Transformation Quarterly 03_2023

By Volker Heck

The proposition of having an electricity price for industry is highly political and controversial. While a large number of energy-intensive companies have clearly stated what they need to be able to continue to work and invest competitively in Germany as a business location, regulatory concerns and the specific interests of small and medium-sized enterprises stand in the way of simple state commitments.

Added to this are the concerns of the EU regarding state aid law, which, to avoid competition distortion in the European single market, cannot grant special rights to a financially strong member state like Germany. However, the chemical industry summit in Berlin on 27 September showed how difficult it is to reach a consensus between policymakers and the business world in Germany too. Much to the chagrin of the chemical industry and the trade unions, no agreement was reached on an industrial electricity price. The chemical industry is now hoping that another meeting in October will lead to an understanding.

The various proposals for and against the electricity price for industry thus direct a magnifying glass onto opposing views as to what a competitive and sustainable industrial location of the future should look like. The answers cannot be found in industrial policy alone. In view of growing scepticism about the acceptance of growth and resource consumption, such questions also touch on far-reaching socio-political issues. Is it fair to subsidise the energy consumption of a small number of companies when society as a whole is supposed to be saving energy? Are energy-intensive industries the enablers of a sustainable future due to their importance for resilient supply chains – or should their production take place at locations where green energy and the necessary resources are already more abundant?

In conclusion, the current discussion on the electricity price for industry illustrates very clearly that companies have to navigate in a politically difficult environment. A clear course and new alliances are needed because rifts around the issues at hand sometimes run not only through the government coalition but also through the existing interest groups. At the same time, companies and their lobbyists in politics and associations must also be able to speak out on socio-political points of criticism. This is where considerable economic risks emerge – for example in the discussion on the abolition of already existing concessions for industrial energy consumption. Therefore, it is necessary to have comprehensive analyses of the positioning of a company and its competitors, continuous monitoring of important processes and a detailed roadmap on how to successfully overcome any hurdles that arise.

Photo: iStock.com/forrest9