In June, international attention focused on rising tensions in the Middle East. The escalation between Israel and Iran led to concerns about a possible regional spread of the conflict. For the global energy industry, the potential threat to the Strait of Hormuz, through which a significant portion of global oil and LNG trade is conducted, was particularly relevant. The possible impact on producing countries such as Saudi Arabia was also closely monitored. Against this backdrop, we remain committed to our goal of assessing geopolitical developments objectively and not fuelling speculation. This market commentary therefore focuses on two terms that are relevant to economic and state aid law: electricity price compensation and industrial electricity prices.
On Pentecost Sunday, the Ministry of Economic Affairs announced that it would again make €75 million available for so-called electricity price compensation in 2025 and 2026. The measure was last applied in Austria in 2022, when the volume amounted to €185 million for 44 companies. In Germany, electricity price compensation has been in place since 2022 and was recently extended until 2030. In Austria, however, it was suspended in 2023 and 2024.
The aim is to protect energy-intensive industries. Electricity price compensation is an existing EU instrument designed to provide relief to companies with high electricity consumption (over 1 GWh per year), especially in sectors such as paper, wood, metal and chemicals. It is intended to prevent these companies from relocating to third countries with lower environmental standards due to rising CO₂ costs. As it is based on existing EU state aid guidelines, it can be implemented with legal certainty and without additional ratification – quickly and without interfering with price formation on the electricity market.
The price of CO₂ is likely to rise significantly in 2025. Against this backdrop, electricity price compensation can help to ensure the competitiveness of energy-intensive companies. However, the instrument has also been criticised: since part of the indirect CO₂ costs are compensated, there is a lack of price pressure to trigger efficiency measures. Critics see this as a weakening of the polluter pays principle, a one-sided favouring of emission-intensive industries and a potential delay in the ecological transformation.
Speaking of climate policy, the EU’s interim target for 2040 is faltering. Originally, the EU Commission was supposed to propose a CO₂ reduction target of -90% (compared to 1990) on 2 July. This interim target forms the path between -55% by 2030 and net zero by 2050. However, political resistance is growing: French President Macron has expressed criticism and warned of negative consequences for European prosperity. Together with Poland, he is seeking to weaken the target path.
Unlike electricity price compensation, the introduction of an industrial electricity price requires approval by the EU. With the publication of the new state aid framework on 25 June, a clear legal framework has now been created that will apply until the end of 2030. It enables member states to provide permanent relief to energy-intensive companies – subject to defined criteria.
Electricity- and trade-intensive companies are eligible for support. The prerequisite is an electricity and trade intensity of at least 5% each and a product of both values of at least 2% at EU level. Sectors not explicitly listed may also be eligible for aid if they can provide individual proof. The aid may amount to up to 50 per cent of the average spot market price, based on a maximum of 50 per cent of annual electricity consumption. The minimum price is 50 EUR/MWh. The basis for calculating consumption can be either the previous year or the current year. Implementation is a national responsibility. The new requirements are designed as ‘optional’ provisions, meaning that it is up to the Member States to decide whether and how they use these aid options.
Back to the beginning, back to current market developments. The escalation in the Middle East – in particular the Israeli attack on Iranian nuclear facilities in mid-June – was the central topic on the energy markets. As a result of the attack, prices for electricity and gas rose significantly. This was triggered by concerns about supply bottlenecks, as around 20% of global LNG trade is conducted via the Strait of Hormuz. Iran responded with a law allowing for the possible blockade of this strait. Although this was not actually implemented, the political uncertainty was enough to drive up the futures markets by up to 15% within a few days. It was not until the end of the month that the situation eased, with noticeable price declines.
At the same time, reports of new corrosion cracks at the French Civaux 2 reactor caused additional nervousness. EDF stated that the repairs were part of planned maintenance and would not affect electricity production in 2025. Nevertheless, many market participants recalled 2022, when similar findings led to a wave of reactor outages and significant price jumps. As a result, a geopolitically driven bubble formed on the electricity futures market in mid-June, which was only partially deflated at the end of the month as risks subsided.
The spot market in June was strongly influenced by fluctuations in the supply of renewable energies. With an average of 65 EUR/MWh in Germany and 63 EUR/MWh in Austria, the month saw the lowest spot prices of the year to date. This was mainly due to above-average feed-in from photovoltaics and wind power. In several weeks, combined electricity production from both sources was well above the seasonal norm of 4.5 TWh, with peak values of up to 6.2 TWh. Negative prices were repeatedly observed, particularly at midday. Daily values fell below -28 EUR/MWh in some cases, and even below -38 EUR/MWh on weekends. The lowest value was recorded on 22 June at -99.01 EUR/MWh, caused by an overproduction of around 15 GW.
The European supply situation remains fundamentally robust. Norway is reliably exporting gas, LNG volumes are stable, and demand is falling as is typical for the season. However, geopolitical developments could dominate again at any time. At the same time, the heatwave is affecting the electricity market: rising cooling demand is increasing consumption, while several French nuclear power plants have had to reduce their output due to high river temperatures – around 2.2 GW are affected, including Golfech 1 and Blayais 1.
The spot market is likely to pick up slightly in the first week of July. The wind forecast is 84% of the long-term average, while PV generation remains strong at 115%. This suggests a similar price level to June – with typical volatility.
We expect the futures market to move sideways in the short term. Stable gas flows and moderate CO₂ prices limit the upside potential. Nevertheless, companies should continue to factor in short-term fluctuations. Geopolitical risks remain the dominant source of uncertainty for energy price developments.
