Sunbeams penetrate heavy steam and smoke in a gray factory hall on a cold February morning. The freezing temperatures are impossible to ignore even inside the Lössnitz Foundry in the eastern German state of .
But if you walk past one of the tall vats, you can feel the enormous heat. Glowing molten metal is transported over the heads of the workers to the spot where it will be cast into shape.
The foundry produces parts for car companies like . These days, managing director Max Jankowsky and his team of 85 employees have a lot to worry about.
“The are really painful. There’s a lot of uncertainty,” Jankowsky told DW.
The company was founded 176 years ago and has seen two world wars and many economic crises come and go. Jankowsky’s grandfather once ran the business, now Max Jankowsky is worried about its future.
Heart of the industry
The Lössnitz Foundry is not the only company that is struggling amid adverse production conditions in Germany these days. Italian steel company Feralpi, which employs 850 workers at three different German sites, even had to temporarily halt production for some days, general manager Uwe Reinecke told DW.
The situation is similar at the Georgsmarienhütte steelworks, where currently the more than 6,000 workers are able to produce steel only at night and on weekends. CEO Anne-Marie Großmann told DW that the reason for this was the electricity price, which is lower at these times compared with the price during normal weekday working hours.
Both Feralpi and Georgsmarienhütte melt their steel with electricity, with the latter company consuming more electricity a year than an average city of 150,000 inhabitants, according to their own figures.
Steel producers and foundries make some of the most basic materials for Germany’s economy: the metals from which cars, bridges and rails are made.
Last year, the German Chambers of Industry and Commerce (DIHK) surveyed over 300 companies that use a lot of electricity in Germany to gauge their opinions about the current government’s policies on energy transition and climate protection.
Around 45% of them said they are planning to reduce production — or already have done so — due to high energy costs. Some are even playing with the idea of relocating abroad.
Fluctuating prices
In Germany, the industrial electricity price includes levies, taxes and grid fees, among other things. Grid fees are a charge levied for the use of the electricity grid.
Germany also produces a lot of electricity from gas-fired power plants. When and Russian gas supplies to Germany dried up, the price of electricity also skyrocketed. Since then, however, the industrial electricity price has fallen again to prewar levels.
Achim Dercks, deputy CEO of the DIHK industry group, claims energy prices here are still “among the highest in the world.” Additionally, Germany is “no longer competitive” as a manufacturing hub due to energy costs “neither in Europe nor globally,” he said.
And indeed, the industrial electricity price in the United States was much lower according to data from 2023, costing companies about seven euro cents per kilowatt-hour, compared with about 20 euro cents for electricity in Germany today.
In China, the price was about eight cents per kilowatt-hour in 2023, according to a study by the Bavarian Business Association (vbw).
Within Europe Germany’s industrial electricity prices were just about the average in 2022. Companies in Germany consuming more than 150 gigawatt-hours per year paid roughly 10% more than the EU average, according to the vbw study. For companies with a consumption of 70 to 150 gigawatt-hours per year across Europe, Germany was actually around average.
However, since prices were at their highest in 2022 due to the war in Ukraine, these numbers provide a difficult basis for wider comparison.
Difficult comparisons
In the end, there is no single industrial electricity price. Depending on size, industry and energy consumption, there are different discounts on taxes or network charges. A large bakery will pay a very different price than a huge steel mill.
International comparisons are even harder. This is because electricity prices for end consumers are always influenced by the purchasing power in the respective country, says Leonhard Probst from the Fraunhofer Institute for Solar Energy Systems.
“For example, you wouldn’t compare the price of bread in Germany to that in Bulgaria,” Probst told DW.
The end consumer price is the price the customer pays, including levies, network charges and taxes. So, the numbers should be viewed with caution and only offer a rough overview.
Future developments
Lössnitz Foundry’s Max Jankowsky points to a pile of coke in front of his factory hall. White crystals cover the black surface. Here, they still use many traditional melting methods.
But when using fossil fuels there is an additional cost in Germany and the EU: This increases the cost of polluting fuels, making melting with coke unprofitable in the long term.
Jankowsky wants to switch from fossil fuels to electric melting, but the electricity prices are cause for concern, too. “We want to melt electrically here in the future, but it feels like we are running into an open knife,” he said. As a medium-sized company, they would need more support for the transformation, he adds.
However, Leonhard Probst from the Fraunhofer Institute and Swantje Fiedler, scientific director of the Forum for Ecological Social Market Economy, expect electricity prices to stabilize and continue to “fall over time” with the expansion of . But will “over time” be fast enough for companies like the Lössnitz Foundry?
On February 23, . Many political parties have promised to stabilize or lower electricity taxes and network charges.
This article was originally written in German.
The post High electricity prices: A threat to Germany’s industry? appeared first on Deutsche Welle.
