Economics Minister Habeck wants to subsidize the industry with an electricity price discount. But that inhibits innovative power and thus slows down the climate change, says a government advisory board.
The Scientific Advisory Board of the Ministry of Finance rejects a subsidized industrial stream. Economic experts see the risk that the necessary structural adjustment processes will not be carried out by promoting energy-intensive industries and value creation that is not internationally competitive will be maintained with public funds.
“The fact that this danger is real is also shown by the fact that industry is already calling for permanent subsidies for industrial electricity, although there are no signs of a structural competitive disadvantage for Germany, at least in Europe,” the experts judge. However, it does not make sense to give in to this demand: “If you assume that electricity in Germany will remain more expensive in the long term than in other locations, you should refrain from compensating for this locational disadvantage for industry with subsidies,” say the experts.
Better abolish electricity tax
Alternatively, the experts advise abolishing the electricity tax. When this was introduced in 1999, it had a useful steering effect because the majority of electricity production was generated using fossil fuels. “However, this logic no longer applies with the progressive expansion of renewable energies. The electricity tax is thus part of an overall extremely complex and contradictory structure of taxation and subsidies in the energy supply.” Its abolition can also be seen as a replacement for climate money that has not yet been implemented, because poorer households spend a disproportionate part of their income on electricity.
As early as spring, the four leading economic institutes in Germany had warned against making electricity cheaper through state aid. If there were no price signals, it would make the search for innovations less attractive and jeopardize the achievement of climate targets.
DIHK: distortions pre-programmed
The German Chamber of Industry and Commerce (DIHK) has also spoken out against the electricity subsidy. In their opinion, distortions in the economy are programmed by the industrial electricity price. The ongoing debate is causing unrest in the economy and harbors the risk of imbalances. “Wrong incentives and misdirections cannot be avoided in such a heavily regulated model in the medium term – no matter how much it will help those who fall under the privilege,” the DIHK judged in June.
At the same time, she pointed out that the additional requirements create more risks and bureaucracy for companies and limit the effect of the relief. “All in all, it is clear that any industrial electricity price only combats the symptoms, while the cause of the lack of electricity supply is not taken into account,” according to the DIHK.
DIHK: Better taxes, levies, lower fees
The DIHK also advocates tax measures instead of subsidies and considers three alternatives to be more sensible: relieving electricity costs of taxes and levies, strengthening the direct expansion of renewable energies together with industry or supplementary measures for energy-intensive companies.
“The state can immediately and unbureaucratically reduce taxes, levies and fees,” is the conclusion of the DIHK. Investment grants could also help to expand renewable energies and support low-cost direct electricity supply contracts with companies, especially in industry. “In this way, the federal government can regain confidence in Germany as a business location and secure competitive prospects for the entire economy on the path to transformation.”
Unions are for industrial electricity price
Trade unions, on the other hand, welcome the proposal to cap the electricity price for industry: The chairman of IG Metall, Jörg Hofmann, had spoken out in favor of the temporary subsidy, as did the German trade union federation: “In order for the energy-intensive industries to have a green future in Germany, they need inexpensive green electricity.” Industry is also an important driver of the economy as a whole. The German economic model is based on very complex value chains with a high degree of vertical integration. “These production chains must not break.”
In May, Federal Economics Minister Robert Habeck proposed an electricity price for energy-intensive companies in international competition of six cents per kilowatt hour for 80 percent of their electricity requirements. The capped industrial electricity price is to be temporarily subsidized from state funds in order to prevent major companies from moving away until enough electricity is generated from renewable energies to offer cheap electricity prices without subsidies. That should be the case in 2030.
Finance Minister Christian Lindner spoke out against the subsidy plans. The SPD, as the third coalition partner, is undecided.
Price guarantees and cheap electricity: VW builds battery factory in Canada
Meanwhile, another company has announced new investments abroad: The car manufacturer VW is building a battery factory in Canada. There are stable and long-term energy price guarantees, Oliver Blume, CEO of VW and at the same time head of Porsche, had confirmed to the “Stuttgarter Zeitung” and the “Stuttgarter Nachrichten”.
VW is looking for locations with industrial prices of less than seven cents per kilowatt hour including additional costs. Since the production of battery cells is energy-intensive, price guarantees and higher electricity prices are very important, as are official processing and subsidies. “I experienced these aspects very positively in North America,” Blume told the two media.