In June, international attention focused on rising tensions in the Middle East. The escalation between Israel and Iran led to concerns about a possible regional spread of the conflict. For the global energy industry, the potential threat to the Strait of Hormuz, through which a significant portion of global oil and LNG trade is conducted, was particularly relevant. The possible impact on producing countries such as Saudi Arabia was also closely monitored. Against this backdrop, we remain committed to our goal of assessing geopolitical developments objectively and not fuelling speculation. This market commentary therefore focuses on two terms that are relevant to economic and state aid law: electricity price compensation and industrial electricity prices.
On Pentecost Sunday, the Ministry of Economic Affairs announced that it would again make €75 million available for so-called electricity price compensation in 2025 and 2026. The measure was last applied in Austria in 2022, when the volume amounted to €185 million for 44 companies. In Germany, electricity price compensation has been in place since 2022 and was recently extended until 2030. In Austria, however, it was suspended in 2023 and 2024.
The aim is to protect energy-intensive industries. Electricity price compensation is an existing EU instrument designed to provide relief to companies with high electricity consumption (over 1 GWh per year), especially in sectors such as paper, wood, metal and chemicals. It is intended to prevent these companies from relocating to third countries with lower environmental standards due to rising CO₂ costs. As it is based on existing EU state aid guidelines, it can be implemented with legal certainty and without additional ratification – quickly and without interfering with price formation on the electricity market.
The price of CO₂ is likely to rise significantly in 2025. Against this backdrop, electricity price compensation can help to ensure the competitiveness of energy-intensive companies. However, the instrument has also been criticised: since part of the indirect CO₂ costs are compensated, there is a lack of price pressure to trigger efficiency measures. Critics see this as a weakening of the polluter pays principle, a one-sided favouring of emission-intensive industries and a potential delay in the ecological transformation.
Speaking of climate policy, the EU’s interim target for 2040 is faltering. Originally, the EU Commission was supposed to propose a CO₂ reduction target of -90% (compared to 1990) on 2 July. This interim target forms the path between -55% by 2030 and net zero by 2050. However, political resistance is growing: French President Macron has expressed criticism and warned of negative consequences for European prosperity. Together with Poland, he is seeking to weaken the target path.
Unlike electricity price compensation, the introduction of an industrial electricity price requires approval by the EU. With the publication of the new state aid framework on 25 June, a clear legal framework has now been created that will apply until the end of 2030. It enables member states to provide permanent relief to energy-intensive companies – subject to defined criteria.
Electricity- and trade-intensive companies are eligible for support. The prerequisite is an electricity and trade intensity of at least 5% each and a product of both values of at least 2% at EU level. Sectors not explicitly listed may also be eligible for aid if they can provide individual proof. The aid may amount to up to 50 per cent of the average spot market price, based on a maximum of 50 per cent of annual electricity consumption. The minimum price is 50 EUR/MWh. The basis for calculating consumption can be either the previous year or the current year. Implementation is a national responsibility. The new requirements are designed as ‘optional’ provisions, meaning that it is up to the Member States to decide whether and how they use these aid options.
Back to the beginning, back to current market developments. The escalation in the Middle East – in particular the Israeli attack on Iranian nuclear facilities in mid-June – was the central topic on the energy markets. As a result of the attack, prices for electricity and gas rose significantly. This was triggered by concerns about supply bottlenecks, as around 20% of global LNG trade is conducted via the Strait of Hormuz. Iran responded with a law allowing for the possible blockade of this strait. Although this was not actually implemented, the political uncertainty was enough to drive up the futures markets by up to 15% within a few days. It was not until the end of the month that the situation eased, with noticeable price declines.
At the same time, reports of new corrosion cracks at the French Civaux 2 reactor caused additional nervousness. EDF stated that the repairs were part of planned maintenance and would not affect electricity production in 2025. Nevertheless, many market participants recalled 2022, when similar findings led to a wave of reactor outages and significant price jumps. As a result, a geopolitically driven bubble formed on the electricity futures market in mid-June, which was only partially deflated at the end of the month as risks subsided.
The spot market in June was strongly influenced by fluctuations in the supply of renewable energies. With an average of 65 EUR/MWh in Germany and 63 EUR/MWh in Austria, the month saw the lowest spot prices of the year to date. This was mainly due to above-average feed-in from photovoltaics and wind power. In several weeks, combined electricity production from both sources was well above the seasonal norm of 4.5 TWh, with peak values of up to 6.2 TWh. Negative prices were repeatedly observed, particularly at midday. Daily values fell below -28 EUR/MWh in some cases, and even below -38 EUR/MWh on weekends. The lowest value was recorded on 22 June at -99.01 EUR/MWh, caused by an overproduction of around 15 GW.
The European supply situation remains fundamentally robust. Norway is reliably exporting gas, LNG volumes are stable, and demand is falling as is typical for the season. However, geopolitical developments could dominate again at any time. At the same time, the heatwave is affecting the electricity market: rising cooling demand is increasing consumption, while several French nuclear power plants have had to reduce their output due to high river temperatures – around 2.2 GW are affected, including Golfech 1 and Blayais 1.
The spot market is likely to pick up slightly in the first week of July. The wind forecast is 84% of the long-term average, while PV generation remains strong at 115%. This suggests a similar price level to June – with typical volatility.
We expect the futures market to move sideways in the short term. Stable gas flows and moderate CO₂ prices limit the upside potential. Nevertheless, companies should continue to factor in short-term fluctuations. Geopolitical risks remain the dominant source of uncertainty for energy price developments.
Good luck with your energy decisions!
Yours,
Felix Diwok
For the Inercomp team