High electricity prices remain a competitive disadvantage

Large segments of German industry continue to pay electricity prices that are not competitive by international standards. According to calculations commissioned by the BDI, electricity prices are up to two and a half times higher than those of major competitors, depending on the specific consumption scenario. Energy-intensive sectors such as chemicals, steel, paper, glass, ceramics, and non-ferrous metals are particularly affected. However, as the electrification of their production processes increases, many other industrial companies are also feeling the impact of high electricity costs more and more acutely.

As a result, energy prices are increasingly determining where companies build new facilities and modernize existing sites. If the operating costs of climate-friendly processes remain too high in the long term, companies will postpone their investments or opt for other locations. This jeopardizes not only individual businesses but also entire value chains and industrial transformation as a whole.

Relief measures are the right step, but they still don’t go far enough

Even before the parliamentary summer recess, the federal government initiated the first important relief measures—and that is a positive step. These include a permanently reduced electricity tax for the manufacturing sector, the expansion of electricity price compensation, a subsidy for transmission grid costs, and the industrial electricity price. These measures send an important signal to companies suffering from particularly high electricity costs. This represents an urgently needed change of course toward a more industry-friendly energy policy.

However, the impact of these relief measures remains limited. The subsidy for transmission grid costs, currently set at 6.5 billion EUR, is limited to 2026; for the subsequent years through 2029, it will be reduced by approximately one billion per year. While this continuation provides planning certainty, it also noticeably reduces the relief effect.

Under the proposed structure, the industrial electricity price applies only to certain energy-intensive companies and for the years 2026 through 2028. It covers only a portion of electricity purchases, is tied to investment commitments, and is paid out retroactively. Furthermore, its combination with electricity price compensation is limited. The expectation that the entire industrial sector will receive a guaranteed electricity price of five cents per kilowatt-hour (kWh) in the short term is therefore inaccurate.

Policymakers must reliably finance relief measures, design them to be practical, and plan beyond short-term budgetary decisions. Electricity-intensive companies, in particular, need long-term certainty, as their investment decisions have an impact spanning decades. At the same time, new levies must not erode the relief measures that have just been approved.

The entire electricity system must become more efficient

Sustainably competitive energy prices cannot be achieved through government subsidies alone. The total costs of the electricity system are decisive: generation, grids, security of supply, system services, and government-mandated price components.

Germany continues to need high-capacity north-south interconnections and must consistently implement power lines that have already been planned and approved. At the same time, grid expansion must not be an end in itself. The challenge is to better coordinate renewable energy, storage, flexible consumers, secured capacity, and digital control. Infrastructure planning should be more closely aligned with actual expected demand. In this way, Germany can secure its supply and avoid unnecessary costs.

The StromVKG (Electricity Supply Security and Capacity Act) provides an important impetus through competitive tenders for new controllable power plant capacity. However, financing this through an additional surcharge would be counterproductive. It would raise electricity costs once again and thereby partially offset other relief measures.

Two key reforms are on the horizon: the EEG 2027 and the German Grid Package. Both reforms must better integrate renewable energy into the market and the electricity system and make their expansion more cost-effective. At the same time, transparent criteria are needed for allocating scarce grid connection capacities. In this regard, greater consideration should be given to where connections directly enable industrial transformation, decarbonization, and value creation. It is crucial to coordinate both reforms in such a way that they reduce system costs without hindering the expansion of renewable energy—which serves the system—or industrial investments.

Climate protection and competitiveness go hand in hand

The BDI is committed to the goal of climate neutrality. Technologically speaking, Germany can in principle achieve this goal by 2045, but implementation is becoming increasingly difficult under current conditions. The debate must therefore not be limited to target years. What matters is whether emissions actually decrease and whether companies can invest in climate-neutral facilities.

This requires an open approach to technology and the appropriate infrastructure: sufficient renewable electricity, hydrogen where it is needed for decarbonization, high-performance electricity-, hydrogen- and CO₂ networks, as well as opportunities for CO₂ capture, utilization, and storage. Climate policy must enable investment rather than simply making industrial production more expensive or driving it overseas.

What the Federal Government Must Do Now

The key demands:

• Design relief measures reliably: Industrial electricity pricing and electricity price compensation must reach as many actually affected companies as possible and be meaningfully combinable with one another. Relief on grid fees requires a long-term perspective until grid costs have returned to a competitive level.
• Avoid new burdens: Additional surcharges on electricity prices would weaken competitiveness and electrification. The costs of security of supply and infrastructure must be spread across a broader base and financed in a more predictable manner.
• Implement the EEG 2027 and the Grid Package: Renewable energies must be integrated in a way that better serves the market and the system; grid connections must be allocated transparently; and industrial transformation projects must be given appropriate consideration.
• Enable flexibility and strengthen supply security: Policymakers must create incentives that better serve the system for storage, voluntary flexible electricity demand, digital control, and new controllable capacities. This will create a stable and efficient overall system.
• Enable a technology-neutral transformation: The federal and state governments must accelerate the expansion of electricity, hydrogen, and CO₂ infrastructures and align them with actual demand. Companies need reliable framework conditions for investing in climate-neutral production.

The success of the energy transition is not determined by individual expansion figures. It is measured by whether climate-neutral electricity reaches businesses reliably and at competitive costs. Only then can Germany sustainably combine climate protection, industrial value creation, and prosperity.