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German Compromise Limits Power-Price Increases, Ensures Election-Year Battle

German Compromise Limits Power-Price Increases, Ensures Election-Year Battle

Germany's environment and economy ministers, coalition partners from different parties who have clashed over the country's shift from nuclear power, forged a joint plan to slow power-price increases caused by subsidies for renewable energy.

The agreement by Environment Minister Peter Altmaier and Economy Minister Philipp Roesler includes reduced compensation for both existing and new renewable sites and fewer exceptions for energy-intensive companies, Altmaier's ministry said in a statement. The proposals limit the surcharge consumers pay for funding renewables to 5.28 euro cents (7.04 cents) a kilowatt-hour next year and an annual increase to 2.5 percent in future.

The deal, which would save consumers an estimated 1.86 billion euros in 2014, sets up an election-year conflict between Chancellor Angela Merkel's government and opposition-controlled states, which can block the changes in the upper house. Both ministers are holding talks with regional officials today.

"The states have to look very carefully at whether they want to back or reject this brake on power prices," Roesler said today on ARD television. "Whoever refuses the model will be politically responsible for any further price increase."

Law This Year

The cost of Merkel's decision made following the Fukushima disaster to shutter atomic plants in favor of renewables such as solar and wind power is becoming a campaign theme before the Sept. 22 elections. Roesler said the "way is now open" for legislation before the election.

The planned subsidy cuts may "throttle" renewables expansion by curbing investment, the Berlin-based BEE renewable energy federation said in a statement after the proposals were announced. Merkel should instead cut energy tax that comprises about 25 percent of power prices, the BEE said.

Germany wants to more than triple the share of renewables in the energy mix by 2050 as it phases out nuclear generation. The scale of the energy transformation, the most dramatic overhaul since World War II, and the risks it carries to Europe's biggest economy has moved the soaring cost of electricity to the center of the political and economic agenda.

Germany's four electricity grid operators said in October that consumers would shoulder an average increase in subsidies for renewables of 47 percent per kilowatt-hour this year.

Solar Panels

While it was a coalition government of Social Democrats and the Green Party that first legislated to shutter all Germany's nuclear plants, they oppose aspects of Merkel's energy overhaul. Now in opposition, the SPD and Greens used their majority in the upper house, the Bundesrat, to block a law last year lowering subsidies to the solar industry, saying that the reduced tariffs put panel makers at risk. The legislation was passed after going to a mediation committee. The SPD says that the latest government moves will slow the expansion of renewables.

The planned savings, if agreed by the opposition-controlled states, may lower the estimated 20.36 billion euros that Germans are set to pay this year for electricity from renewable sources. Electricity companies are compelled to pay for power from solar plants and wind parks that is tapped into the national grid, the costs of which are then passed on to consumers and industry.

Altmaier proposed a shift in clean-energy expansion costs last month to producers from consumers to stem the price surge. Roesler, who leads the pro-business Free Democratic Party, Merkel's junior coalition partner, had resisted the change.

Consumers could face a 10 percent increase in the renewables surcharge next fall without any action, Altmaier said in an interview with Phoenix television. The government proposes limiting any rise to 2.5 percent per year. "A lot of citizens are prepared to pay that for the energy overhaul," he said.

Lead image: Negotiation highway sign, via Shutterstock

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