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EU Investigating German Renewable Energy Waivers

EU Investigating German Renewable Energy Waivers

Exxon Mobil Corp. (XOM), Bayer AG (BAYN) and Linde AG (LIN) are among companies at risk of having to repay billions of euros in German aid as Chancellor Angela Merkel clashes with Europe’s antitrust regulator over renewable energy rebates to companies that use the most energy.

A total of 1,691 companies or units are benefiting from power fee waivers worth about 4 billion euros ($5.3 billion) this year, according to data from German authorities. While the European Commission is examining whether the waivers constitute illegal state aid, Merkel said they’re key to safeguarding the competitiveness of Europe’s biggest economy.

“Germany needs energy prices that are competitive,” Merkel said at an event in Cologne yesterday marking the 150th anniversary of drug maker Bayer, whose plastics unit gets the waiver at four different locations, according to the Federal Office of Economics and Export Control. Germany will “fight resolutely” in Brussels for the waivers.

The waivers free companies from paying the full fee to support the country’s clean-energy expansion. Merkel’s government is expanding wind and solar power to make up for the generation capacity lost when Germany shut its nuclear stations two years ago.

The commmission today ruled against a separate German support mechanism for non-ferrous metal producers from 2009. The 40 million-euro program was incompatible with the internal market, the commission said in a statement. It approved a plan compensating energy-intensive users for CO2 costs in their electricity price.

Triple Share

Germany’s plan to more than triple the share of renewables in its power mix helped drive up energy costs as Merkel prepares for a general election in September. Germany had the third-highest consumer power prices in the European Union in 2012, behind only Denmark and Cyprus, according to Eurostat.

Bayer’s MaterialScience plastics unit pays twice as much for electricity in Germany than in the U.S., Christian Hartel, a spokesman for the Leverkusen-based company, said by e-mail yesterday.

“Energy-intense industries must also in the future be partly disburdened from these high costs to remain competitive in global markets,” Hartel said.

Waivers exempting companies from those costs are “existential for energy-intensive companies,” Dieter Schweer of Germany’s BDI industry association said in an e-mailed statement. “Even the opening of an investigation can have negative consequences on investments as companies then have to make adequate provisions.”

Quickly Reform

The industry lobby group representing 100,000 companies with 8 million employees urged the German government to “quickly” reform the EEG clean-energy law.

The waivers, regulated by Germany’s EEG clean-energy law, are being investigated by the commission. They exempt companies from paying the full fee to finance the country’s renewable expansion. Consumers have seen electricity bills climb this year after the renewable fee jumped 47 percent to a record.

Germany this year authorized more than twice as many waivers than in 2012, when 734 companies or units got exemptions worth about 2.5 billion euros, according to data from the Federal Office of Economics and Export Control and Germany’s Environment Ministry.

This year’s list includes ExxonMobil Production Deutschland GmbH, cement maker HeidelbergCement AG (HEI), gas producer Linde Gas Produktionsgesellschaft mbH & Co. KG and Vattenfall Europe Mining AG.

Not Over

The commission’s preliminary investigation after a complaint related to the EEG law isn’t over yet and further developments aren’t expected before the summer break, Antoine Colombani, a spokesman for the commission in Brussels, said July 15.

Germany is “confident” the country’s EEG doesn’t constitute illegal state aid, Merkel’s chief spokesman, Steffen Seibert, told reporters in Berlin July 15. Merkel has said in the past that Germany is in talks with the commission to revise the law. Her government plans a fundamental overhaul of the EEG after the Sept. 22 federal elections.

Copyright 2013 Bloomberg

Lead image: Files and magnifying glass via Shutterstock

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