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Research Briefing | Feb 21, 2025

Industrial electricity prices to ease in 2025, but uncertainty is high

Despite the recent uptick in wholesale electricity prices, we expect to see industrial electricity prices in Europe fall slightly through 2025. The declines will be driven partly by the delayed pass-through to industrial retail prices of wholesale electricity price declines experienced last year.

What you will learn:

  • Across Europe, we think the scope for industrial electricity price reductions in 2025 are greatest in Germany. A relatively high share of long-term contracts in the German electricity sector, together with recent reductions in electricity taxes, means more energy price declines will feed through this year as new contracts are negotiated.
  • Declines in industrial electricity prices through 2025 should reduce cost pressures in highly energy-intensive sectors where output remains weak, allowing for a partial output recovery.
  • There is a high degree of uncertainty in European energy markets, and risks to prices are tilted towards an increase. While our baseline forecasts suggest wholesale prices will recede through the year, should they remain higher-for-longer, it could push up industrial retail prices later in the year and therefore delay the recovery for energy-intensive sectors of the economy.
  • Even with the declines in our baseline, European electricity prices will remain structurally elevated relative to the pre-energy-crisis period. As a result, some sectors like, chemicals, face permanent output losses.
Tags: ElectricityEnergy and commoditiesEuropeIndustries
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