The opportunity costs of closing down of thermal power plant Šoštanj and coalmine Velenje
Gospodarska gibanja 501
Abstract
Subsidizing the production of electricity from renewable sources in Germany has been so extensive as to have notably influenced the electricity supply and demand in Slovenia. Germany is now becoming a great net exporter of electric power. In 2015, net electricity exports accounted for 9% of its final electricity consumption. From 2011 to 2016 the price of electricity on the European energy exchange fell by 43%. Out of this process Slovenia has become a major net importer of electric power (excluding the automatic delivery of the Croatian half of the electricity produced from Nuclear Power Plant Krško).
Due to the disruptions on the Slovenian-relevant electricity market, from 2012 to 2014 the sales of electric power from Thermal Power Plant Šoštanj and consequently also the sales of coal from the Velenje Coal Mine decreased. After that those two enterprises adjusted to the new circumstances and start to produce more. Nevertheless in 2016 the income of the Velenje Coal Mine was 11% and the income of Thermal Power Plant Šoštanj was 24% lower than in 2012.
The possible closure of the Velenje Coal Mine and Šoštanj Thermal Power Plant would lead to a decline of demand on the production chain of these two enterprises as well as to reductions in personal, investment and public spending that would together make up a loss of approximately 1,1 billion euros in Slovenian value added and 29 thousand jobs. Further consequences would be 6 billion euros of unused fixed assets, a drop in research and development investment of 19 million euros and a reduction in general government revenues of more than 400 million euros. At the annual level, the initial negative impact of the closure of the Velenje Coal Mine and Šoštanj Thermal Power Plant would exceed 3% of Slovenia’s GDP and employment.
The Slovenian economy’s potential loss due to the termination of operations in the Velenje Coal Mine and Šoštanj Thermal Power Plant over the entire projected period of their existence (until the year 2055) would amount to 7,7 billion euros of gross value added (in 2016 prices).
Keywords: the market structure pricing, firm strategy and market performance, production of electricity, energy and the economy
JEL: D40, L10, L94, Q43
Full article is available in Slovenian language.
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