EU clears Germany’s double energy aid

Germany’s factories are getting a relief that most European competitors can only look at with envy. The Commission is allowing Berlin, from 2026, to let eligible industrial plants claim two forms of state aid on the same electricity use: electricity-price compensation and the newer industrial electricity price.

That lowers the power bill for German heavy industry. It also raises the more awkward Single Market question for smaller member states: do common competition rules still set the terms, or does fiscal muscle now do more of the work?

Berlin’s wider relief could add about €1bn to budget costs. The industrial price sits inside a German scheme worth about €3.8bn for 2026-2028, with a target near €50/MWh for eligible power use. The legal opening comes through the Commission’s temporary crisis framework, which keeps emergency aid space available until 31 December 2026.

How The Discount Works

Electricity-price compensation refunds part of the carbon cost that is buried inside power bills. The industrial electricity price cuts the bill directly. Germany’s advantage is that firms no longer have to choose between them: the same unit of electricity can receive both supports, a structure German steel groups call a dual relief mechanism for heavy power users.

The numbers matter, but the lever matters more. Berlin covers enough of the wholesale electricity cost to move eligible use towards €50/MWh. Under the crisis rules, aid for energy-intensive companies can rise from 50% to 70% of eligible electricity costs without extra green-investment conditions.

Germany has a genuine industrial problem. Its energy-intensive sectors employ close to 1 million people and generate about 17% of industrial gross value added. Output is still roughly 12% below its pre-pandemic level, while energy-intensive production in April 2026 was only 0.9% above where it had been a year earlier. Berlin is buying time for weak factories, rather than subsidising a boom.

The Cost Moves Across Borders

German plants benefit first. German taxpayers pay first. Then the pressure travels through the Single Market, because their competitors are selling into the same European supply chains without the same backing from the state.

Factory power bills are not just wholesale electricity prices. They include network charges, taxes, levies and hedging, the advance contracts that protect firms from market swings. France shows the difficulty: high-voltage network tariffs for users including large industrial consumers will rise by an average 3.34% from 1 August 2026. A French chemicals or steel plant may have access to low-carbon electricity, but it still competes with German sites whose final bill can be cut by federal money.

Italy faces the sharper choice. Its firms already paid average electricity costs of €278/MWh in 2025, compared with €242/MWh in Germany, €183/MWh in France and €171/MWh in Spain. Rome can copy the approach, but not easily the scale: Italy’s Parliamentary Budget Office puts the 2026 deficit at 2.9% of GDP and debt at 138.6% of GDP. Matching Germany would risk adding debt to fix an energy-cost problem.

Poland is caught both ways. German industry buys from Polish suppliers, so keeping German plants open helps orders across the border. But Polish firms using 500-2,000 MWh already face electricity costs of €19.15 per 100 kWh, above the EU average of €18.37. A German subsidy can protect Polish demand upstream while making life harder for Polish producers downstream.

Sweden’s problem is the rulebook. Southern Sweden’s SE4 power zone has prices roughly at Germany’s level, while Swedish industry wants electrification under stable EU rules. If similar electricity prices meet unequal subsidies, the advantage comes from public budgets rather than productivity.

What Still Needs Scrutiny

The missing piece is the full Commission decision authorising cumulation on the same electricity volume. The general state-aid framework is public, but the German safeguards, beneficiary perimeter and checks are not clear from the available material.

There is also no clean plant-by-plant map of who receives stacked relief. Eurostat warns that non-household electricity prices vary by consumption band and include energy, supply, network costs, taxes and levies, so national averages can conceal almost as much as they show.

German steel is already asking for a durable all-in industrial power price of €50/MWh. If temporary crisis aid becomes a standing German claim, the Single Market’s balance shifts away from common discipline and towards the member state with the deepest pockets.