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Germany Energy Minister Proposes Cuts to Renewable Subsidies, Industry Reacts

Germany Energy Minister Proposes Cuts to Renewable Subsidies, Industry Reacts

German Energy Minister Sigmar Gabriel is scheduled to propose renewable energy reform on Wednesday. In an effort to reduce government spending and slow the increase in energy costs, Gabriel proposes to cut subsides for renewable sources from €0.17 per kilowatt-hour (kWh) to €0.12 per kWh by 2015, according to several reports.

For onshore wind in particular, Gabriel intends to reduce pay for operators by 10-20 percent by 2015 to 0.09/kWh, and he also intends to reduce the expansion to about 2,500 megawatts a year, according to an Economy Ministry document prepared for a Jan. 22-23 meeting of Merkel’s coalition. Developers would get the current subsidies if their units are authorized before Jan. 22 and enter operation this year, it said.

Gabriel wants green energy reform to take effect Aug. 1, according to Spiegel, though he told ARD that electricity prices won’t decline.

General Electric Co. favors these reforms to Germany’s energy policy, saying the reduced renewable energy subsidies will make the market more efficient.

Germany needs to focus energy spending on research and development rather than subsidies, Stephan Reimelt, GE’s head of energy in Germany, said in a telephone interview today. The company today sealed a 100 million-euro ($136 million) contract from Vattenfall SE to supply a gas turbine to a plant in Berlin.

“The direct market requirements for renewable energy is very important, and that is something that we see spelled out very clearly and that we support,” Reimelt said. “Germany should focus on innovation rather than subsidies and building. There is 230 million euros of R&D budget for this space and 20 billion euros of subsidies for renewables.”

The proposed cuts come as Chancellor Angela Merkel’s third-term government intends to cut the cost of her plan to shutter Germany’s nuclear plants and move Europe’s biggest economy toward renewables. She said one of her top priorities is to modernize the system of clean-energy aid after rising wind and solar costs sent consumer power bills soaring.

“The more renewables you bring into the grid, you have to take the fossil power out of the grid,” Reimelt said. “And so the projects and the operating power in gas turbines are heavily decreasing and being reduced to situations where most of these projects are not competitive any more. If you plan a project based on 8,000 operating hours rather than 1,000, you can imagine there is a fundamental difference.”

The president of BWE (Bundesverbandes WindEnergie), Sylvia Pilarsky-Grosch, called the proposed reform counterproductive to a successful continuation of the energy turnaround in Germany.

"Germany is the energy change in a very good way...The acceptance by the people is enormous, the demand for 100 percent renewable power is growing. To successfully continue on the path...we need a courageous policy," said Pilarsky-Grosch in a statement. "The proposals of the Minister of Energy are going in the wrong direction. The energy revolution is liable to be thwarted."

Copyright 2014 Bloomberg

Lead image: Green cuts via Shutterstock

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