Energy costs are a key factor for many companies when deciding where to open up shop. In particular, energy-intensive industries have faced significant international competitive pressure since the energy price crisis of 2022. The federal government therefore aims to establish various instruments to safeguard Germany as an industrial hub. What is the current status?
Industrial electricity price: How is Germany providing relief to its industry?
What is the industrial electricity price?
Since 2022, the terms “industrial electricity” and “industrial electricity price” have been used to describe a proposed subsidy scheme for energy-intensive companies in Germany. At that time, electricity prices increased severalfold within a few months, threatening the viability of production sites whose profitability depends heavily on electricity costs.
The aim of the industrial electricity price is to provide relief to such sites through subsidized electricity rates, thereby preventing companies from further relocating industrial production abroad.
Concrete plans are now on the coalition table, providing for temporary support measures. These are intended to give companies time to invest in more energy-efficient and climate-friendly technologies. However, the requirements of European Union competition law must be taken into account.
Which companies are eligible for relief?
The industrial electricity price is intended to benefit large energy-intensive production sites that are in international competition and therefore have a particularly strong incentive to relocate their production abroad. The list of eligible economic sectors is long and follows the so-called KUEBLL list, named after the European Union's Climate, Environmental Protection, and Energy Aid Guidelines. Additional sectors could be added via the EU aid framework, the Clean Industrial Deal State Aid Framework (CISAF).
Accordingly, numerous manufacturing companies - for example from the food, clothing, or automotive sectors - could be eligible for the industrial electricity price. However, the majority of the funding is likely to be concentrated in the following six energy-intensive sectors, which together account for nearly one quarter of Germany’s total electricity consumption:
- Building materials
- Chemicals
- Glass
- Paper
- Steel
- Other metals
What type of industrial electricity is currently planned?
National subsidy schemes can often come into conflict with European Union competition law. However, the EU Commission approved industrial electricity in Germany in the summer of 2025 under certain conditions. Accordingly, the subsidized electricity price for eligible industrial operations may:
- not fall below 50€ per megawatt-hour (EUR/MWh),
- be applied at most to half of a company's annual consumption
- be granted for a maximum of three years.
In addition, the scheme may allow for degressive subsidies. This means companies would receive more than 50 percent of their electricity consumption at the industrial electricity price in the first year of funding, and correspondingly less in the final year.
How is the reimbursement calculated?
The funding is to be determined using a differential price methodology with a uniform reference price. The reference price is calculated based on the average forward market prices (year-ahead futures) observed in the respective previous year. Specifically, the reference price for 2026 would be determined on the basis of the prices observed on the electricity exchange in 2025 for base-load futures with delivery in 2026.
How much relief could the planned industrial electricity price provide?
Under an earlier assumption that the subsidy could apply retroactively from 2025, the Federal Ministry for Economic Affairs estimated the cost to taxpayers at around four billion euros.
Conversely, the German Economic Institute (IW) calculated the expected relief for companies and arrived at a similar order of magnitude. Based on current electricity futures prices, the IW assumed slightly declining electricity prices and therefore came to the following annual figures:
- 2025: 1.5 billion euros
- 2026: 1.4 billion euros
- 2027: 1.1 billion euros
These calculations were based on an average exchange electricity price of 80 EUR/MWh. However, according to Energy Charts, it was around 85 EUR/MWh in the first ten months of 2025. Relief and costs are therefore likely to be somewhat higher. At the same time, companies’ actual electricity costs may also be higher, since the industrial electricity price applies to only half of annual consumption. The remaining share of electricity consumption would, in this scenario, have been procured at prices exceeding those assumed by the IW.
The federal government has since recalculated the funding requirement. On the one hand, it assumes the funding starts only from 2026 and is paid out in the following year. On the other hand, it takes into account the degressive design of the subsidy as well as the option (or, for some companies, the obligation) to choose between the industrial electricity price and electricity price compensation pursuant to §10a of the Electricity Duty Act (StromStG).
The government may also be assuming falling electricity prices. Currently, it estimates the total financing requirement at only around three billion euros:
- 2027: 1.5 billion euros
- 2028: 0.8 billion euros
- 2029: 0.8 billion euros
What relief can individual companies expect?
The precise level of savings a specific company can achieve through the industrial electricity price depends on both the eligible volume of electricity consumption and the applicable reference price. Since both parameters can only be determined after the end of the funding year, an exact calculation is possible only thereafter.
From the recipient's perspective, it is possible to estimate the expected payout. This requires only current futures prices and an estimate of annual consumption. The calculation works as follows:
Payout amount = 0.5 × annual electricity consumption × differential price
The differential price is 0.5 × reference price, capped so that the target price=reference price - differential price does not fall below 5 ct/kWh.
