the price is moving again between 200-250-260 euros per megawatt hour which is an extremely high price.

Will this stay in the long run, as I said, I no longer expect this price to stay in the long run forever, but how long will this last - so I think we will not spend the whole of 2022 with a lower average of 150 euros, maybe a little stabilizes in 2023, which means it will fall to around 120-130 euros and it will slowly stabilize, but I think we will no longer see prices below 80 euros per megawatt hour.

Was it necessary to abolish the daily cheap electricity tariff for the citizens in order to amortize the increase in the price of electricity on the regulated market?

- The calculation of the price of electricity is a formula that includes several components. If the cheap tariff had probably remained, and the Government had a certain amount of money or a certain amount of money that it planned to spend on subsidies, then that 9,48 percent increase would have been higher. So in the end it all comes down to how much energy you will produce at home and at what price you will sell it, how much energy you will import. Price is a mix of those components. If we look at the clean mix, the increase should probably have been 30-40-50 percent. Now, from that real increase to a 10 percent increase is a state subsidy that gives in the price and it is an equation with a few unknowns in which if you do not abolish the cheap tariff then you will increase the price of electricity and vice versa.

NGOs are urging the government to abolish subsidies for small hydropower plants and say the state provides more funds for subsidies than they generate electricity. Your comment?

- You see, I'm sorry that this discussion is being conducted rather one-sidedly. Whenever I enter a discussion to explain that topic I run the risk that someone will think I am protecting my own position, because I own some of those hydropower plants, although I personally own some 15-16 percent of all hydropower plants in the country as property.

I think it's time to say some things like that. I think that is what people who rarely or never have seen a hydroelectric power plant are talking about. I think it has become a bit populist and modern. And I think that's like, say, a discussion that comes in as a discussion of people who don't look at it in the long run. Here are basically two topics here. So, one topic is that they have a detrimental effect on the environment, and the second topic is that they are subsidized. You asked the question about subsidies.

Let's talk about subsidies now. An audit report that I disagree with and did not take into account all the facts quickly came out, and that is when economists wanted to discuss energy and did not take all the facts into account. They assumed that the price charged by the hydro power plants in the country was 80 euros, while the price on the stock exchange was 41 or 44 euros. Now they did a simple math on how much the hydropower plants produced in this period and the difference between those two prices and came to a sum of 40 million euros that the hydropower plants took more. Let's now consider whether this is the case. For example, they did not take into account that the hydropower plants paid 17 million euros in advance in the country to build the hydropower plants as a one-time fee. So now take those 40 out of those 17. And after that, the hydropower plants pay two percent of the production every year, so take that out. So, it also goes to the state. So take into account that if 200 hydropower plants are built, and about 120 have been built so far, let's talk about 120, those 120 hydropower plants cost not less than 200 million euros, of which 70 percent is construction - Macedonian companies built 140 million euros from that investment remained in the construction of Macedonia. Only taxes and VAT how much is paid accordingly in the budget. And what will be the difference, if we do not build the hydro power plants, in that case we have to import all that electricity, so is it better to import it?

Now, here we come to a paradox. Now, today let's look at the situation. We call 80 euros is the price of electricity from small hydropower plants paid by the state. But today we see that the price on the stock exchange is 260 euros, so only today if we take that those hydropower plants currently produce 50 megawatts, and they produce so much, I checked that before this conversation and if we take that in 24 hours they produce 50 megawatts and if we take it the difference of 261 euros as it is today when they would sell electricity on the market up to 80 euros as much as the state pays them, that is 181 euros per megawatt hour price difference or 217 thousand euros per day. This means that today the small hydro power plants, for those we are talking about - disputable, today they leave 217 thousand euros in the country and probably that is why these spokespersons are no more. Now, if we talk about it on a monthly basis, it is 6,5 million euros, and if we talk about this crisis lasting a year and the hydropower plants leaving that electricity in the system that they leave today, it is 79 million euros. Well, everything they took from the last 10 years, now they will return it to the state twice this year.

