German Economy Minister Katherina Reiche (CDU) has announced the introduction of subsidized electricity rates for energy-intensive industries starting January 1, 2026. It is a response to excessively high energy bills that are undermining the competitiveness of German industry. However, the enthusiasm may be premature.
Speaking at a heavy industry conference, Reiche emphasized that negotiations with the European Commission are nearing completion. Brussels must approve the subsidies as state aid, but the signals are positive, according to the minister. The plan envisages a discount of up to 50% on the wholesale price of electricity, but only for half of a company's annual consumption and for a maximum of three years — through the end of 2030. Preliminary estimates from the ministry put the rate at 5 cents per kilowatt-hour, which for approximately 2,000 enterprises would mean annual costs to the state of around 1.5 billion euros. The funds are to come from the Climate and Transformation Fund.
Germany's decision coincides with a crisis in the steel sector. Reiche also announced the extension of compensation for steelworkers, to be discussed at the "Steel Summit" on November 6. Chancellor Friedrich Merz, Vice-Chancellor Lars Klingbeil (SPD), and the premiers of states with heavy industry are expected to attend. Topics: supply chain resilience, trade, and energy prices. For many companies, this is a signal that the government is taking their pain points seriously — after all, average prices for small and medium-sized enterprises hover around 18 cents per kWh, and slightly lower for large ones.
German industry, particularly the chemical, metallurgical, and aluminum sectors, has been losing its competitive edge for years. Compared with the United States, electricity prices here are twice as high, fueling speculation about offshoring production. The pandemic, the war in Ukraine, and sanctions on Russia only made things worse: in 2022, wholesale rates spiked to 46.5 cents per kWh. Although they have since fallen to around 10 cents, forecasts for 2030 point to 8 to 15 cents — still too expensive for the "energy guzzlers."
Business enthusiasm contrasts with the sober analysis from experts at the German Institute for Economic Research (DIW). In a 2023 report (updated in 2025), Lea Bernhardt and her team simulated the effects of electricity price increases of 6 and 18 cents compared to 2018. For the majority of firms, the cost increase amounted to a mere 1 to 2 percent of value added.
Germany will never be the cheapest in Europe, DIW argues, and the energy transition will push prices higher still. It would be better to abolish the electricity tax (6.7 billion euros per year), which would provide relief to everyone, including consumers.
Moreover, selective tax breaks raise legal doubts: the European Commission permits them, but only on the condition that they are non-discriminatory. DIW advises: instead of blanket subsidies, conduct a value chain analysis. Which sectors are strategic? Where would the flight of companies cause downstream losses, as in the automotive industry's dependence on steel? Without data, it is a gamble.
Reiche calls for a "European Silicon Valley" instead of a bureaucratic jungle. You are right, Madam Minister: a unified energy market is key. But Germany, as the leader in renewables, pays a high price — EEG and CHP surcharge exemptions expired in 2022, driving up bills. In the background looms the COP summit, where Merz is lobbying for the EU's CBAM mechanism (carbon border tariff) to protect European industry from cheap Chinese imports.
