EU probes Germany's energy discounts for industry

[kristopher]

8. I'm not sure I agree with that reasoning

"not unreasonable in any other industry where larger volume purchases result in preferential pricing"

In the field of energy the act of discounting the cost to heavy users is part of a cycle that drives increased energy consumption and large system inefficiencies. It is tied to the fact that most utilities (here and abroad) are reimbursed on a cost plus basis. This gives an additional incentive for expansion.

A utility is motivated to build more capacity than they actually need, then they are motivated to discount the unused capacity in order to derive some sort of revenue. This promotes inefficient industrial expansion as heavy industry relies on the subsidized power rather than seeking efficiencies in their processes.

Raise the cost of power and the formula changes regarding how much it is worth spending on efficiency.

It is a common part of centralized thermal generation, and it is something we need to address if we are going to change the trajectory of energy use.