Europe’s energy-intensive industries are facing mounting pressure from persistently high electricity prices, with companies cutting production, delaying investment and warning of long-term damage to the bloc’s industrial base.
At a recent Euractiv event on electricity price support, industry representatives and policymakers agreed that while the EU’s energy market design is broadly functioning, it is failing to deliver competitive outcomes.
“The market system is working as it should, but it is not delivering the outcomes we need,” said Christof Lessenich, head of unit for the Internal Energy Market at the European Commission’s Directorate-General for Energy.
A structural competitiveness gap
Speakers stressed that the crisis goes beyond short-term shocks, pointing to structural weaknesses in Europe’s energy system.
Electricity prices remain significantly higher than in competing economies, leaving European manufacturers at a disadvantage.
“The problem is structural for Europe,” said Paul Voss, director general of European Aluminium. “Half measures are worse than nothing” if they fail to keep companies in operation.
Across industries, the impact is already visible. Steel production has dropped sharply, while the chemicals sector reports a 10 per cent loss of capacity and an 80 per cent decline in investment over the past three years.
“We are shutting down and not investing,” said Nicola Rega of the European Chemical Industry Council (CEFIC), describing a sector squeezed between high energy costs and the need to invest in decarbonisation.
For Adolfo Aiello, deputy director-general of Eurofer, the consequences are long-term. “We are building the industrial base of the next century,” he said, warning that reduced output and uncertainty are already undermining future investments.
State aid under scrutiny
Much of the discussion focused on the EU’s Clean Industrial State Aid Framework (CISAF), introduced to help industry cope with high energy costs.
The Commission pointed to strong interest from Member States and a pipeline of national schemes. However, industry representatives argued that the framework remains too restrictive and slow to deliver.
“There is a mismatch between the protection that exists on paper and what reaches companies,” Aiello said, pointing to limits on combining different support schemes.
Companies also criticised short time horizons. Industrial investments often span decades, while state aid visibility is limited to a few years, weakening incentives to invest.
For Nick Keramidas of Metlen Group, the urgency is immediate. “We expect solutions yesterday,” he said, calling for rapid revisions to CISAF, including more flexible rules and the possibility to combine different forms of support.
Limits of market-based solutions
Beyond state aid, the discussion turned to whether the current electricity pricing model can deliver affordable energy for industry.
Despite large-scale investment in renewables, electricity prices remain closely linked to fossil fuels, limiting the expected benefits for consumers and industry.
“The market will not deliver prices that allow us to remain competitive in the foreseeable future,” Rega said, calling for stronger policy intervention.
Long-term contracts such as power purchase agreements (PPAs) were highlighted as part of the solution, but speakers noted they remain tied to short-term market volatility and are difficult to match with industrial consumption patterns.
“There is a structural gap between the cost of producing electricity and what industry can afford,” Lessenich acknowledged, underlining why state support remains necessary.
Bridging energy and industrial policy
A recurring message was the need to better integrate industrial policy into energy policy, rather than treating them separately.
Speakers called for mechanisms that provide long-term price visibility, including reforms to contracts for difference (CFDs) and new models linking governments, energy producers and industrial consumers.
Such approaches could help align incentives and stabilise prices over time, while supporting both decarbonisation and competitiveness.
At the same time, industry representatives pushed back against expectations that demand-side flexibility could significantly reduce costs.
“For some sectors, flexibility is technically impossible,” Keramidas said, noting that industrial processes such as smelting cannot simply adjust output without major risks.
Risks for cohesion and competitiveness
The discussion also highlighted growing concerns about fragmentation within the EU, as energy costs vary significantly across Member States.
Aiello warned against concentrating industry in a few lower-cost regions, arguing that such a shift could undermine economic cohesion and the social dimension of the green transition. “The social pillar of the transition could fall apart,” he cautioned.
A narrow window for action
With geopolitical tensions continuing to affect energy markets, including volatility linked to developments involving the Strait of Hormuz, pressure on European industry is intensifying.
Speakers agreed that both short-term relief and long-term structural solutions are needed but warned that the current pace of policymaking may be too slow.
“The rest of this policy cycle needs to be driven by a ‘whatever it takes’ approach,” Voss said.
For industry, the stakes are clear: without decisive action, high energy costs risk accelerating deindustrialisation and weakening Europe’s economic resilience at a critical moment for the green transition.
This article follows the Euractiv policy debate “High energy prices and European industry – How can electricity price support be designed to promote competitiveness?” sponsored by Metlen.
[BM]
