German government's plan to subsidize electricity prices for industry is not in line with EU law

The European Union (EU) could prevent Germany from introducing a subsidized electricity price for industry. The plan is a central element of the new German government's proposed economic turnaround. The business newspaper Handelsblatt reported the news, citing a confidential document from the Ministry for Economic Affairs.

For the new German government, introducing a lower electricity price for industry is politically important in order to halt the decline of energy-intensive industry and put Germany back on a growth path. Energy-intensive sectors such as steelmaking, chemicals and glassmaking are facing international competitive pressure because of high electricity prices.

According to a document from the German Ministry for Economic Affairs, experts warn that there is a risk the EU will not approve electricity price support for German industry. The document, seen by Handelsblatt, states: “Implementing the concept poses significant challenges under EU state aid law … the EU's reservations are substantial and the prospects of approval are highly uncertain.”

According to the article, a subsidized industrial electricity price would therefore require a change to EU state aid law. The plan must also be implemented as soon as possible to succeed. Officials quoted in the document are urging the new Minister for Economic Affairs, Katherina Reiche, to submit the proposed plan to Brussels by the end of this month.

German industry representatives have long called for electricity price subsidies. The average electricity price for industry currently stands at 16.1 cents per kWh. The proposed subsidy could bring it down to five cents per kWh.

The new government, formed by Chancellor Friedrich Merz's CDU and the Social Democrats (SPD), included an industrial electricity price in its coalition agreement despite the difficulties involved in implementing it. Reiche said that such relief measures “absolutely require cooperation with the European Commission” and stressed that the interests of the Commission and Germany must be aligned.

Former Green Party Minister for Economic Affairs Robert Habeck tried to introduce a preferential electricity price for industry under the previous government, but faced opposition from his coalition partners.