Market & Industry
July 1, 2024, 10:15 AM CEST
Germany‘s electricity costs compared to international benchmarks.”/>Germany Launches EU-Approved Industrial Electricity Price Support; Energy Sector Voices Concerns
Berlin – The German government has officially moved forward with implementing an industrial electricity price support scheme, enabled by the European Commission’s recently approved Dialog on Industrial State Aid Framework (CISAF). While the German Economics Ministry, led by Minister Robert Habeck, hailed the decision as a crucial step in bolstering the nation’s industrial competitiveness, the German Association of Energy adn Water Industries (BDEW) expressed reservations, citing potential market distortions and implementation challenges.
The CISAF framework,greenlit by the EU on June 26,2024,allows member states to provide limited state aid to energy-intensive industries to mitigate the impact of high electricity prices. Germany’s plan aims to offer eligible companies a discounted electricity rate, partially offsetting the costs that currently place it at a disadvantage compared to international competitors, especially the United States and China. A recent KfW study highlighted Germany’s comparatively high electricity costs – second only to Italy within the EU – as a critically important impediment to its attractiveness as a business location.
The scheme’s design is now under intense scrutiny. Sandra talhof, a partner at Ziska & Talhof Rechtsanwälte specializing in energy law, emphasized the need for a streamlined application process. “A practical mechanism is needed that leads companies to the aid with minimal bureaucracy,” Talhof stated in a recent commentary. The German government is expected to publish detailed guidelines on eligibility criteria and application procedures by the end of July 2024.
BDEW’s concerns center on the potential for the subsidized electricity to create unfair competition within the energy market and the complexity of ensuring compliance with EU state aid rules. Specifically,the association worries about the impact on power grid stability and the potential for cross-subsidization,where costs are shifted to consumers not benefiting from the scheme. BDEW Managing Director, Kerstin Andreae, has called for a thorough impact assessment and ongoing monitoring of the program’s effects.
Germany’s industrial electricity price is intended to support sectors like steel, chemicals, and paper, which are particularly vulnerable to high energy costs. The initial budget allocated for the scheme is estimated at €6 billion for the years 2024-2025, with potential extensions subject to EU approval and budgetary constraints. The program will be administered by the Federal Ministry for Economic Affairs and Climate action (BMWK) in coordination with the German Energy Agency (dena).
