Berlin plans to freeze electricity prices for the most energy-intensive industries hit by rising costs until 2030 by subsidizing their spending, according to a plan unveiled Friday but far from unanimous.
This tariff shield should block “at 6 cents per kWh” nearly “80% of the electricity” of “the most energy-intensive companies, operating internationally”, according to a working document of the Ministry of Economy and Climate. This measure aims to “preserve the competitiveness” of sectors crucial to Europe’s largest economy, such as chemicals, paper, glass and steel, which are threatened with relocation due to rising energy prices, according to the ministry. “Electricity prices are falling, but they will remain in the next few years double or triple their level before the war in Ukraine,” justified the Green Minister of Economy Robert Habeck to the press.
Germany is all the more affected by the rise in energy prices in the wake of the war in Ukraine because part of its economic model was based on cheap Russian gas supplies, which ended with the conflict. Last year, Olaf Scholz’s government introduced a tariff shield on energy prices for private individuals and companies that is supposed to apply until mid-2024. This 200 billion euro energy “bazooka” had earned him criticism from some of his European partners, who deplored unfair competition.
The new scheme should offer the most threatened industrial sectors a period of stability at a time when the energy transition requires them to make massive investments to decarbonize their activity, Habeck defended. His project is already the subject of criticism within the government itself. Liberal Finance Minister Christian Lindner said this week that the idea was “not smart” and worried about “very expensive subsidies”. “The economy should not be based on subsidies in the long term,” said Chancellor Olaf Scholz, a social democrat.
The whole system should cost between “25 and 30 billion euros”, according to the calculations of the Ministry of the Economy, which proposes to dip into the 200 billion euro fund released last year. The current rate shield locks in electricity prices for businesses at 13 cents, twice as much as the ministry’s proposed plan. Electricity prices for nonresidential customers averaged 18 cents per kWh tax-free in the second half of 2022, up from less than 10 cents before 2021, according to statistics agency Destatis.
