Berlin, Dusseldorf The industrial electricity price proposed by Economics Minister Robert Habeck (Greens) is intended to help energy-intensive sectors, but Finance Minister Christian Lindner (FDP) rejects the concept. There is great disappointment in the affected sectors. Reiner Blaschek, CEO of the steel manufacturer Arcelor Mittal Germany, told the Handelsblatt that steel production in Germany cannot be maintained without competitive electricity prices. “It’s annoying that an emergency situation is being used for partisan vote-hunting.”
The energy-intensive chemical industry also supports Habeck’s plans to introduce a secure industrial electricity price for a limited period of time. Christian Hartel, CEO of Wacker Chemie, told Handelsblatt that high electricity prices in Europe are blocking the transformation to climate neutrality and destroying competitiveness. “In Europe, the price of electricity is currently five times higher than in the USA and four times higher than in China,” said Hartel. With such a large price difference, energy-intensive companies could not operate out of Europe in the long term.
There was a risk of a wave of emigration from Germany and the loss of entire production chains. “Without an industrial electricity price, emigration is inevitable,” expects Blaschek. There are currently no signs of a large-scale shift, but such processes can be gradual.
It is clear that companies are beginning to adapt their investment plans for the coming years to the foreseeable general conditions. The chemical group Lanxess has announced that it will not expand its German sites for the time being. CEO Matthias Zachert explicitly blames the high energy costs in Germany.
The Cologne-based group is investing money for more production capacity primarily in the USA. This is not happening because of the investment incentives there. On the contrary, the foreseeable cheaper electricity guarantees lower operating costs in the long term, emphasizes Lanxess.
Dow Germany boss: “Investing in Germany is difficult to justify”
The management of the leading US chemical company Dow assesses the outlook in a similar way. The Americans have large locations in Germany and close ties to German industry. But Germany boss Julia Schlenz has to fight harder and harder for an expansion in Germany with her superiors in the USA. “When energy costs are as high as in Europe, it is difficult to justify an investment here in an international context.”
Habeck announces subsidies for industrial electricity
Habeck wants to counteract this development with his concept for an industrial electricity price. According to this, a price of six cents per kilowatt hour is to be introduced for energy-intensive industries, which is to apply until 2030. The subsidized price should apply to 80 percent of company consumption. In return, the companies should undertake to complete the transformation to climate neutrality by 2045, maintain locations and pay collective wages. The Ministry of Economic Affairs puts the cost of the subsidy at 25 to 30 billion euros per year.
>> Read here: Habeck announces industrial electricity price of six cents – coalition partners skeptical
Gunnar Groebler, CEO of the steel manufacturer Salzgitter, considers Habeck’s plan indispensable. For the first time there is now a holistic concept of how an urgently needed industrial electricity price could be implemented, he says. The Ministry recognizes the need to act quickly in order to create predictability and security for companies.
Lindner considers industrial electricity price to be “economically unwise”
But Finance Minister Lindner sees it differently. In a guest article for the Handelsblatt, Lindner argued: It is “economically unwise” and also contradicts the principles of the social market economy to rely on direct state aid to support the industry on the path to transformation. An industrial electricity price would be unfair in terms of distribution policy because it could only be implemented at the expense of other electricity consumers and taxpayers.
Finance Minister Lindner has so far rejected the Economics Minister’s proposal.
(Photo: Reuters)
“Increasing competitiveness for some would mean a loss of competitiveness for others,” wrote the FDP leader. In addition, there is no leeway in the already tense budget. Small and medium-sized businesses are also warning of a “serious distortion of competition” to their detriment.
The fact is that companies in Europe have been paying higher electricity prices for longer than in other regions of the world. With the Ukraine war, however, the gap has increased further. In Germany in particular, the price level is once again higher than in other European countries with relevant industrial production.
>> Read also: Does Germany need an industrial electricity price? Pros and cons
This is due, among other things, to high government taxes and surcharges that are added to the wholesale electricity price. Although there are also special rules and relief for large electricity consumers in Germany, the bottom line is that the electricity price level is significantly higher than in France, for example.
In France, a number of large industrial customers have had a state-regulated industrial electricity price of four cents per kilowatt hour for years. According to the Federal Association of Energy and Water Industries (BDEW), industrial customers with an annual consumption of up to 20 million kilowatt hours in Germany paid 28 cents per kilowatt hour this year when concluding a new contract. The information from the BDEW is from April.
Industry: Cheap electricity is the basis for green transformation
The problem is growing into an acute danger because the demand for electricity will increase significantly in the coming years. The background is the transformation of industry to climate neutrality. Wherever possible, coal, gas and oil are being replaced by electricity.
In cases where this is not technically possible, electricity is used to produce hydrogen by electrolysis. If the electricity comes from renewable sources, the hydrogen is climate-neutral. However, the electricity requirement for electrolysis is immense.
In the future, climate-neutral hydrogen will be used on a large scale for steel production for the so-called direct reduction process. It replaces the primary steel route, i.e. the classic blast furnace. In addition, the secondary steel route, i.e. the melting down of scrap in electricity-powered plants, is gaining in importance. This also increases the demand for electricity.
The steel industry is already taking a clear direction. Companies such as Thyssen-Krupp, Salzgitter and Arcelor Mittal are investing in converting steel production to hydrogen and electricity-based processes. They receive government grants for the construction of the new facilities. However, they are dependent on low electricity prices for their operation.
Arcelor Mittal Germany boss Blaschek assigns responsibility for financing the transformation processes to politics: “The energy-intensive industry is not the cause of the problem. Poor energy policies in recent years, combined with the supply shortages caused by the Ukraine war, have created an unsustainable situation,” he said.
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