Industrial Electricity Price Slows Down Efficiency and Competition
Research
09.02.2026
ZEW Analysis of Electricity Subsidies from 2026
By introducing a subsidised industrial electricity price, the German government intends to provide relief for energy-intensive industries. The planned price cap is supposed to apply to up to 50 per cent of the electricity consumption of large companies for a period of three years. It is intended to significantly reduce electricity prices of eligible companies to 50 per cent of the wholesale price, with a price floor of 50 euros/MWh. However, this could lead to distortions in competition that would weaken the energy efficiency and productivity of the manufacturing sector as a whole. Moreover, a new study from ZEW Mannheim shows that even today companies with lower electricity demand pay significantly more on average for electricity than those with higher demand.
“The industrial electricity price provides short-term relief, but such subsidies can result in a very inconsistent treatment of companies operating in the same market and thereby distort competition,” says ZEW economist Joscha Krug, co-author of the study and researcher in the ZEW “Environmental and Climate Economics” Research Unit. Professor Kathrine von Graevenitz, PhD, co-author and deputy head of the unit, adds: “If the pricing scheme primarily shields large electricity consumers, their incentives to improve efficiency are reduced. Over time, this may slow innovation and weaken Germany’s competitiveness as a business location. Younger and medium-sized firms, which do not benefit from this protection, may struggle to compete on equal terms.”
Instead of an industrial electricity price, Krug suggests that “measures should be taken to enable efficiency gains, such as investments in infrastructure and digitalisation and cutting back bureaucracy. In addition, the electricity market should be adapted to today's realities with a high share of renewables and increasing decentralised energy generation.”
Large electricity price differences already exist today
Even in the absence of an industrial electricity price, prices in 2024 varied significantly, ranging from around 272 euros/MWh for small consumers to 155 euros/MWh for major consumers. “The price difference of 117 euros/MWh was mainly due to grid fees, taxes and levies, which account for around 63 per cent of the difference,” says Krug.
Selective relief measures may be harmful to competition and efficiency
When energy prices rise, companies that do not receive subsidies respond more strongly with efficiency measures, or they lose market share. Beneficiary companies, on the other hand, are able to produce at lower costs despite high prices, expand their market shares and thereby alter the structure of entire industries. Because, on average, these companies have fewer incentives to save electricity, the energy efficiency of energy-intensive industries as a whole may decline.
In fact, the ZEW study shows that during periods of rising energy prices, producers with higher effective energy prices were more likely to exit markets, while producers with lower energy prices were more likely than average to expand or enter new markets.
About the study
The study is based on current electricity price data, data on relief instruments and model-based calculations that show how price differences between companies can influence market shares and energy efficiency in several energy-intensive industries. The findings are also placed in the context of existing and past relief instruments, such as reductions in grid fees, electricity price compensation and previous EEG-levy reliefs.
