German plans to lower industrial power costs from January

In an attempt to boost Europe’s faltering industrial powerhouse, Germany said Monday that it would launch a plan to lower energy prices for factories that require a lot of power in January.

Germany’s high electricity costs have long been a source of grievance for industries like steel and chemical manufacturing.

In an effort to revive Europe’s largest economy after two years of recession, the conservative-led government, which came to office in May, has vowed to bring them down.

“I am assuming that we will introduce the industrial electricity price from January 1, 2026,” Economy Minister Katherina Reiche said at a conference in Berlin.

“We are in the final stages of negotiations with the European Commission”.

Reiche provided no other information. However, according to plans for the program, the government would have to pay up to 4.5 billion euros ($5.2 billion) over three years, according to the Handelsblatt business daily.

Berlin requires an exemption from EU state aid regulations, which typically forbid large national subsidies, in order to carry out the proposal. In order to safeguard domestic industry, exceptions are allowed.

Reiche stated that the “key to the competitiveness of steel” would be decreased electricity prices in particular.

Crisis discussions on supporting the nation’s steel industry, which is being severely impacted by cheaper Asian suppliers, are scheduled to take place in Berlin on Thursday.

An energy advisory group and think tanks recommend aiming for a subsidized price of five cents per kilowatt-hour, which is far less than the current average and may help about 2,000 businesses, according to the Handelsblatt report.

Businesses who get the subsidies would have to increase their investments in cutting greenhouse gas emissions.

Some have criticized the plan, arguing that it may deter businesses from reducing their energy use, impede the green transition, and only apply to businesses and not to consumers.

When Russia cut off inexpensive gas supplies to Germany in 2022 because to rising tensions over Moscow’s invasion of Ukraine, energy prices in Germany skyrocketed.

Even though Berlin has now discovered alternate energy sources, costs are still significantly higher than they were prior to the start of the war.