After all, no one does this math. That is why energy is made in the long run. Here, I ask, if we do not build hydropower plants, if we do not build photovoltaics, if we do not build wind farms, then what will this country have electricity from? Will we import everything? Well we no longer have coal! It is a lie that there is coal for four blocks or it has not been dug. No. The truth is coal is depleting. So, there is no more coal in this country. There is no gas. What will we make energy from? So we are left with only renewable sources, we have it as our own energy - hydro, photovoltaics, wind and possibly biogas - biomass and nothing else. There is no other in the world, it is not invented. And we have to look at them in the long run.

Now I ask, all those spokesmen who were environmentally against small hydropower plants, do they not mind today to burn fuel oil and import coal? Is it less polluting? They are gone today, they are silent. And that is good now. So when the power goes out everything is fine, right? See, let's be objective. Every single thing when you build it, whether it is a building in the city, a hydroelectric power plant in the mountains, a photovoltaic power plant, a wind power plant, it has an impact on the environment during the construction. I invite all of them to come after 10 years to see what the hydropower plant looks like. Only two plots of 200 square meters are above ground, everything else is underground and the greenery has been returned to the mountain. Yes, a trench was dug when it was being built, some trees were cut down, but after 10 years it was returned, and the hydropower plants will produce electricity for 100 years, not 10 years, and that is why a smart country should be aware.

After all, we do not have to be very smart. You should not listen to me speak. Let's see what the world does. There are currently 24 small hydropower plants operating in Europe and they have never been an issue anywhere. Most of them are in Germany. Of these, 21 percent or 6.406 hydropower plants are currently located in protected areas. So, environmentally friendly in national parks are located. Of those, 3.936 are existing in national parks, and we call in Macedonia not to make them in national parks. But we call in Macedonia not to do anything anywhere. That is a big problem. That is a big mistake. And after that, at the moment, 2.396 are still planned in protected areas, and 77 in Europe are currently being built in protected areas. It is a lie that this is not done in protected areas. If done properly, it is done in protected areas.

Let's see what the environment does. That is very important. Bulgaria had 2005 small hydropower plants in 95, 2007 in 127 and 2020 in 200, which means that Bulgaria has meanwhile built 70-80 small hydropower plants and that is not a topic at all. Greece in 2005 had 50 small hydropower plants, in 2007 - 61, in 2009 - 96, in 2020 - 175. Slovenia, we consider the most environmentally friendly country and we can compare it mostly with our country in terms of size and after all and was part of former Yugoslavia, etc., at the beginning of the survey in 2005 had 201 small hydropower plants, in 2020 there are 380. So, Slovenia in the meantime built another 179 small hydropower plants. Not to mention in France that in 2005 there were 1.710 small hydropower plants, and in 2020 there are 2355 small hydropower plants. Austria has 4-5 thousand etc. What does it mean that these countries do not know what they are doing, only we know what we are doing?

The question is different. If you look at the map, there is no longer a river in Northern Italy, in Austria, in Germany, in France where no small hydroelectric power plant has been built, it is all built. The only potential is another part of Bosnia, part of Serbia, Kosovo, Albania and Macedonia. And I ask the question - is not the fight for that, for the free concessions? So, we need to ask the question a little bit more broadly. And for whom are we fighting that here? I think we should be smarter as a country. I have told you enough arguments that very clearly reflect the situation from an environmental point of view. Is it less environmentally friendly to build a photovoltaic or wind farm - it's the same to cut down trees, the same, especially if you take agricultural land with a photovoltaic, so you take it permanently. I think that we as a society are too guided by daily politics, we are too guided by campaigns that someone will finance and we easily accept those campaigns without looking at the big picture and the long-term strategy. Here, I hope I answered you as briefly as I could, as specifically as I could on this question.

You said that it is easier for countries that have their own production of electricity to deal with the energy crisis. What should our country do to increase its own production?

- To make its own production from what it has as sources. You see, in the world energy is made from several sources. You can do it from nuclear power, we can not do that, unfortunately, I think it is too big and complicated and requires international permits. You can make it from coal-fired power plants. We no longer have coal, and even if we do, we call it polluting and we do not want it. You can make it from gas, but here's when you make it from gas the price goes up dramatically. I would not like to discuss fuel oil at all, because it is the most harmful of all these. These are the conventional ways and those that are renewable sources - hydropower, wind, water, solar and biomass and biogas. Now, we, unfortunately, no longer have the previous conventional ones. So, we have neither gas nor nuclear, we no longer have coal, fuel oil and if we want to do it again we have to import fuel oil - it does not matter if you import electricity or fuel oil - you import. So, we have only what nature has given us - photovoltaics, hydropower plants against which there is a campaign, further windmills as much as we can. However, we must know that renewable sources produce more expensive energy than conventional sources, I am talking about coal and nuclear, and that it comes at a price. But still it is better to have your own production than to be one hundred percent dependent as it is now. And here I told you again the example with hydropower plants.

