A state-subsidized industrial electricity price is controversial in the traffic light coalition. The Economics Minister is now presenting a concept. The proposal for funding is also likely to cause debate.
In order to keep companies and jobs in Germany, Federal Economics Minister Robert Habeck wants lower electricity prices for industry. The Green politician proposes state aid – with a volume of up to 30 billion euros. Habeck presented a concept for a two-stage industrial electricity price. The aim is to ensure competitive electricity prices.
Trade unions and business associations have been demanding an industrial electricity price for a long time. It is feared that companies will relocate production abroad because of the high electricity prices in Germany in international comparison.
“The energy-intensive companies are the basis of German industry and thus of our prosperity,” says Habeck in a paper. Many of these manufacturing companies, such as those in the chemical, steel, metal, glass or paper industries, supply the raw materials for the products with which German industry is internationally successful.
The Russian war of aggression against Ukraine and the resulting energy crisis hit these companies very hard. “The energy price shock acutely endangers Germany’s prosperity and its strong industrial base.” The energy price brakes have succeeded in stabilizing the situation in Germany. “We must not now jeopardize what we have achieved. Germany needs its basic industries just as much as it needs new industries of the future.”
Long-term “transformation electricity price” planned
Habeck wants a “transformation electricity price” in the long term. Industry should benefit from cheap electricity from renewable energies. However, measures to this end, such as more space for wind turbines, needed time to take effect and to permanently guarantee the supply of energy-intensive companies with renewable electricity at competitive prices.
Therefore, in an interim phase until 2030, there should be a “bridging electricity price” of 6 cents per kilowatt hour for a “clearly defined” group of recipients, which must be financed from public funds.
“German industry has started and is already in the process of converting its processes, which are needed for climate-neutral production worldwide,” said Habeck, according to a statement from the Ministry of Economic Affairs. “We have to support you on this path, because this path will also ensure us a strong, competitive location with sustainable jobs in the future.”
Cost of industrial electricity price
According to the paper, the costs of an industrial electricity price depend to a large extent on the further development of market prices. According to the current situation, there will be a financial requirement of around 25 to 30 billion euros until 2030 after the electricity price brake has expired. The money is to come from the Economic Stabilization Fund.
This fund, set up during the corona pandemic, was reactivated during the energy crisis to cushion the consequences. Above all, the electricity and gas price brake will be financed with up to 200 billion euros. Due to falling prices, however, the financing of the brakes could become significantly cheaper.
According to the paper, the legal hurdles for using the Economic Stabilization Fund are high. “A constitutionally clean solution urgently requires new parliamentary resolutions.”
Controversial industrial electricity price
An industrial electricity price is controversial in the governing coalition. Finance Minister Christian Lindner (FDP) has reservations. Relying on direct state aid is “economically unwise” and contradicts the principles of the social market economy, he wrote in a guest article for the “Handelsblatt”. Lindner had also spoken out against opening up the Economic Stabilization Fund.
According to Habeck’s concept, the bridge electricity price should only apply to 80 percent of consumption in order to create efficiency incentives. Conditions should include adherence to tariffs and a location guarantee. The bridge electricity price should preserve “complex value chains and good jobs”, create the basis for the settlement of “tomorrow’s” industries and set the framework for the rapid conversion to climate-neutral production methods.
Union faction Vice Jens Spahn (CDU) said that an industrial electricity price is an important issue for Germany as an industrial location. “Therefore, the exact design is very important. We take a constructive look at the concept and examine the proposal. But we have one question: what does the Minister of Finance actually say about it? It is remarkable that this concept, given the importance of the topic was not coordinated within the federal government.”
FDP criticizes Habeck plans
Criticism of Economics Minister Robert Habeck’s plans comes from the FDP. The FDP energy politician Michael Kruse warned Habeck against throwing tax money around. The energy-intensive industry in Germany needs attractive location conditions and that means above all competitive energy prices. “In particular, the shutdown of the nuclear power plants has led to a reduction in the cheap electricity supply. It makes no sense for the Minister of Economic Affairs to first force the cheapest base-load power plants out of the market, only to then throw government subsidies around.”
Instead of promising money that is not available, Habeck should rather work on concepts for smart framework conditions. Kruse mentioned, for example, a reform of electricity and energy taxes. Making grid fees more flexible would also be an important step so that the explosion in the costs of grid expansion doesn’t bring energy-intensive industry to its knees. “The goal of all state activities must be that companies are not permanently dependent on taxpayers. However, Habeck’s paper gives the impression that new permanent dependencies on the state are to be created.”
Industrial union welcomes Habeck plans
The industrial union IG BCE has welcomed the plans of Federal Minister of Economics Robert Habeck. Michael Vassiliadis, Chairman of the IG Mining, Chemicals and Energy (IG BCE) spoke of a clear signal to strengthen the location. Germany cannot afford an “exodus” of the energy-intensive industries.
“For large parts of industry, energy is now the largest item of expenditure and thus the decisive location factor,” said Vassiliadis. “The Russian war of aggression in Ukraine also drove up electricity prices in Germany to such an extent that we lost touch with other industrialized nations.”
Electricity prices in Germany are now seven times higher than in China, four times higher than in the USA and three times higher than in France, which has long had a national industrial electricity price.
According to Vassiliadis, the energy-intensive industries in particular are facing huge investments in the coming years in order to modernize their production processes in a climate-friendly manner. “With a competitive industrial electricity price, we give them the security that the path of transformation is worthwhile and that it can be taken in Germany and not elsewhere. And we build a bridge for them until renewables and grids are expanded to such an extent that our electricity prices can also be maintained without Aid is internationally at eye level again.”