How to keep the lights on -- Medium and large companies left without support on liberalized energy market in North Macedonia
The high cost of doing business, mainly caused by a sharp increase of energy prices, has eroded the competitive capacity of Macedonian enterprises, according to a recent enterprise survey the Organization of Employers of Macedonia carried out with ILO support.
Following North Macedonia’s rebound from the COVID-19 pandemic in 2021, recovery momentum has since faded amid the global energy crisis. Soaring energy prices have pushed inflation to levels unseen for decades, while the country’s high dependence on energy imports has left it particularly exposed to this crisis.
The Government intervened with measures to support households and small enterprises. These measures, however, have left medium and large enterprises to weather the crisis alone, despite their accounting for 53 per cent of total added value and 43 per cent of employment. The Organization of Employers of Macedonia (OEM), with the support of the ILO, rushed to carry out a survey of 125 enterprises between 18 October and 8 November 2022 to better understand the challenges faced by these companies and inform government decisions on potential additional support measures. Additionally, the survey aimed to gauge the experiences of companies considering or undergoing a transition to renewable energy.
The vast majority of survey respondents identified the spike in energy prices and the resulting increase in inflation as the two most acute challenges they faced. More than half of respondents anticipate falling well short of profit targets, with one third of companies considering temporary closure if energy costs do not decrease, or if support from government is not provided. The cost of electricity as a proportion of operating costs has multiplied by between 3 and 5 times within a year, leading to a significant increase in overall operating costs for companies. The high cost of doing business has eroded the competitive capacity of Macedonian enterprises, which see themselves as being inevitably excluded from international markets.
Only 10 per cent of surveyed companies that purchase electricity on the liberalized market were satisfied with the existing government support measures, and more than a half found them inadequate. In the absence of sufficient support, most companies have independently initiated mitigation efforts, including the adoption of energy saving measures, adjusting the working hours of staff, and, most commonly, accelerating their uptake of renewable energy technologies. Over a third (36 per cent) of all surveyed companies have started or fully completed the process of transitioning to self-generation of electricity from renewables. However, the administrative procedures are time-consuming and cumbersome, involving institutions at both central and local levels which apply procedures and impose taxes inconsistently. The process in its current form can take between one to three years, and it is discouraging and off-putting for companies ready to adopt renewable energy technologies.
Two sets of support measures have emerged from the survey and are promoted by the Employers. One aims to mitigate the effects of the crisis through financial support measures which cap energy prices at either €100/MWh or €200/MWh. The preference for the lower or higher level depends on the maturity of the company and its ability to compete internationally, as well as the attitude of the management towards economic uncertainty and their outlook on the evolution of the energy market. The other set of measures is geared towards facilitating the transition to renewable energy production for companies. By simplifying investment procedures, improved access to financing and consultancy services enterprises could make more informed decisions on investing in renewable energy technologies.
Read the report "Keeping the lights on: challenges and opportunities for companies on the liberalized energy market in North Macedonia"