The payout factor in ct/kWh is then calculated accordingly:
Multiplying the payout factor by annual electricity consumption gives the total payout amount.
An example illustrates the calculation:
(1) If the reference price is 8 ct/kWh, the differential price is 3 ct/kWh. For an annual consumption of 10 million kWh (10 GWh), the company receives a payout of:
€0.03/kWh × 0.5 × 10,000,000 kWh = €150,000
(2) If the reference price is 12 ct/kWh, the differential price is 6 ct/kWh. For an annual consumption of 10 million kWh (10 GWh), the company receives a payout of:
€0.06/kWh × 0.5 × 10,000,000 kWh = €300,000
To put this payout in perspective, individual electricity procurement costs should be used as the basis. Depending on the procurement strategy, these costs may be higher or lower than the market price. Assuming the "average company" procures electricity at market prices, the examples above yield the following relative savings from the industrial electricity price:
(1) If the purchase price equals the reference price at 8 ct/kWh, total electricity procurement costs are 800,000 EUR. A payout of €150,000 therefore corresponds to savings of 18.75%.
(2) If the purchase price equals the reference price at 12 ct/kWh, total electricity procurement costs are €1.2 million. A payout of 300,000 EUR results in savings of 25% for this company.
In both cases, companies that buy electricity at lower prices than the market average benefit more from the industrial electricity price.
Note that only the wholesale price is considered here, which is just part of total electricity costs. Grid fees, levies, and taxes are added on top. Including these, the savings on energy costs are typically well below 20 percent. The individual case must be examined here in particular, as energy-intensive companies can claim a range of additional subsidies that reduce these ancillary costs of electricity procurement.
What conditions are tied to the industrial electricity price?
The industrial electricity price is only granted for consumption that would otherwise have a high probability of being relocated abroad. However, the subsidy is not 'free'. Companies wishing to benefit must meet certain conditions and provide proof of compliance. In particular, companies are required to invest at least 50 percent of the aid they receive within 48 months in modernizing or upgrading their facilities. These investments are intended to reduce overall electricity system costs without increasing the use of fossil fuels.
The eligible investments are defined under the Clean Industrial Deal State Aid Framework (CISAF, para. 121) and include:
- Capacities for generating renewable energy
- Energy storage solutions
- Improvements in energy efficiency
- Development of electrolyzers for producing renewable or low-carbon hydrogen
- Electrification of operations
- Measures to increase demand-side flexibility
Flexibility bonus
Increasing demand-side flexibility is so important to the federal government that it is considering additional funding for it. Companies may receive a flexibility bonus about 10 percent of the industrial electricity aid if they invest at least 80 percent of their required investment volume in measures that increase demand-side flexibility. Of this bonus amount, 75 percent must again be reinvested in one of the eligible measures listed above.
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How are energy-intensive companies further supported?
In addition to the planned industrial electricity scheme, various relief measures for industrial operations with high electricity demand have existed for many years. These measures are intended to offset the competitive disadvantage that German industrial sites face in international markets due to high electricity costs.
Special equalization regulation (BesAr)
The Special Equalization Regulation (BesAr) allows companies with high electricity costs to limit the levies charged on grid electricity consumption. Until the end of 2022, it was regulated in the Renewable Energy Sources Act (EEG); since the beginning of 2023 it has been governed by §§ 28 et seq. of the Energy Financing Act (EnFG).
The legislative amendment has also tightened the requirements for BesAr claims. Previously, installing an energy management system was sufficient. Now, companies must also meet the so-called 'green conditionality.' This is satisfied if companies can prove that they have increased their energy efficiency to a certain degree, source a particularly high share of renewably generated electricity, or invest in decarbonizing their production processes.
BesAr applies to electricity consumption exceeding one gigawatt-hour per grid connection. For consumption above this threshold, companies can cap their levies either at 15 or 25 percent of the standard levies or at 0.5 or 1 percent of their gross value added. Which cap applies depends on whether the company’s sector is classified as having a normal or a “significant relocation risk” under Annex 2 of the EnFG.
While the relief volume was still around five billion euros in 2020 and 2021, it has significantly decreased due to the stricter requirements. In 2023, more than 2,100 companies benefited from BesAr according to the Federal Office for Economic Affairs and Export Control (BAFA).
Reduced network charges under § 19 StromNEV
Like all electricity consumers, industrial companies are required to pay grid fees. However, under Section 19 of the Electricity Network Charges Ordinance (StromNEV), certain large consumers may qualify for reduced fees if their electricity consumption is very evenly distributed over time or if their load profile differs significantly from the typical pattern in the relevant network area. This mainly applies to high levels of electricity consumption at night and, increasingly, to daytime consumption during summer months due to the self-consumption of solar power.
