European energy-intensive industries seek METSAF extension and changes

European energy-intensive industries have called for changes to the temporary state aid framework METSAF and for it to be extended until at least the end of 2027. Industry representatives say the current scheme does not adequately offset high electricity costs or protect companies’ competitiveness.

European companies pay two to three times as much for electricity as competitors in the United States and China. This puts particular pressure on sectors supplying strategic value chains in energy, defence and digital technologies. Industry representatives say access to internationally competitive electricity prices is essential to maintain production, attract investment, and support electrification and decarbonisation.

The European Commission has announced plans to extend METSAF, but industry representatives say no support scheme under the framework has yet been launched anywhere in Europe because of flaws in its design. They have proposed three changes.

First, the limits on eligible electricity consumption and on combining METSAF aid with compensation for indirect costs under the EU Emissions Trading System (ETS) should rise from 50% to 70%. METSAF has already increased the permitted electricity price relief from 50% to 70% of the relevant annual average wholesale price in response to the exceptional burden of the Middle East energy crisis. But the existing limits prevent companies most exposed to electricity costs and the risk of production moving elsewhere from fully benefiting from the higher support.

Second, industry is seeking the removal of the requirement that beneficiaries reinvest at least half of their aid in measures to reduce electricity system costs. The condition still applies to a significant share of the support. Industry representatives argue that requiring companies to reinvest half of their relief runs counter to the framework’s goal of protecting competitiveness and preventing carbon leakage. They also point to the substantial investments already required of companies to decarbonise production under the ETS.

Finally, industry is calling for METSAF to be extended until at least the end of 2027 and then kept in place until European electricity prices become stable and internationally competitive. Short-term extensions do not give companies enough certainty for investment decisions, industry representatives say. They also stress that state aid cannot permanently substitute for competitive electricity prices: Europe’s long-term priority should be an energy system that provides predictable power costs for industry, investment and decarbonisation.