By Riham Alkousaa, Christian Kraemer and Holger Hansen
BERLIN, June 25 (Reuters)
The electricity prices in Germany have been a hot topic of discussion for quite some time. This is in part due to the transition to a more renewable energy system coupled with the fluctuating costs of electricity production. A lot of effort has been made to invest in more renewable energy sources, such as solar and wind power. These investments have also affected the electricity market and its related prices.
An electrifyingly taxing situation
Germany’s plan to cut electricity tax for selected sectors was criticized on Wednesday, as representatives from the retail, industrial, and energy sectors warned it could distort competition and have limited impact. Electricity prices in Germany are among the highest in the world, ranking fifth globally in the first quarter of the year with an average of 38-euro cents per kilowatt-hour.
Earlier this year, Germany’s ruling coalition of conservatives and Social Democrats agreed to cut electricity tax to the European minimum for all consumers. As a whole, electricity taxation is inclusive of a variety of components. These components include your sales tax, other levies and then also the electricity tax. When all of these are clustered together, it has an influence on the consumer electricity costs.
But the Finance Ministry framework budget for 2026 introduced on Tuesday limited the planned relief to industry, agriculture and forestry, excluding many companies and consumers, citing financial difficulties. The dispute between the SPD-led finance ministry and the conservative CDU/CSU over the scope of the subsidies is one of the first since the two parties officially took office.
Falling on a divided agreement
“With such a breach of the coalition agreement, the government is squandering the trust of the trade and tearing the rug out from under companies,” Alexander von Preen, head of HDE trade association, said. Sepp Mueller, the deputy leader of the conservative CDU/CSU parliamentary group, said reducing electricity costs for everyone remained the party’s goal.
“We now need to quickly discuss when we can implement this,” Mueller told Reuters.
Germany’s Chamber of Industry and Commerce (DIHK) said the cuts were a slap in the face for many companies as the government had sold the scheme as an immediate measure. “No one understands why, despite the planned record debt, this already quite small but very important relief should not be possible,” DIHK President Peter Adrian said.
The German Chamber of Commerce and Industry is a represents the industrial, service and commercial sector within Germany. The member compliment is formed out of the 79 chambers of industry and commerce (IHKs) with several million companies then from services, industry and trade. These can be from large groups of companies to small kiosk owners.
A planned scope for the future
On Wednesday, Economy Minister Katherina Reiche said Germany will present a concrete concept for an industrial electricity price after the European Union introduced a new state aid framework that would allow such subsidies. Germany’s utilities lobby BDEW also warned of market distortions and a slowdown in the expansion of renewable energy.
BDI industry association said the narrow scope and numerous restrictions of the measure leave too little room to lower electricity prices to an internationally competitive level. The ZDH Central Association of Skilled Crafts said an industrial electricity price would distort competition to the detriment of small and medium-sized craft businesses, which must co-finance this relief.
Germany’s EEG 2023 is the country’s biggest guiding force to energy legislation. It came into effect January 2023. This document forms the basis by which Germany aims to become climate neutral. All the planning that is done is aimed at a more consistent and much faster expansion so as to increase the share of gross electricity consumption that is covered by renewable energy to at least 80% by the year 2030.