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Electricity Costs of Energy Intensive Industries
An International Comparison

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Electricity Costs of Energy Intensive Industries An International Comparison
Authors:
Ecofys: Katharina Grave, Mandana Hazrat, Sil Boeve, Felix von Blcher, Charles Bourgault
Fraunhofer-ISI: Barbara Breitschopf, Nele Friedrichsen, Marlene Arens, Ali Aydemir, Martin Pudlik,
Vicki Duscha, Jose Ordonez
GWS: Christian Lutz, Anett Gromann, Markus Flaute
July 2015
For the German Ministry of Economic Affairs and Energy

Executive Summary
Energy prices are a key factor for the competitiveness of many German companies. To finance the
energy transition, the costs of promoting renewable energy technologies in Germany are passed on
to the consumer, predominantly via energy prices (i.e. electricity prices). A large number of levies as
well as the electricity tax are currently raising the price of electricity and thereby the electricity costs
of industries. To limit the burden, especially for energy-intensive industries, the German government
has designed various rules regarding exemptions and rebates (privileges).
For the same economic considerations, competing national economies have also introduced special
regulations for industrial electricity consumers. The present study examines in detail, the composition
of electricity prices in Germany and ten other countries: the Netherlands, the United Kingdom,
France, Italy, Denmark, Canada, the United States, China, Korea and Japan. It assesses the effects of
the special regulations on the competitiveness of industrial companies in Germany on four levels.
The analysis divides electricity price components into three categories:
Electricity purchase prices include the costs of purchasing electricity on the wholesale
market and the margins of the utilities. Their value is determined by the composition and
technical characteristics of the power plant fleet, the fuel costs, the development of demand,
and the framework regulation of the electricity market.
Network charges distribute the costs of transmission and distribution system operators for
their services to end users.
State-regulated components finance the cost of energy policy instruments or channel rev-
enues to the state budget. These components include taxes and levies, as well as the costs of
meeting established quotas.
The analysis of national electricity markets shows the different regulatory approaches in the exam-
ined countries. While European regulators in Germany, the Netherlands, France, Italy and Denmark
distribute the costs of energy policy measures through levies and taxes with defined privileging crite-
ria for individual customers, the British and North American governments employ quota systems for
the distribution of costs, thereby leaving the question of burden sharing largely to market players. In
none of three Asian countries under consideration was it transparent how the costs of political inter-
ventions in the power system are distributed.
In the context of this study, the electricity purchase prices, network charges, and privileging criteria
on taxes and levies determined are applied to case study examples from six energy-intensive indus-
tries: chemicals, paper, steel, aluminium, copper and textiles. The power consumption of these in-
dustries accounts for 70% of electricity consumption in the manufacturing sector and about 27% of
total electricity consumption in Germany.

The comparison shows that energy-intensive, large-scale consumers from the metalworking industry
and the chemical industry pay the lowest electricity prices in most of the analysed countries. Alumin-
ium and copper producers, and also electric arc furnace operators, pay no or significantly reduced
taxes and levies and low network charges (Figure 1). For comparison, the German price without privi-
leges (DE) would be much higher than electricity prices than in other countries.
Figure 1: Electricity prices for big, privileged companies
The electricity prices of these electricity-intensive large consumers are determined by the electricity
purchase prices. In this study, electricity purchase prices are estimated based on power exchange
prices. However, electricity prices of individual companies can differ significantly, depending on com-
pany-specific consumption structures and procurement strategies for electricity. In most analysed
countries, companies with electricity consumption of less than one gigawatt hour per year pay notice-
able higher prices (Figure 2).
Figure 2: Electricity prices for small, in Germany hardly privileged companies
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DE (DE) NL FR UK IT DK CA US KR CN JP
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ctri
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ct/k
Wh
] Renewables and environment
Taxes and levies
Transmission and distribution
Energy procurement
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DE (DE) NL FR UK IT DK CA US KR CN JP
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ct/k
Wh
] Renewables and environment
Taxes and levies
Transmission and distribution
Energy procurement

Aluminium and copper producers, steel production in electric arc furnaces, and chemical reduction
processes meet almost all of the privileging criteria that are applied by countries to relieve businesses
with high international competition from state-regulated electricity tariff components. These privileg-
ing criteria include:
Absolute consumption: The rates of many state-regulated electricity tariff components are
graded or contain fixed base amounts. Thus companies with high consumption pay, on aver-
age, less per unit of energy. For example, in Germany all companies in the special equalisa-
tion scheme (BesAR) pay the full EEG surcharge for the first Gigawatt hour of consumption.
Energy intensity: The total electricity costs compared to sales or gross value added shows
which companys competitiveness might be put at risk as a result of high electricity prices. In
various regulations, companies that exceed a certain threshold of energy intensity are privi-
leged. In the German special equalisation scheme, this threshold is 16% of gross value added
in 2015.
Sector affiliation: Some industries are more exposed to international competition than oth-
ers, so exemptions are often tied to sector affiliation. The revision of the special equalisation
scheme is also an example thereof: Depending on the sector affiliation, companies must
reach different thresholds of energy intensity to be privileged.
Processes used: Some industrial processes are power-intensive by nature. The power con-
sumption of defined processes is therefore often exempt from taxes and levies. An example is
electricity consumption in metallurgical processes, for which no electricity tax is paid in Ger-
many.
Energy efficiency measures: Some regulators reward energy efficient companies with
lower electricity prices by reducing taxes and levies. An example of this is the special equali-
sation scheme in Germany, which requires companies to install energy management systems.
Costs cap: Some regulators set a relative or absolute cost cap to limit the total expenditures
per company for a policy measure. For example, the newly regulated special equalisation
scheme in Germany limits the payments for the EEG surcharge to a maximum of 4%, or
0.5% of the gross value added of a company.
Autoproduction: Energy-intensive companies sometimes produce their own power to save
costs. Self-consumption is often exempt from taxes and levies. The special equalisation
scheme in 2014, for instance, provides that companies are charged 15% of the EEG sur-
charge for self-consumption.
As the example of the German special equalisation scheme shows, criteria are combined in many
cases to limit the number of privileged end consumers.
Compared to the other countries studied, Germany raises quite a few and rather high taxes and lev-
ies. Without the German privileges, electricity prices for some companies would be almost 8 ct/kWh
higher in 2014. The

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