Power play: Power subsidies around the world

PAKISTAN

The government has decided to start Multi Year Tariff (MYT) in the power distribution companies. The subsidies which are now being provided across the board will be rationalised and optimised by targeting them to the deserving segment of consumers.

GERMANY

Germany is struggling with rising energy costs as it phases out nuclear power and tries to shift to more renewable energy. In a bid to stem these rising costs in the coming years, energy minister Sigmar Gabriel has proposed cutting the average subsidy for wind, solar and other renewable power sources. On January 22, Chancellor Angela Merkel urged her cabinet to join her in backing Gabriel’s plan to reduce financial support for renewable energy. Gabriel’s plan includes reducing the average subsidy for wind, solar and other renewable power sources to an average of 0.12 per kilowatt-hour in 2015 from 0.17 at present. However, the plan has been criticised by members of the governing parties and business lobby groups.

GHANA

In September 2013, Ghana’s electricity tariff was increased by 78.9 per cent as the decline in cedi (Ghana’s currency) made imports of crude and refined products more expensive. In November, the government announced a reduction in the tariff by 25 per cent, meaning consumers now pay 59.8 per cent. The action will translate into a subsidy of over  400 million cedi to be paid to the utility companies to maintain a steady supply of energy.

ARGENTINA

In December, 2013, residents of Buenos Aires took to the streets to protest after being left without power for weeks during a heatwave. The government is currently stuck with an energy subsidy bill of 2.6 per cent of the GDP, around half of the overall fiscal deficit. Experts say the problem is not the production of electricity, but of distribution. The government said that it would step in to take over electricity distribution service in the capital if companies don’t resolve blackouts sparked by the record demand. Energy firms rely on government subsidies, estimated at around $11 billion in 2013, to cover their costs. The government has now threatened to seize control of power companies as it did in 2012, when it nationalised the country’s largest oil company YPF.

 MEXICO

For decades, Mexico has enjoyed a subsidy in  residential power bills and to industrial high volume users. Over the past decade, the cost of this subsidy to the Mexican federal government has been growing at a significant rate. But by law, written into the legislation establishing any subsidy in Mexico is the word “temporary”. In August 2013, President Peña Nieto decided that the subsidy would stay. The World Bank criticised this stating that electricity was “too cheap” in Mexico, promoting waste, and not stimulating the use of more expensive but energy saving technology.

Compiled by Aleesha Matharu