On November 7, 2024, Alice Weidel, co-chair of the party AfD, stated in a ZDF television interview that Germany has the highest energy costs worldwide, which she claimed was making its economy noncompetitive. This claim turns out to be mostly false.
The interview took place after the German government coalition breakdown. Weidel used this claim to advocate for returning to nuclear energy, which aligns with the right-wing party’s demands. Several inquiries about the sources supporting her statement remained unanswered. However, reports indicating that high energy costs burden German industry are easily accessible on the websites of various trade associations.
A closer examination of energy costs in an international context reveals that the situation is more complex than Weidel suggests.
The context indicates that Alice Weidel was referring to energy costs faced by companies and industry in Germany. These “energy costs” primarily include electricity and gas prices, which have been high for several years. Contributing factors include the COVID-19 pandemic, Russia’s invasion of Ukraine, and the resulting cessation of Russian gas supplies to Europe. Though, in comparison to data from 2022, prices have dropped by now.
German electricity prices
According to database platform Global Petrol Prices, Germany ranks 18th out of 134 countries for high industrial electricity costs. This reveals that several countries have higher energy costs, such as the UK and Italy. The Federation of German Industries (BDI) explained in response to an inquiry: “Electricity costs in Germany are not the highest globally, but they are significantly higher than for key competitors like the USA or China.”
Representing an energy-intensive sector, the German Chemical Industry Association (VCI) points out that energy costs are statistically challenging to quantify comprehensively. Total costs (including market prices, grid fees, and state-imposed levies) are highly dependent on specific regulatory relief mechanisms, making generalizations difficult. This applies not only to Germany but also to Europe, the USA, and especially China, where transparent data is nearly nonexistent.
A spokesperson of the VCI also noted: “In Germany, production with low energy costs for certain consumer groups benefiting from maximum regulatory relief is indeed possible. However, these costs remain significantly above comparable levels in the USA and China.” This is consistent with findings from a study published by BCG, IW, and BD earlier this year.
The VCI further explained that the composition of electricity prices has changed significantly. While taxes and levies were the main drivers of high costs in the past, grid fees have now become the primary factor pushing up prices.
Especially smaller and medium-sized industrial enterprises benefited from reduced levies this year, partly due to the abolition of the Renewable Energy Sources Act (EEG) surcharge in July 2022. Previously, this surcharge was a component of Germany’s electricity prices, designed to fund the expansion of renewable energy. A comparison of the changed price components was published by the Federal Association of the Energy and Water Industry (BDEW) recently.
Natural Gas Costs
In addition to electricity, natural gas plays a crucial role in energy-intensive industries, particularly in the chemical sector.
The loss of Russian gas supplies has led to a sharp increase in European gas prices. As of March 2024, Germany ranked 15th in a comparison of several countries regarding gas costs globally, according to Global Petrol Prices. Though, the VCI noted that gas market prices in Germany currently align with the global LNG average.
Germany’s Competitiveness
Germany’s competitiveness is indeed impacted by energy costs, particularly due to the lower costs in important competitor countries like the USA and China. According to the IMD World Competitiveness Ranking, Germany fell from 22nd place in 2023 to 24th place in 2024. However, energy costs are not the sole factor negatively affecting competitiveness, as the ranking also highlights other challenges.
This is also emphasized by Prof. Dr. Hubertus Bardt of the German Economic Institute (IW): “High energy costs are a major issue for energy-intensive companies. However, other factors like labor costs, bureaucracy, and the availability of skilled workers also contribute to Germany’s loss of competitiveness.”
The situation also varies by company size. Energy-intensive sectors, such as the chemical industry, are particularly affected. A recent VCI survey provides insights into the most significant cost factors for companies in this sector.
By November 2024, fewer companies in the chemical industry perceived energy costs as a major burden. Instead, regulatory hurdles, high labor costs, taxes, and slow approval processes were identified as the most significant barriers to international competitiveness.
For small and medium-sized enterprises, bureaucracy and the shortage of skilled workers now pose greater challenges than energy costs.
Bardt (IW) points out that many larger German companies still remain competitive internationally and generate revenue abroad. However, this is increasingly achieved through production outside Germany.
Conclusion
Alice Weidel’s claim that Germany has the highest energy costs worldwide is incorrect. Nevertheless, Germany remains one of the industrial locations with the highest energy prices globally, which perform worse than those of major competitors.
Her assertion that high energy costs undermine Germany’s competitiveness is partially true. While energy costs are indeed a significant burden for German industry, they are neither the sole nor the most important factor affecting competitiveness. Therefore the statement is mostly false.
RESEARCH | ARTICLE | Sabeth Wollinger, Hochschule der Medien Stuttgart, Germany
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