The funding guidelines for Germany’s industrial electricity price were published in the Federal Gazette on 6 May 2026. The guidelines are therefore now in force and form the binding framework for electricity price relief applications and awards for 2026 to 2028. The key provisions are outlined below.
Background
The introduction of an industrial electricity price has long been the subject of political debate in Germany. Stemming from this, the German Federal Cabinet presented a framework paper at the end of 2025, followed in January 2026 by draft funding guidelines (see our article here), which were approved by the European Commission under EU State aid law on 16 April 2026 (SA.120495) (see our article here). The basis for the relief is section 4.5 of the Clean Industrial Deal State Aid Framework (“CISAF”), which permits Member States to grant State aid to electricity-intensive sectors or parts thereof that are at risk of relocation.
The published guidelines (in German only, see here) contain no fundamental changes compared to the draft and simply confirm its core content.
What the guidelines cover
Section 1 – Objective and purpose
The guidelines aim to ease the burden on electricity-intensive industries facing international competition, promote decarbonisation through mandatory investment commitments, safeguard high-quality jobs and strengthen the resilience of the German economy.The decarbonisation of the European electricity system has not yet fully translated into lower electricity prices, which means that electricity-intensive companies continue to face higher costs relative to competitors in jurisdictions with less ambitious climate policies. To avoid undue hardship, companies may therefore apply retroactively to the Federal Office for Economic Affairs and Export Control (“BAFA”) for a discretionary payment for each of the years 2026 to 2028.
- Section 2 – Discretionary payment
The aid is granted by BAFA as a discretionary payment upon application. The payment is at BAFA’s sole discretion, with no legal entitlement. The aid is also subject to the availability of public funds. Should these be insufficient, all aid due will be reduced on a pro-rata basis. Section 3 – Beneficiaries
Companies are eligible to apply if their points of delivery can be assigned to a sector listed in the first part of Annex I of the EU’s Guidelines on State Aid for Climate, Environmental Protection and Energy 2022 (sectors with a significant risk of relocation), while other sectors may be brought within scope by a separate European Commission decision. Assignment is based on the Classification of Economic Activities of the Federal Statistical Office (2008 edition), with the company’s principal activity at the end of the respective year being decisive. The points of delivery must be located in Germany. Exclusions apply in particular to companies in difficulty (e.g. insolvency) and those that have not complied with recovery orders.The group of beneficiaries is consistent with that previously communicated in the framework paper. Critics argue however that this part of Annex I of the EU’s Guidelines relies on data from 2013 to 2015 and therefore no longer adequately captures the present exposure of certain sectors.
Section 4 – Special conditions: decarbonisation contribution
The aid is tied to a mandatory decarbonisation commitment: beneficiaries must invest at least 50% of the relief received in projects that demonstrably reduce electricity system costs without increasing fossil fuel use. The guidelines list four categories, with further details of the types of measures covered set out in corresponding sub-categories:(a) measures to increase renewable energy generation capacity (including power purchase agreements);
(b) measures to improve energy efficiency;
(c) measures to increase demand-side flexibility; and
(d) measures to modernise or expand infrastructure.Measures not expressly listed may also be eligible where they deliver a comparable reduction in electricity system costs. Companies may have third parties realise the projects, provided this is done in Germany. The decarbonisation measures must be implemented within 48 months (extendable to 72 months where appropriate for technical reasons), and investments may be split over multiple years.
The list is intentionally broad and non-exhaustive, giving companies flexibility in selecting suitable projects. The granting authority may also check beforehand whether planned measures qualify (section 4.4), providing additional planning certainty.
- Section 5 – Type, scope and calculation of the discretionary payment
The aid takes the form of a non-repayable grant, with 50% of the annual electricity consumption at a point of delivery qualifying for relief (eligible consumption). This consumption will attract relief equal to 50% of the average wholesale market price (the reference price), but the target price of EUR 50/MWh (5 euro cents/kWh) will function as a lower limit on what companies can receive. Quantities actually consumed by the company itself, including indirect electricity consumption for the networked production of secondary energies within industrial estates, are eligible, whereas quantities forwarded to third parties must be separated out. Electricity volumes for which electricity price compensation is claimed under EU emissions trading rules for the same year are excluded. Companies should therefore clearly segregate electricity consumption for which they intend to claim electricity price compensation from that to be claimed under industrial electricity price relief. - Section 5.3 – Flexibility bonus
If a company invests at least 80% of its contribution to decarbonisation in measures to increase demand-side flexibility, it will receive a flexibility bonus of 10% of the base compensation amount. 75% of this bonus must be invested in additional decarbonisation measures. Section 6 – Procedure
Applications must be submitted electronically to BAFA and may only be filed once per company per year. The application period will end no sooner than 31 March and no later than 30 September of the application year, with the exact date to be published on BAFA’s website. Payment will be made after the application has been reviewed, but approval can be revoked and payment recovered. Documentation requirements are extensive: In addition to sector classification and electricity bills, applicants must submit, among other things, self-declarations regarding the segregation of electricity volumes for which electricity price compensation has been applied for and consent to data being checked by public authorities. Applications in respect of consumption of 10 GWh or more must also include an audit certificate from a German public auditor. Failure to comply may result in the aid being revoked and reclaimed pro rata.Further details of the application procedure will be published on BAFA’s website in good time before the application period begins.
- Section 6.4.5 – Cumulation with other aid
One provision of particular relevance in practice is that the discretionary payment may be cumulated with other State aid for other identifiable eligible costs. It is possible to claim both the industrial electricity price and electricity price compensation for different electricity volumes. Where aid is cumulated, the total amount of aid must not exceed the higher of the maximum aid amounts permitted under the respective guidelines. - Section 7 – Duration
The guidelines entered into force on the day following their publication in the Federal Gazette and apply for the years 2026 to 2028.
Assessment and next steps
The main criticisms of the guidelines are well known: Given that only 50% of electricity consumption is eligible for aid and in light of the associated investment commitment, the effective industrial electricity price is expected to remain significantly above the politically targeted level of 5 euro cents/kWh. From an industry perspective, the fact that the measure is limited to three years provides only a modest investment incentive for long-term transformation projects. Another criticism is that the measure entrenches existing structures rather than creating incentives to reduce electricity consumption.
Although the guidelines are now in force and the relief scheme applies retroactively from 1 January 2026, it is not yet possible to submit applications. Potential beneficiaries should monitor BAFA’s website, where details of the application procedure will be published in good time. During the preparatory phase, companies should verify their sector classification, identify eligible points of delivery in Germany, establish a robust metering and documentation framework for eligible electricity consumption, select appropriate decarbonisation measures, ensure consumption volumes are clearly segregated from any volumes covered by electricity price compensation applications, and implement processes for meeting deadlines and documentation requirements. For applications in respect of consumption of 10 GWh or more, companies should budget for an audit certificate from a German public auditor.
Potential developments should be monitored. In particular, the European Commission is currently conducting consultations on adjustments to the State aid framework that could also affect the funding guidelines.
Forward
