Energy price ceilings in the Czech Republic and Germany are a clash of concepts, say analysts

Both the Czechia and Germany have started capping energy prices from next year, but their concepts are different. While the Czech system of price ceilings will limit energy costs mainly for households, in Germany industry should benefit more from the measure. Moreover, unlike Germany and other neighboring countries, the Czech Republic does not limit consumption by capping. This follows from the comments of the contacted analysts.

The German government approved maximum electricity and gas prices last week. Households and small and medium-sized businesses will pay 40 cents (CZK 9.70) per kilowatt hour (kWh) for electricity, up to 80 percent of their previous annual average consumption. For industrial customers, the price is 13 cents (CZK 3.20) per kilowatt-hour up to 70 percent of last year’s consumption. For gas, households and small and medium-sized enterprises will have 80 percent of the previous average annual consumption for 12 cents (CZK 2.90). Industrial customers will be entitled to 70 percent of the previous consumption of seven cents (CZK 1.70).

In October, the Czech government set energy price ceilings for households, small and medium-sized enterprises and the public sector at six crowns per kWh of electricity and three crowns per one megawatt hour (MWh) of gas. At the same time, the use of the price ceiling in the Czech Republic is not limited by consumption.

“Germany has always seen a priority in supporting domestic industry and has reaffirmed this orientation,” said ENA analyst and executive director of the Association of Independent Energy Suppliers (ANDE) Jiří Gavor. At the same time, he pointed to the capping of electricity prices, where Germany set a price ceiling for large companies at 130 euros per MWh, i.e. much lower than for households with 400 euros per MWh.

In the Czech Republic, the price ceilings for households and small and medium-sized companies, on the other hand, are balanced, and they are now being prepared for large companies. “So higher aid compared to German households, lower compared to German industry,” Gavor said. In addition, he reminded that it is an advantage for Czech households that price ceilings are not limited by consumption, unlike in Germany, but also, for example, in Austria, Poland or Hungary.

Capitalinked.com analyst Radim Dohnal identified the setting of price ceilings for energy in the Czech Republic and Germany as a clash of concepts. According to him, only time will show which of them will be more advantageous. Only next winter can tell. “Germany is following the path of lower ceilings for large industrial enterprises, but only for 70 to 80 percent of consumption in 2021. For smaller enterprises and households, the ceilings in Germany will be much higher than in the Czech Republic,” he said. According to Dohnal, Germany thus stifles investment activity in the energy sector and motivates household savings more.

“In a comparison of wages and government aid in the Czech Republic and Germany, the domestic government helps sufficiently given the current state of public finances,” said XTB analyst Tomáš Cverna. He recalled that due to criticism from the EU, Germany reduced the planned aid volume from 200 billion euros (4.86 trillion CZK) to 99 billion euros (2.4 trillion CZK). At the same time, he pointed out that Germans will pay full energy prices if they exceed the limit of 80 percent of last year’s consumption.