Environmentalists want VAT reduction on electricity

The environmental association Zero defended this Friday as essential the reduction of VAT on electricity for domestic consumers to 6%, to circumvent the "unacceptable distortion" that makes electricity cost twice as much as natural gas.

Analyzing the regulated prices of electricity and gas bills (piped natural gas and bottled butane), the association reveals, in a statement, that there is an “unacceptable distortion in comparative costs to the detriment of electricity , which contradicts the decarbonization objectives, as gas is 100% fossil fuel and electricity is 70% renewable”.

Zero concludes that the fact that electricity is much more expensive than fossil gas in the residential sector “is an obstacle to decarbonization.”

And it adds: “With the aim of encouraging the widespread use of electricity to replace fossil gas in family homes in Portugal, ZERO proposes that the VAT to be applied to all parts of the electricity bill for electricity contracts up to 6.9 kVA (kilovolt-ampere) of contracted power be increased from 23% to 6%”.

The comparison made by the association took into account the most common contracted powers in electricity in the domestic sector (up to 6.90 kVA) and in the first gas consumption tier (70% of contracts), in addition to other specificities, such as the social tariff.

Analyzing the data, Zero reports that electricity (€0.1658/kWh) costs more than twice as much as fossil natural gas (€0.0785/kWh) , with the difference even greater for those on the social tariff, with electricity costing almost three times as much. Even for bottled gas, the difference remains, with electricity costing about 1.5 times as much.

In the analysis, Zero also compares the so-called kWh (kilowatt-hour) that is effectively used (useful kWh) by the equipment (the gas stove that has an efficiency of 50% and the induction hob of 90%) to say that electricity to heat water is more expensive than gas (except in the heat pump).

“When we compare daily charges, the disadvantage of electricity is even more substantial: 4.1 times,” according to the statement, which attributes one of the main reasons for the distortion to the State.

The State, with the support of the European Union, made large investments in gas networks, “indirectly subsidizing the consumption of piped fossil gas” , and in the case of the electricity network this does not exist, with the bill, by community imperative, being overloaded with investments in the necessary maintenance and reinforcement of the network , justifies Zero.

In the statement, the association also considers the Government's E-LAR program , which replaces gas appliances with electricity, as “a step in the right direction towards reducing greenhouse gas emissions”.

Doing the math, Zero says the E-LAR program allows for at least seven years of savings on the overall energy bill and adds that, for the program to have the greatest benefit, the price difference between gas and electricity must be quickly eliminated, "an expected result if there are green fiscal policies reflecting climate objectives."

To make electricity more affordable, he argues, the Energy Services Regulatory Authority (ERSE) must review the methodology for calculating electricity and fossil gas prices in the regulated components.

And it asks the Government and Parliament to show in next year's State Budget that they will adopt measures to eliminate all direct and indirect subsidies for the consumption of fossil gas, and to progressively increase the value of the Tax on Petroleum Products (ISP).

Fossil gas cannot continue to be about twice as cheap as electricity and with daily charges that can be four times lower, warns Zero.