Industrial electricity price: What Germany’s decision means for EU industrial policy

The German government plans to introduce a so-called “industrial electricity price” for energy-intensive industries from January 1, 2026. The governing parties CDU, CSU and SPD have established a target price of 5 cents per kilowatt hour, which is calculated based on the average electricity exchange price. The energy price for industry currently stands at around 14 cents per kilowatt hour. Under the proposal, the industrial electricity price applies to 50 percent of a company’s electricity consumption, with companies required to reinvest at least half of the savings in decarbonization efforts. Covering more than 90 sectors and set to last until 2028, the scheme is designed to shield core industries such as steel, chemicals and glass from persistently high energy prices and the associated competitive disadvantages. For Berlin, the rationale is clear: providing targeted relief allows domestic production, jobs, and investment to remain in the country. Yet the measure raises a broader European question: how far can national interventions go without fragmenting the EU’s single market?

High electricity prices have become a structural competitiveness problem for European industry. Germany, with its large energy-intensive base, feels this pressure particularly acutely. Speaking at the “Steel Summit” in November, Chancellor Friedrich Merz (CDU) stated: “Companies are facing a crisis that threatens their very existence,” “We must protect our markets, which is why we must protect our manufacturers.” The timing of the proposal also reflects a shift in Brussels. With global competition intensifying, the EU has softened its traditionally strict stance on state aid.

Under Article 107 of the EU treaty, subsidies that favor certain companies or products and thereby distort competition across the EU’s single market are generally prohibited. However, in June 2025, the Commission adopted the Clean Industrial Deal State Aid Framework (CISAF), allowing temporary national measures that support industry, including energy subsidies or investment incentives, under clearly defined conditions. These provisions include capping the amount that EU countries can spend on their industry, as well as conditionality clauses aimed at stimulating investment in modern, climate-friendly production. To prevent it from becoming a permanent subsidy, the EU is limiting its duration to three years. The Commission’s reorganization of EU industrial policy thus reflects an attempt to balance the need for a Union-wide industrial policy and the recognition that some of the aid is necessary to prevent member states from falling behind in the global competition. Germany’s electricity price scheme is designed to fit within this framework.

While Germany’s program is likely to be approved by the Commission, political discussions continue at EU level. Smaller member states warn that the subsidies could distort the EU’s single market, as economically stronger countries can more easily afford substantial relief measures. France, for instance, has pushed to align CISAF more closely with the Net-Zero Industry Act, hoping to facilitate the Commission’s approval of state aid for nuclear projects. Smaller states often do not have sufficient fiscal capacity to offer such subsidies. In this context, EU diplomats warn that this asymmetry risks fragmenting European industrial policy and shifting competitiveness problems from one member state to another, undermining trust and cohesion within the Union.

For beneficiary industries, the effects are primarily stabilizing. The subsidy reduces costs and offers short-term predictability at a time of uncertainty, even if it does not fundamentally alter investment decisions. The temporary nature of the scheme does not create long-term investment security and restricts planning certainty. Like other national relief measures, the industrial electricity price treats symptoms rather than causes. Hence, national measures like the industrial electricity price provide temporary relief, but they do not solve the problems of European competitiveness. The discussion, therefore, goes beyond Germany’s domestic situation. It touches on the question of how European competitiveness can be strengthened in a way that is consistent with the single market.

A sustainable solution would require a long-term, EU-wide approach that is reliable for planning purposes and ensures lower production costs. Coordinated initiatives of this kind would help the EU build a competitive industry and a truly integrated market. The complexity of European energy policy, therefore, calls for a thorough and in-depth assessment of its implications for industrial consumers.