The Croatian Employers' Association (HUP) has sent proposals to the government and the Ministry of Economy and Sustainable Development for the expansion of measures designed to mitigate the impact of rising energy prices, putting emphasis on electricity subsidies for entrepreneurs.

HUP said on Tuesday that despite further energy price growth and deteriorating economic conditions, the government has not expanded the existing measures.

“The business sector expects this because it can no longer cope on its own with the energy price hikes and upcoming energy and digital transition, which it absolutely needs to survive in a competitive environment,” HUP said, recalling that it had supported the government package of measures designed to alleviate the impact of rising energy prices, in effect since 1 April.

“When it was adopted, we expressed concern because it did not refer to large consumers of gas and consumers of electricity, which is the most important energy source for all enterprises,” said HUP, which is also seeking faster procedures to encourage investment in renewable sources of energy and a faster energy transition.

It notes that it has repeatedly appealed to the government and the competent ministry to take action and urgently expand compensatory measures as well as invite applications for grants and indirectly for access to financial instruments under EU-funded programmes.

Five key points of HUP’s proposal

HUP’s proposals are divided into five points. The first point, energy subsidies, proposes expanding the criteria of eligible customers for the gas segment to include large companies and large consumers, those with consumption of more than 10 GWh.

Furthermore, HUP calls for including electricity consumers who have recorded an enormous increase in consumption compared to last year, introducing subsidies based on consumed megawatt-hours (MWh) of energy for all (large) energy consumers, as well as reducing or temporarily suspending the regulated part of the price of electricity at least until the end of 2024.

The second point refers to encouraging the establishment of a system for the use of renewable energy sources and encouraging investment in energy efficiency with significant increases in grants for green transformation and opening financial instruments through a capital rebate, which allows the write-off of the loan principal for achieved public policy goals.

Due to delays in calls for applications, retrograde recognition of costs from investments in energy efficiency through 2022 should be enabled, says HUP.

HUP also proposes interest-free lending for working capital with the issuance of state guarantees for businesses whose survival is endangered and for those whose increased energy costs have jeopardized the further course of business.

There is also a need to create a more favourable environment for renewable energy source investments and projects and urgently remove current obstacles and adopt bylaws based on the new Electricity Market Law, as well as create mechanisms to simplify and accelerate investments in renewable energy sources by improving renewable energy supply systems.

The fifth point refers to the introduction of a measure to reduce the tax rate on reinvested profit by up to 100%, depending on the amount of investment, for investments in renewable energy sources and investments that increase energy efficiency to the level of independence.

Electricity prices up 100% for 40% of enterprises

A survey conducted by HUP among its members in May shows that for 80% of companies, electricity is the most important energy source in business, with the largest number being among small consumers, using up to one gigawatt hour (GWh) per year, while one-sixth of consumers use more than five GWh per year.

For as many as 40% of companies, the price of electricity has increased by more than 100%, a further 20% have reported increases of up to 300%, and for 15% the price has increased by more than 300%.

At the same time, 72% of companies are not able to transfer the increase in energy prices to the price of their final product or service and will have to bear most of the burden of the price increase on their own.

The survey also shows that 46% of companies are losing customers and their competitive position in the market due to rising energy prices, and 30% said they would give up investments due to rising costs.

The decline in investments, exports and personal consumption would lead to total GDP in 2022 growing at a rate of 2.4 percentage points below current government projections, or at a rate of 0.6%. In 2023, Croatia’s GDP could thus be 4% below the current expectations, HUP estimates.