You said that the increase in the price of electricity is mostly due to the problems with Russian gas. Do the announcements from the German co-owner of the Nord Stream 2 gas pipeline that he will receive all the necessary permits to operate the gas pipeline from the German authorities in the first half of the year mean that some end to the energy crisis or lower market prices is in sight?

- So, yes, it means that if that pipeline is launched, ie a new gas pipeline, the quantities that will come to this market will probably increase, and thus the supply will increase, the price will fall a little, but keep in mind that it will not stop consumption in Asia, China, etc., that it will continue further. Which means that now that demand has risen, prices are likely to return to normal, meaning they will probably never go back to the old $ 200-300 per XNUMX cubic meters of normal gas. That is why I say that the price of electricity, which will directly depend on it, will stabilize, it will not remain so high, but it will never fall to the level we saw a few years ago.

Now let's get back to your current activities. You have recently become the Honorary Consul of Malta. What does this mean and can you help increase economic cooperation between the two countries?

- Malta is one of the smallest countries within the European Union, and we want to be a member of the EU. First of all, I want to say that an honorary consul is an honorary position. It is a great honor, as it were, to be the honorary consul of a country, and I thank the President of Malta, the Government of Malta, for inviting me and offering me this opportunity. I need to represent Malta's interests in Macedonia in some way because Malta does not have its own embassy. Practically this consulate is their representative office.

One of the roles of the consul is to help develop economic relations. Unfortunately, we have a very small level of trade with Malta and I think there is a lot of space here, especially in, say, food. We say that we produce agricultural products, but, unfortunately, we do not realize that our agricultural products are small in quantity for large markets. For Russia, Germany, France, we do not have quantities that we can deliver, while Malta is 100% import oriented for vegetables, fruits, etc., and in size, it is appropriate for our production facilities and here I see a lot of space.

Furthermore, Malta is an interesting society that has a high GDP per capita, maybe five times higher than ours, and at the same time it does not have some natural resources. So, they push her more on intellectual work, services, IT technologies, financial services, etc. I think that in that part there is also room for increased cooperation. As a consul, I will do everything I can to intensify that.

How did the health and energy crisis affect the work of your companies and did you use any of the six measures provided by the Government to support the economy and the citizens?

- The crisis was a big problem for the entire economy and, of course, for our companies. I am the owner of Feroinvest Group, which owns Brako, and Brako is the owner of Green Machines. "Brako" is a factory in Veles that employs about 700 employees, exports to 42 countries, and "Green Machines" is a subsidiary of "Brako", which is a brand for the production of cleaning vehicles so called. sweepers, street sweepers and is one of the largest brands in the world. Fortunately, "Brako" had the opportunity to buy the brand. "Brako" has been producing for 7-8 years. Previously it produced for the owners of the brand, so we produced components, and then we took the complete vehicle to make it, and from 2018 we bought the brand, so it is now a Macedonian brand, our brand, which we started to develop. In the meantime we have developed two more new vehicles. The public was familiar - hydrogen, the world's first vehicle for street cleaning. Now the last order has arrived from France two days ago, otherwise they are already driving in the Netherlands. Next, we developed a new electric small vehicle. We promoted that before the New Year, 400ZT and we make the old vehicles that were made by "Green Machines" and we developed a new big diesel vehicle 5,5 cubic meters. This is a new part of the Green Machines segment, with which we have expanded the 955 which we have now started to ship to the Middle East.

"Brako" dealt with the crisis successfully. The crisis was a problem, it required a lot more work. But I must say it was also an opportunity. Why was it an opportunity? It was an opportunity because a lot of our competition closed the markets, closed the production programs. "Brako" never closed. So, despite the fact that the market has generally decreased, as many production facilities have closed their facilities, "Brako" increased its market share and grew in 2021 by 50 percent compared to 2020, and in 2020 did not decrease. "Brako" decreased by 18 percent only while I was in the Government, at that time. It was a bigger disaster for "Brako" than Covid.

