German Gas Price Brake Will Be Much Cheaper than Expected
Germany’s gas price brake will cost the country much less than expected. Last winter, the German government had earmarked EUR 40.3 billion for it in the Economic Stabilization Fund. According to the latest estimate by the ifo Institute, it will actually cost only EUR 13.1 billion – one-third of the original sum. “The reason is that gas prices have fallen sharply since then. Of the EUR 13.1 billion, just under EUR 12.4 billion will go to households and small and medium-sized enterprises, and just under 700 million to industry. Gas-fired power plants and larger residential units will receive no relief,” says ifo expert Max Lay.
“In 2024, we expect the cost to be zero, because many new gas contracts signed by ordinary consumers already fall below the price limit of EUR 0.12 per kilowatt-hour. For a few months now, industrial customers have not had to pay more than the 0.07 per kilowatt-hour set by the price brake.”
Lay adds: “Even though energy markets have calmed, the estimated cost to the government remains highly uncertain because it is based on a forecast of market prices for the respective consumer groups.” The forecast of market prices for natural gas is taken from the ifo Economic Forecast Summer 2023. Under the gas price brake, a guaranteed price applies up to a certain quantity. The government pays out the difference between the contracted market price and this guaranteed price. In the national accounts, this is recorded as a subsidy on goods to companies.
