In Girona (Catalunya, Spain) there is a strong group of teachers, former students, researchers,  that is getting to work to help mitigating global warming. They are working in a project, that will be launched around the 10/10/10.

"We aim to create a popular movement to do local small scale investments in renewable energy and consume this energy ourselves"- Gijsbert

Here the article I just received from Gijsbert that will be published in El Punt and Avui, two big newspapers that covered the whole Catalonia region:

sites/all/files/somenergia_web_2.0.jpgSo electricity is going to get more expensive from October, according to the Spanish industry minister Miguel Sebastián earlier this week when he announced a 4.8% price increase. Unlike last July, the government will not be reducing the part of the tariff it regulates – the access tariff or tolls element – to offset the increased auction cost of energy.

As always, news of ever-higher bills is met with dismay. In the case of electricity there is this idea that it is a basic good, like bread and sugar were 40 years ago, and so should be under some form of price protection.

Times have changed, however, and we believe this concept should not be supported by a government wanting to create a ‘sustainable economy’ and promote innovation. What's more, it's our opinion that the price we pay for energy in Spain is actually too low. Why do we say this? Well, let's look at electricity prices in Spain. Do you know what you pay for the power in your home or business?

This is a question we have been repeatedly asking people in Catalunya during the last months. Our little (non-scientific!) research shows an error of at least 50% in 8 out of 10 peoples' responses – and most estimate a higher price than they actually pay.

The current tariff people pay is around 0.12 Euro/KWh. This varies depending on the company. On top of this, you pay a fixed tariff of about 2 Euro/KWh of contracted power. An average family has around 5 KWh contracted power and an average consumption of around 300 KWh per month and ends up paying between 40 and 50 Euros per month.

The standard economic theory states that people’s behaviour can be influenced by changes in prices. People respond to incentives, as we say. Research in The Netherlands has shown that electricity has a price elasticity of around 0.2. This means that a 10% increase in price leads to a 2% reduction in consumption. 

From the fact that they do not know what they pay and generally estimate that they pay considerably more (estimates were up to almost 1 Euro/KWh) one may conclude that the current expense is not worth too much attention. Or, put it another way, in Spain we pay too little.

In other countries, like for example The Netherlands, the price for a KWh is more than twice as high. Does this mean that the Dutch electricity companies are more inefficient than Spanish ones? Not really. All over Europe the price of producing, distributing and selling a KWh of electricity is roughly the same at 0.14 Euro/KWh.  The difference is in the way electricity is taxed. The Dutch government taxes each KWh with 0.11 Euro, in Spain the government subsidizes each KWh with 0.02 Euro.

Economically, this is perverse. Why would the government subsidize the consumption of electricity and then tell us it is working towards a ‘sustainable economy’, give subsidies to renewable energies and so on?  The best KWh is still the one we do not use.

The current subsidy of 0.02 Euro/KWh leads to a yearly deficit of around 3.000 million Euro and has resulted in a historically accumulated total debt of around 16.000 million Euro.

So we say: 'Raise the price of electricity considerably and clearly.' A first step of 0.03 Euro/KWh starting January 2011 seems a good start. Also it is wise to announce in advance subsequent rises (maybe 0.01 Euro/KWh for the next 5 years) so people and business know what they can expect and know that investments in saving energy will pay off.

The example of The Netherlands, which started ‘greening’ its tax system in 1996, shows that this does not hurt industry or people. It just helps them preparing for the future and reducing their impact on the environment.

So, let’s start working towards a real sustainable economy. Let’s start taxing electricity. Let’s clean up the mess created over the last years and prepare for a sustainable way of living.  The cost of doing nothing to prepare might be too high.

Gijsbert Huijink (Netherlands, 1968) is associate Professor of Environmental Economics at UdG.

David Montgomery (Scotland, 1965) is a technology journalist.

Both writers are part of a small but fast-growing grassroots group setting up Catalunya’s first renewable energy production and consumption cooperative at Parc Cientific i Tecnològic in Girona. For more information, see: 

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