The draft funding guidelines for the industrial electricity price for 2026 to 2028 have now been published, providing further detail on the earlier key proposals paper. The industrial electricity price is designed to offer financial relief to industry, but only in exchange for investment commitments. The scheme is also yet to receive approval from the European Commission under State aid law.
Key proposals confirmed
The draft confirms the key funding proposals, with relief to be provided to electricity- and trade-intensive companies listed in the first part of Annex 1 of the EU’s Guidelines on State Aid for Climate, Environmental Protection and Energy 2022 to help ensure their competitiveness internationally. In return, those companies must invest in decarbonisation. The aid will be available for the years 2026 to 2028 and, according to policymakers, will be paid out retroactively in the respective following year.
The draft guidelines retain the aid structure set out in the proposal, with 50% of annual electricity consumption being eligible for relief, capped at a target price of 5 euro cents/kWh. Electricity will continue to be purchased at market price but companies will receive compensation equal to 50% of the average wholesale price (reference price). The target price of 5 euro cents/kWh will however function as a lower limit on what companies can receive. The draft also includes the proposed “flexibility bonus” of an extra 10% for cases where investment is focused on demand-side flexibility. However, 75% of the bonus must then be reinvested in similar measures (see our comments here).
Further clarifications
Whereas the key proposals paper defined the overarching framework, the draft specifies the procedures, definitions, calculation methods and proof requirements central to application submission and compliance:
Eligible quantity of electricity and quantities consumed by third parties: The eligible quantity of electricity is the quantity consumed by the company itself in the consumption year. Quantities not consumed by the company itself or forwarded to third parties remain ineligible and must be deducted. Indirect electricity consumption for the networked, outsourced production of secondary energies and utilities (industrial gases including compressed air as well as cooling, heat, steam or water) within industrial estates is eligible, however. Sections 45 and 46 of the Energy Financing Act (Energiefinanzierungsgesetz, “EnFG”) expressly apply. It can also be assumed that – as customary in the context of sections 45 and 46 EnFG – the granting authority will use the October 2020 guideline “Measuring and Estimating for the Purposes of EEG Surcharge Obligations” as a basis for identifying third-party quantities.
Competence, procedures and deadlines: The granting authority is the Federal Office for Economic Affairs and Export Control (“BAFA”). Applications must be submitted electronically using BAFA’s forms and may be filed once per company and year only. The application deadline will be announced by BAFA and end no sooner than 31 March and no later than 30 September of the application year, with proof able to be submitted afterwards in some cases. Payment will be made to the designated account once the application has been checked, but approval can be revoked and payment recovered. Applications in respect of eligible electricity consumption of 10 GWh or more must include an audit certificate from a German public auditor or equivalent body covering the relevant factual information.
- Budget proviso and pro-rata reductions: The aid is subject to the budgetary appropriations. Should funds be insufficient, all aid due will be reduced on a pro-rata basis. The amount payable for each approved aid application will then be determined by dividing the available funds by the aggregate aid awarded.
- Eligibility for aid, and determining company locations and sectors: Companies will qualify for aid if they are listed in the first part of Annex 1 of the EU’s Guidelines on State Aid for Climate, Environmental Protection and Energy 2022. Further sectors or parts thereof may be brought within scope by a European Commission decision. Where a company is economically active in more than one sector, its sector for industrial electricity price purposes will be determined by its entry – as of the end of the respective year – in the Federal Statistical Office’s Classification of Economic Activities, 2008 edition (WZ 2008, used in Germany to classify companies by economic activity for statistical and State aid purposes). Points of delivery must be located in Germany and any decommissioning or relocation reported. Companies that are in difficulties, i.e. in pending insolvency proceedings, facing outstanding recovery orders or registered as debtors under section 882b Code of Civil Procedure (Zivilprozessordnung), are disqualified. There is no legal claim to the aid, which is at the discretion of the relevant public authority.
- Ecological commitments – investment in decarbonisation and deadlines: At least 50% of the State aid received must be invested. Defined options include renewable energy generation, energy storage solutions, measures to increase demand-side flexibility, energy efficiency improvements, electrolysers, electrification, grid infrastructure and power purchase agreement (PPA) costs for new or modernised renewable energy installations. The double counting of investments – once in return for relief under the funding guidelines for the industrial electricity price and once for other benefits that require climate protection or energy efficiency improvements in return – is excluded. Investments must generally be made no later than 48 months after the State aid is granted, but the public authority may check beforehand whether a project qualifies. The draft allows companies to have third parties realise the investment projects and to split investments across more than one year as long as the deadline is met.
- Definitions and formulas: The draft defines key terms (such as “point of delivery”, “eligible electricity consumption”, “industrial estate”, “reference price”, “difference price”, “target price”) and establishes formulas for calculating both the basic aid and the flexibility bonus. Because the guidelines exclude electricity volumes for which electricity price compensation for the indirect costs of the EU emissions trading system is claimed, any such volumes must be clearly separated.
- Proof of eligibility, data access and transparency: The draft places detailed obligations on companies to prove that their economic activity is eligible for State aid under the Federal Statistical Office’s Classification of Economic Activities, 2008 edition, using invoices or legally compliant meter readings. Extra declarations must be made for indirect consumption on industrial estates, and consent given to the data being checked against that held by the relevant public authorities, for example in connection with electricity price compensation. The draft also sets out disclosure and proof obligations for separating out electricity for which electricity price compensation has been applied for and electricity not consumed by the company itself. Further obligations revolve around transparency and cooperation with public bodies, including the publication of beneficiaries and aid amounts, data reporting to the European Commission, Bundesrechnungshof (Federal Audit Office) and financial authorities, and record retention. If these obligations are not complied with, the State aid may be revoked and reclaimed.
Similarities and differences to the key proposals paper
The draft funding guidelines confirm the key proposals rather than deviate from them. They also provide further detail with regard to definitions, the application procedure, calculations and obligations to provide proof. Of particular relevance in practice are the strict obligations to provide proof, grant access to data and identify third-party quantities, the inclusion of indirect consumption in industrial estates, the audit certificate for volumes from 10 GWh and pro-rata reductions in the event of a shortage of funds – points that were only hinted at or not formulated in detail in the key proposals paper. The option in the key proposals paper for a degressive distribution of the eligible quantity of electricity over the term of the aid does not appear in the draft guidelines, which instead only include an explicit degressive element in respect of the allocation of the sums to be invested in return.
What companies should do now
Companies should plan ahead by ensuring their economic activities are classified as eligible for State aid, identifying which points of delivery in Germany are eligible for aid, establishing the metering and verification infrastructure for eligible consumption – including indirect consumption in industrial estates – and selecting the projects through which investment commitments are to be met. In parallel, companies should segregate electricity consumption for which they intend to claim electricity price compensation from that to be claimed under industrial electricity price relief. They should also establish deadline monitoring and documentation processes for BAFA application documentation and the audit certificates for volumes from 10 GWh in order to ensure an orderly first round of applications.
Forward
