The set of measures deployed by the Government to address the energy crisis derived from the war served to contain inflation by 2.5% and boost the economy by 1.1%, according to the analysis published this Wednesday by the Bank of Spain, in chapter 4 of its annual report in which it analyzes the impact of the energy crisis on the economy.
Despite these positive effects on the economy as a whole, the body chaired by Pablo Hernández de Cos has verified that the current energy crisis is having a highly asymmetric incidence between households and companies, and identifies the poorest households and the smallest companies as the most affected by the measures.
The Bank of Spain positively values the determined action of the European authorities to implement the RePowerEU aid programs, as well as the response of the member states to alleviate the effects of the war in Ukraine, despite the fact that once again it returns to criticize that the measures deployed, above all by the Spanish authorities, have had a markedly generalized nature instead of being focused on the most vulnerable groups.
Along these lines, the institution has been especially positive in terms of the value of the 200-euro check for the most vulnerable families approved by the Spanish Government on March 31 and which will begin to be collected in June. "We positively value the fact that the measure is focused on vulnerable groups, but there is room for improvement if the expense variable is also included in the equation for the target population," said Ángel Gavilán, general director of Economy and Statistics of the Bank of Spain during the presentation of the report.
According to the Bank's estimates, this check could benefit "approximately 3.6 million Spanish households, around half of them located in the bottom 40% of the income distribution."
In this way, a basic need is covered since the study has also detected that in 15% of Spanish households the expenses for energy supplies represent a "disproportionately high" percentage compared to total expenses.
These households are concentrated among those with the lowest income. In other words, the poorest households are the ones that suffer the greatest impact from the escalation in the prices of energy supplies.
The situation is similar in the case of small energy-intensive companies. The impact of the rise in energy prices in 2022 had a greater impact than in the large ones, since the ability to reduce consumption and diversify their production is less. According to the Bank of Spain survey, in 2022 the average increase in energy costs for Spanish companies was slightly over 30%.
The general reaction to this shock was to renegotiate its supply contracts. 40% also increased their energy efficiency and almost 30% invested in renewable energy to reduce their dependence on fossil fuels and lower their electricity bills.
Looking to the future, the Bank of Spain sees some scope for gradually withdrawing the most general measures, although it considers that those focused on vulnerable groups should be maintained. The agency's forecasts do not anticipate that the current episode of low prices will continue in the near future.
“It is the result of temporary favorable factors such as an exceptionally mild winter as well as low demand from China due to its zero Covid policy. In the face of next winter, inventories will have to be refilled and China will have resumed its normal activity, so by the end of 2023 an appreciable increase in energy prices is expected," Gavilán predicts.
Looking to the long term, he is much more optimistic. The development of renewable energies will put an end to the high dependence of Europe in general and Spain in particular on fossil fuels and will contribute to the reduction of the national energy bill. "Spain is the second country in the EU with the greatest potential for onshore wind energy production and the first for solar energy, and it also has leading companies in both sectors," says the report.
Between both scenarios, the Bank of Spain draws a journey that is not easy to tackle. Because, as Gavilán explains, on the one hand, a strong public commitment is needed to finance and accelerate the transition to renewable energies with public money and policies that encourage investment in new technologies.
At the same time, the most polluting energies must be taxed in such a way that their use is discouraged. Which will make the total energy bill higher during that transition time.
For this reason, Gavilán considers that aid focused on the most vulnerable groups should be maintained. But above all, he warns that it is a process that is not without risk. Among the most prominent, he points out a possible loss of the Spanish and European industrial fabric if companies continue to reduce their gas consumption at the cost of paralyzing or diverting their production.
The energy transition in search of security of supply sources runs the risk of leading countries like Spain to other types of dependencies such as that linked to certain raw materials linked to the production, for example, of solar panels, with materials originating in Asia whose shortage could be a source of future price tensions, supply bottlenecks and, ultimately, "new dependencies".
