Energy Prices Drive German Energy-Intensive Industries to Invest Abroad Amid New Subsidy Plans

A recent study reveals a significant shift as 73% of Germany's energy-intensive companies are relocating investments abroad, driven primarily by high domestic energy prices and regulatory challenges. The Simon-Kucher Standortperspektiven-Studie 2025 highlights that 42% plan to move production within Europe while 31% consider relocation outside the continent. Energy costs rank as the foremost factor for 97% of firms, and 43% cite prolonged approval processes and regulatory uncertainties as major obstacles towards achieving CO2-free energy generation. The basic chemical sector is particularly affected, with 86% moving investments overseas, signaling a critical threat to Germany's industrial competitiveness (Source: 148335).

In response, the German government is set to introduce an industrial electricity price of five cents per kilowatt-hour for selected energy-intensive industries starting January 1, 2026, significantly lower than the approximately 40 cents households currently pay. This subsidy aims to alleviate costs for sectors like steel, paper, and parts of the chemical industry, covering around 2,000 companies on the EU’s carbon leakage list. However, the subsidy is contingent on EU approval and comes with restrictions such as a three-year limit and requirements to reinvest at least half the savings into decarbonization projects. The estimated cost ranges from three to five billion euros, financed via the Climate and Transformation Fund, with debates ongoing about the subsidy’s sufficiency and potential competitive distortions (Sources: 148339, 148337).

Experts emphasize that while the subsidy may offer short-term relief, it does not fully address long-term structural challenges. Critics argue that the relief primarily benefits large companies, with about 100 companies in regions like Bayerisch-Schwaben qualifying, leaving many businesses without support. Moreover, the need to reinvest savings into climate measures limits operational flexibility. This is juxtaposed with relaxed EU supply chain regulations that ease compliance burdens for larger firms but raise concerns about human rights protections.

Jan Hämer of Simon-Kucher characterizes the industrial migration as a long-term structural trend rather than a sudden exodus. Industry leaders stress the importance of balancing competitiveness, regulatory certainty, and sustainability to safeguard Germany’s industrial strength. Without strategic alignment and support, the outlook for energy-intensive industries remains precarious (Sources: 148335, 148339, 148337).