As discussions on a flexibility bonus show, greater flexibility in electricity consumption is desired due to the growing share of renewables in the power mix. Therefore, this regulation is expected to be reformed in the near future to create stronger incentives. Until then, companies can save up to 90 percent of network charges through particularly static consumption profiles. The law provides two options here:
1. If a large consumer's load peaks deviate significantly from the general usage profile at the same network level, its network charge can be reduced to as little as 20 percent of the standard rate.
2. If annual consumption exceeds ten gigawatt-hours (10 GWh) and the operation can demonstrate more than 7,000 usage hours per year (out of a maximum of 8,700), the network charge may be reduced as follows:
> 7,000 h/a to a minimum of 20 percent
> 7,500 h/a to a minimum of 15 percent
> 8,000 h/a to a minimum of 10 percent
Category | Objective | Prerequisite | Charge Reduction |
|---|---|---|---|
Atypical Network Usage (§ 19 II 1) | Network peak reduction | Load shifting, atypical profile | Up to 80% |
Electricity-Intensive Usage (§ 19 II 2 et seq.) | Stable network load | ≥ 1 GWh & high usage duration | Depending on annual usage hours: 80% to 90% |
An aluminum plant with 8,000 operating hours and high annual consumption pays only ten percent of the local network charge per megawatt-hour, as its electricity use is very consistent and causes few load peaks.
Electricity price compensation under § 10a StromStG
Electricity price compensation is another support instrument. It offsets indirect CO₂ costs that arise from the European emissions trading system. Operators of fossil fuel power plants pass the cost of emission certificates on to customers through higher electricity prices. Energy-intensive industries, such as the metal and chemical sectors, can be reimbursed for these additional costs.
Since 2021, electricity price compensation has been significantly expanded. Its annual volume increased from around €0.8 billion to about €3 billion, making it one of the largest individual relief measures in the energy sector.
Once the industrial electricity price is introduced, companies that are eligible for both schemes will have to decide which support instrument they use for which share of their electricity consumption. Receiving support from both schemes for the same consumption will not be permitted.
Peak equalization for electricity tax under § 9b stromstg
In Germany, the electricity tax is a standard component of the electricity price. However, companies in the manufacturing sector as well as in agriculture and forestry can benefit from relief through the so-called peak equalization mechanism under Section 9b of the Electricity Tax Act (StromStG). This mechanism is intended to ensure that the electricity tax burden does not disproportionately affect international competitiveness.
In 2024 and 2025, the relief amounts to €20 per megawatt-hour. From 2026 onward, it will be reduced to €5.13 per megawatt-hour.
This tax relief thus also benefits small companies. In 2024 and 2025, annual consumption of 12.5 MWh was sufficient to qualify for the subsidy. From 2026, companies with around 50 MWh annual consumption will be eligible for peak equalization.
Concession fee according to § 2 KAV
The concession fee is a charge that energy suppliers pay to municipalities for the right to lay electricity lines in public spaces. It is not a tax, but rather a fee for the use of public land. Industrial customers usually benefit from a reduced concession fee of €1.10 per megawatt-hour under § 2 of the Concession Fees Ordinance (KAV). This is because their production facilities are typically connected directly to the high- or medium-voltage grid.
These so-called special electricity contract customers can also claim a refund of the concession fee if they can show that their average electricity price was below the average price determined by the Federal Statistical Office.
This is particularly common for companies with a high share of renewable electricity in their power mix, as electricity prices tend to be lower when renewable generation is high.
Further relief measures
Beyond the mentioned subsidies, there are a number of additional relief options for companies, including electricity tax exemptions for energy-intensive processes under § 9a StromStG and exemptions from CO₂ pricing under the Fuel Emissions Trading Act (BEHG).
Conclusion: what does industrial electricity mean for energy-intensive companies?
Some experts question whether temporary relief covering only 50 percent of electricity consumption is a suitable measure to prevent companies from relocating energy-intensive production abroad in the medium term. Nevertheless, the industrial electricity price offers an opportunity to invest in the sustainability of German industrial sites.
Even today, electricity consumers - not only energy-intensive - can significantly reduce their energy costs through various measures. These include long-term electricity supply contracts, so-called Power Purchase Agreements (PPAs), as well as greater flexibility in electricity consumption, which the industrial electricity scheme also emphasizes.
By shifting electricity consumption to periods with lower market prices, companies can benefit from dynamic pricing on electricity exchanges and reduce their average electricity costs through flexible tariffs.
Although the planned industrial electricity price reduces the incentive to lower overall electricity consumption, the incentive to reduce electricity costs through greater demand side flexibility remains almost fully intact due to the differential price mechanism. This is because the subsidy depends solely on the volume of electricity consumed and a uniform reference price. Any savings achieved through lower procurement prices therefore fully benefit the company.
Status: November 2025
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