Not to owe much, "Brako" in 2021 managed successfully. It hired 150 new employees and increased the turnover by 50 percent thanks to the aggressive approach, the investments in new technologies in the new brand, the development of new vehicles and for the next year we have the same plan to grow another 35 percent. "Brako" is in the investment cycle of 8,5 to 9 million, and together with other investments in my group - biogas power plant and photovoltaic in Kocani, the current investment within two years is 21 million euros. Normally, it's not just company money, it's a lot of bank money supporting projects, and I think that despite the crisis, the only way to deal with the crisis is to be more organized and faster than others and to invest boldly.

Macedonia in the industry has no other chance but to have high technology, because there are no other advantages. "Brako" has the highest technology, state-of-the-art machines, CNC machines, welding robots, plasma and laser cutting materials, etc., and that makes us competitive so that we can compete with the rest of the world. For example, our cars are sold, and the White House is cleaned in Washington, the palaces of the Queen of England in England, Paris is cleaned, London is cleaned.

In order to achieve that, "Brako" had to form daughter companies, so it has a daughter company 100% in the Netherlands, a daughter company in Germany, a daughter company in England and a daughter company in America, in San Diego, California. . You know, it's a lot easier to be a German or an Italian company and sell technology. Then the country itself and the name of the country sells. And when you are from Macedonia you have to be better and cheaper than the whole world to sell. Fortunately, we succeed. We succeed because in those thousand employees, as many as there are in my companies, there are over 150 engineers in the whole system. A good part of those engineers were educated abroad, they were returned to Macedonia. Only in such companies where there is high technology can you bring back from the world the Macedonian engineers or children who went there to bring them back to Macedonia. So, we have students who graduated from MIT, we have students who graduated postgraduate in Munich, we have students in Vienna, and so on. and they returned and today they work in "Brako". Also, the best students from the Faculty of Mechanical Engineering and the technical faculties in Macedonia are the driving force of the development of "Brako" and only in this way can we move forward. Here, I would say briefly, say, dealing with the crisis. I would say and encourage all businessmen that the crisis is a problem, a big problem, but also a great chance because new markets are opening. I will add here that a large space has opened up, because Western European companies have started to withdraw slowly from China and there is a great opportunity to take part of that cake and you just need to be active. "Brako" currently exports to 42 countries, 96% of the production is intended for export.

What do you think is missing to encourage exports from the country and to motivate companies to invest in production facilities that will meet the standards for placement in foreign markets?

- Nothing should be helped to companies other than what is being helped all over the world. What is happening all over the world? Companies should not be given money, let's say now, he will not pay the electricity bill - give him money for electricity. No, it should not.

Companies need to be helped by what the European Union is doing in their own countries. What it does if you invest and buy new technology gives you subsidies for what you invest and buy. In the European Union, those subsidies are up to 50 percent. For example, if you build a factory and buy new technology, they give you a 50 percent subsidy. In Macedonia it is not up to 50 percent for Macedonian companies. The TIDZ offers the same for foreign investors and that is good, it is not disputable.

The Law on Financial Support should be developed and nurtured in such a way as to stimulate Macedonian companies that the state will help them with a certain percentage in the purchase of new technology, because new technology means greater productivity. Higher productivity, on the other hand, means better competitiveness, and better competitiveness means export potential. So, exports do not come from whether you like it or not, but whether you have a product or not. And now we have to ask ourselves in Macedonia, do we have a product for export. Where will we make that product? What technologies will we use to do it? So to make a product you need technology, you need technology. And that needs to be stimulated. The purchase of technologies should be stimulated. There is now a Law on Financial Support for Investments in that part, but here additional mechanisms need to be developed and I think that is the platform that the industry needs. Now I'm talking exclusively about the industry.

It is different for agriculture. That is IPARD. Construction should be treated as much as possible Macedonian companies to be involved in infrastructure projects in Macedonia because otherwise we will lose construction in the country. So, all construction companies will fail, foreign companies will only be left to build and in that case they will withdraw when the projects are completed - who will remain to build in Macedonia. The question is complex, but I think I have answered the most important questions and points in brief.

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