Germany’s industry electricity price subsidy could cost govt billions more than planned – media

Germany’s subsidy to lower electricity expenditures for energy-intensive industry could cost the state significantly more than planned, according to calculations by business daily Handelsblatt. Wholesale electricity prices are now higher than when the scheme was designed, so it could cost up to one billion euros more in 2027 alone compared to this year, the analysis, based on data from consultancy Aurora Energy Research, found.

“The industrial electricity subsidies were approved when electricity prices were moderate. But at current electricity price levels, the burden on the federal budget is rising massively,” Markus Schmidt of the Economic Council, a business lobby group close to the conservative CDU, told Handelsblatt. 

The German government introduced a temporary subsidy that lowers electricity costs for energy-intensive industry. The state covers part of the gap between what companies pay on the wholesale market and a target price, so higher market prices mean higher costs for the state budget. The so-called 'industry electricity price' covers companies in more than 90 industry sectors from the start of 2026 and supports part of their electricity consumption until 2028. Companies are required to reinvest at least half of their savings into decarbonisation measures within four years of benefiting from the scheme.

The blockade in the Strait of Hormuz, an important trading route for oil and gas, has removed roughly a fifth of normal gas volumes from the world market, pushing gas prices up to around three times the pre-war levels, Handelsblatt wrote. Electricity has followed because gas-fired plants help set power prices.

Germany had planned to disburse around 3.8 billion euros for the measure between 2026 and 2028, but costs are set to be much higher, Handelsblatt wrote. The total depends on the amount of megawatt-hours eligible for the subsidy, which is not yet known. Companies may also benefit less than planned because of other costs, such as higher grid charges and levies, it added.

Germany’s industrial production has declined in recent years, with the sector facing weak demand, increasing competition from abroad, high import tariffs, as well as the costs of transitioning to climate-friendly production. The government has introduced a series of measures aimed at lowering industry energy costs, including a lower electricity tax for companies, subsidies for grid fees and the abolition of a gas storage levy.