Luxembourg government allocates €171 million to offset electricity costs

In order to support households amidst rising electricity prices, the government has decided to extend existing subsidies.

In a statement released on Thursday, the Ministry of the Economy and Energy announced that a budget of €171 million had been earmarked to this end. The subsidies are aimed at households with an annual consumption of less than 25,000 kWh. The price reduction will be applied automatically between 1 January and 31 December 2025.

How much is the state actually contributing?

The practical effects of this government subsidy are best illustrated with examples:

• For a flat with an annual consumption of 1,500 kWh, the state will contribute €110;
• For a single-family home with an electric car and a consumption of 7,000 kWh, the state will contribute around €520.

However, even with the state contribution, electricity bills will become more expensive. In the case of the house mentioned above, this increase would correspond to around €400, while the household living in the flat would have to pay approximately €100 more.

Speaking to the members of the responsible parliamentary committee, Minister of Energy Lex Delles stressed that, in accordance with the new price structure, grid costs will continue to be calculated on an individual basis in 2025, adding that only a small number of residents would have to pay more. However, Minister Delles acknowledged that individual consumers will experience price hikes of €500, explaining that this is due to rising electricity prices in 2025. One of the reasons behind this increase is the government's decision to slash the existing energy price cap by half.

The new price structure mainly affects owners of electric cars. Consumers are encouraged to spread out their individual consumption over the course of a day to avoid excessive price hikes. It is worth noting that the time of day is irrelevant in this regard, seeing as the calculation is done on an individual basis. The idea is that consumers should avoid putting too much pressure on the grid at a single point in time. The government's goal is to optimise energy consumption instead of expanding the grid at a potentially high cost.

Bad timing and messaging?

While the government assured MPs that electric cars and heat pumps will remain more economical than fossil fuels, the opposition expressed scepticism. MP Joëlle Welfring of the Green Party (Déi Gréng) and MP Georges Engel of the Luxembourg Socialist Workers' Party (LSAP) both stated that the change "sends a bad message" and criticised that the government had picked a bad time to reduce energy price caps.

MP David Wagner of the Left Party (Déi Lénk) argued that while the "incentive" meant to result from the new price structure might work in theory, it has to be considered that consumers might face practical constraints that prevent them from adjusting their consumption.

In response to some of the criticism, Minister Delles pointed out that the Luxembourg Regulatory Institute (ILR) is an independent authority and began drafting the new price structure alongside providers two years ago. As for price caps, Delles stressed that Luxembourg is one of the only countries that still has such a measure in place.