The Electricity Supply Industry (ESI) is among the most powerful economic sectors in Germany, and constitutes an economic and political power cartel which has been able to resist all attempts at altering the framework conditions for German energy policy in recent decades.

The legal and institutional framework has cemented this structure and secured the privileges of the large utilities as well as the small local monopolies, the ‘Stadtwerke’. In the last decade, issues such as deregulation, energy or CO₂ taxes, privatisation of public utilities, and the realisation of a single European market for energy have also affected Germany, bringing with them major changes and new risks for the electricity business.

The powerful ownership links between the ESI and major financial and industrial interests in Germany indicate that this industry is an integral part of what has been termed German Alliance Capitalism (Shonfield, 1968, 1971). In contrast to competitive capitalism, alliance capitalism is characterised by close ties and collaborative relationships between commercial entities, and the success of industries within this system relies on the concerted orchestration of large resources in pursuit of common goals.

With its huge turnover and vast profits, protected by its monopoly, the ESI grew into the major cash cow of the German economy. The political status of this economic system was consolidated by links to state bodies at all levels and, through revenue-sharing, with German municipalities by way of generous concession fees.