The industrial electricity price is coming. Principles of the draft and options for Vattenfall customers

Principles of the industrial electricity price

From 2026, the industrial electricity price is to be set at 5 cents/kilowatt hour and granted for 50 per cent of annual electricity consumption. In accordance with the European Clean Industrial Deal State Aid Framework (CISAF), the EU's state aid guidelines, payment of the industrial electricity price is limited to three years. The aim of the compensation is to support companies that are demonstrably electricity-intensive, compete internationally and may therefore be tempted to relocate to third countries. Therefore, eligibility applies to companies that belong to the economic sectors listed in the KUEBLL (Climate, Environmental Protection and Energy Aid Guidelines, Partial List 1 of Annex I). In total, this includes around 91 economic sectors, including large parts of the chemical industry and the ceramics, rubber and metal industries. In addition, other sectors are also expected to benefit if the eligibility criteria under CISAF (paras. 116, 117) are met.

Payment period

While the industrial electricity price for 2026 can be applied for, the necessary funds were not allocated until the 2027 federal budget – hence the retroactive payment: 2027 will be paid for 2026, and so on. A total of €3.1 billion from the federal budget has been earmarked for the industrial electricity price. This is distributed as follows: €1.5 billion for 2027, €0.8 billion for 2028 and €0.8 billion for 2029.

Calculation of the reference price

The reference price is to be based on futures contracts in the German-Luxembourg bidding zone, using the annual average value of the previous year (1 year) prior to the settlement year with delivery in the settlement year. In doing so, the Federal Ministry has responded to concerns raised primarily by energy trading companies, which feared that the futures market would dry up.

Consideration on the part of recipient companies

Companies must provide consideration in return for the industrial electricity price. They must invest at least half of the amount received in new or modern facilities. These must contribute to reducing electricity system costs without driving up fossil fuel consumption. Such consideration includes:

• The development of renewable generation capacities,
• Energy storage,
• Improvements in energy efficiency,
• The development of electrolysers for the production of renewable or low-carbon hydrogen,
• Investments focused on electrification.

The role of PPAs and flexibility

The German government has also taken into account the costs of newly concluded power purchase agreements (cPPAs). This is crucial, as the further expansion of renewable energies must increasingly be market-based. However, investments in renewable energy projects can only be made without subsidies if there is a certain degree of long-term risk protection through PPAs. The industrial electricity price thus provides a short-term solution to ensure competitiveness while also securing long-term electricity supply through cPPAs.

The paper from the Federal Ministry for Economic Affairs also emphasises the importance of flexibility: there will be an additional 10 per cent subsidy if companies increase their demand flexibility (‘flexibility bonus’). At least 75 per cent of the flexibility bonus granted must be invested in return.

Vattenfall continues to focus on intensive industrial partnerships that, in addition to pure electricity supply, also focus on the joint implementation of new concepts between electricity consumers and suppliers. In addition to securing electricity through cPPAs, the integration of mutual flexibility concepts also plays a decisive role.

Conclusion

The industrial electricity price sends a message to electricity-intensive industrial companies that compete internationally. However, it is only a temporary measure and does not relieve companies of their obligation to set up a sustainable electricity supply and hedge against volume and price risks. PPAs, for example, are suitable for this purpose. At the same time, any subsidy of electricity prices is an intervention in the market that may have unintended side effects, such as dampening willingness to invest. In addition, the issue of costs is being discussed, as the industrial electricity price places a total burden of around €3.1 billion on the transformation fund.^[1] It remains to be seen whether there will be any changes during the legislative process and how the payment of the industrial electricity price will actually affect industry, energy trading and the expansion of renewable energies.
 

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^[1] https://www.handelsblatt.com/politik/deutschland/energie-unternehmen-kritisieren-die-neuen-industriestrompreise/100176155.html