Germany’s Economics Minister Robert Habeck presented plans on Friday to limit electricity prices for energy-intensive industries in order to protect the sector from sharp cost increases.
According to the plan, the upper limit of 0.06 euros per kilowatt hour (KWh) should apply until 2030.
It is intended to cover at least 80% of the electricity consumption of a clearly defined group of German companies from energy-intensive sectors such as chemicals, steel and glass production.
How much will the price cap cost?
According to Destatis, the electricity price for non-household customers in the second half of 2022 averaged EUR 0.18 without taxes.
The beneficiaries would be reimbursed the difference between the market price of electricity and the cap, with the total cost of the project being between 25 and 30 billion euros, according to the proposal.
Perhaps counterintuitively, Habeck, who represents the Greens in the government, recommends that the taxpayer subsidize some of Germany’s biggest polluters. He described the proposal as a necessary long-term “stopgap solution” until renewable capacity expands and prices fall. Otherwise, the government argues, there is a risk that the major employers and, in some cases, systemically important industries will leave the country.
Energy costs rose sharply in the wake of the Russian invasion of Ukraine, when Moscow cut key gas supplies to Europe.
Energy crisis: who is to blame?
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Plan targets “critical industries”
Germany’s parliament in November approved a €200 billion energy relief plan to protect consumers and businesses from sky-high energy bills by April 2024. The government plans to fund the program from these funds.
The measures would have “stabilized the energy-intensive industry, but we must not gamble away this achievement,” said Habeck at a press conference.
The new upper limit would ensure that “critical branches of industry” remain in Germany and Europe, said Habeck.
The chemical lobby VCI has already welcomed the upper price limit in a statement as a “clear turning point for our international competitiveness”.
Who is critical of the proposal?
However, the proposal immediately met with criticism, including within the German government coalition, a tripartite alliance of Social Democrats, Greens and the business-friendly FDP.
“I take a very critical view of the industrial electricity price,” Finance Minister Christian Lindner wrote in the Handelsblatt earlier this week.
The idea was “economically unwise,” said Lindner, whose party the FDP represents Germany’s balanced-budget orthodoxy.
Habeck’s proposals could also raise concerns in Brussels that Germany is unfairly subsidizing its industry.
The ministry said it would “enter into a constructive discussion with the European Commission on all competition-related issues,” while calling for a broader “European strategy to strengthen energy-intensive industries.”
dh/msh (AFP, dpa, Reuters)
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