German industrial electricity price close to EU approval. Businesses dislike the proposal's terms

Germany is nearing an agreement with the European Commission on introducing a reduced electricity price for industry, which is due to take effect in January 2026 and remain in place until the end of 2028. The programme, worth 3-5 billion euros, is intended to support energy-intensive businesses facing higher electricity prices than their global competitors. The support also includes planned auctions to build 8 GW of hydrogen-ready gas-fired power plants. However, the German government is still waiting for formal EU approval of the measures.

German coalition leaders have announced that negotiations with the European Commission on introducing a reduced industrial electricity price are progressing very favourably. The measure is due to take effect on 1 January 2026 and remain in force until the end of 2028.

According to Vice-Chancellor and Finance Minister Lars Klingbeil, Brussels is expected to approve the plan, and the current stage of negotiations gives a high degree of certainty that the programme can be launched on schedule. According to Clean Energy Wire, this is one of the most significant steps in German economic policy in recent years.

The industrial electricity price support will cost approximately 3-5 billion euros, and the government is already discussing with the European Commission whether the scope of the support can be expanded further. At the same time, auctions are planned to build at least 8 GW of backup gas-fired power plants, which are to be used when electricity generation from renewable energy sources is low, helping to ease price peaks. These power plants are to be capable of burning hydrogen.

Economy and Energy Minister Katherina Reiche said that industrial companies could reduce their electricity costs by up to 50% under the measure. The price support is to be capped at a minimum of 50 €/MWh and reserved exclusively for energy-intensive sectors exposed to international competition. Chancellor Friedrich Merz also noted that a final decision could be announced only after official approval from Brussels.

The measure is primarily motivated by persistently high electricity prices, which affect German companies more than competitors in the US or Asia. Since Russian gas supplies were curtailed in 2022, energy-intensive businesses have come under even greater pressure. This segment of industry is the loudest in calling for preferential pricing, but there is still some scepticism about whether the measure will solve all of its problems.

Mixed reactions from industry

According to Wolfgang Große Entrup, head of the VCI chemical industry association, a reduced industrial electricity price is a useful tool, but not a comprehensive solution. Businesses need a broader package of measures, he said, including tax relief and a reduction in administrative burdens.

However, some of the affected companies say the planned details, reported by Handelsblatt, significantly undermine the value of the measure. Their criticism focuses primarily on the fact that the electricity price discount applies to only half of the electricity consumed. In their view, the industrial electricity price of 50 EUR/MWh promised by the coalition will remain a long way out of reach.

“It is completely unclear to me why support under the industrial electricity price should cover only 50% of the electricity consumption of sectors at risk,” said Philip Nuyken, managing director for policy at the Federal Association of the German Lime Industry.

Businesses also criticise the requirement that they invest at least half of the support they receive, for example in modernising equipment.

“Furthermore, it is wrong to take relief measures intended to protect competitiveness and make them absurd by attaching investment requirements as a form of compensation,” he said.