Electricity

Germany preparing scheme to lower electricity prices for firms

germany industry electricity tariff price cap habeck

Photo: Ministry for Economic Affairs and Climate Action

Published

March 9, 2023

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Published:

March 9, 2023

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The German government is preparing a model to reduce electricity tariffs for businesses and make them competitive with the US and China, which have lower electricity prices. The short- and long-term measures are said to include an electricity price cap and a special industrial electricity tariff.

Vice Chancellor and Federal Minister for Economic Affairs and Climate Action Robert Habeck said it is necessary to adapt the price of electricity for the European industry and that a decision must be made this year.

He noted the issue wasn’t included in the Green Deal Industrial Plan, revealed by the European Commission at the beginning of February.

It was the European Union’s response to subsidies envisaged by the US Inflation Reduction Act and other countries’ green economy incentives.

German companies were paying over two times more for electricity than their competitors in China in 2015

According to a 2015 study, German companies were paying over two times more for electricity than their Chinese competitors, Euractiv recalled.

The official data for prices in China are not available. However, according to the article, the solar power industry floated a EUR 0.07 per kWh benchmark paid by PV equipment producers.

Wacker Chemicals, the last remaining polysilicon producer in Germany, recently claimed that its Chinese competitors have 50% lower electricity bills.

According to Energate, the government is working on a mechanism for companies to be supplied with cheap electricity from offshore wind farms.

The long-term solution is electricity from offshore wind farms

Renewable energy plants are producing electricity at a favorable EUR 0.05 per kWh to EUR 0.09 per kWh, which needs to be passed on to companies according to geographic variations, according to Habeck.

Capital expenditures or CAPEX are subsidized in the EU while the US industry gets support for operating expenses (OPEX), Habeck pointed out. A special industrial electricity tariff is being prepared to balance the discrepancies, he added.

A price cap is also possible

Habeck expressed confidence offshore wind farms would meet the domestic companies’ needs under power purchase agreements (PPAs). The government is considering the possibility to cap electricity prices for businesses until the sector can provide sufficient amounts of energy, he revealed.

Such a support scheme would require clearance from the European Commission to comply with EU state aid rules.

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