German Chancellor Angela Merkel's government plans to cap renewable-energy subsidies when capacity reaches national targets as the administration seeks to cut the cost to consumers of its decision to phase out nuclear power.

The state would end payments to wind and biomass as limits are reached, Environment Minister Peter Altmaier said of plans that lawmakers will debate next year, without giving the limits.

“The energy switch is the biggest economic project of the post-World War II era,” Altmaier, who is responsible for the legislation, told reporters today in Berlin. The government will “fundamentally” reform the system to make renewables compete at market prices “as quickly as possible,” he said.

The proposals mark the most sweeping changes to Germany’s support mechanisms for renewables since the country adopted feed-in tariffs in 2004. The guarantees of above-market prices for clean energy in Germany have helped make the country the biggest market for solar and been emulated around the world, spurring renewables booms in nations including Italy and Spain.

Capping subsidies will create a rush to install renewable projects and deter industry investment in the long run, Dietmar Schuetz, president of German renewable lobby BEE, said today in a statement. “Such steps increase costs,” he said.

Billions in Savings

Germany will save 570 billion euros ($736 billion) by 2050 if it sticks to its plan to replace atomic reactors and fossil sources with renewable sources of energy, a group of researchers said.

“The investments made now, at the beginning, will pay off within a foreseeable time frame and have a positive economic impact,” the Renewable Energy Research Association, a group of clean-energy research institutes, said today on its website.

Solar Target

The planned subsidy changes build on a target announced in June to cap solar payments when capacity reaches 52 gigawatts, up from about 30 gigawatts of facilities now. Germany gets about a quarter of its power from renewable generation totaling 70 gigawatts, including about 30 gigawatts from wind, 5.5 gigawatts from biomass and 4.4 gigawatts from hydroelectric plants.

At the same time as capping subsidies, Merkel plans to lift the target for renewable power to 40 percent of total generation by 2020, from 35 percent previously. Altmaier said Germany, which plans to shut all its nuclear reactors by 2022, will certainly surpass the earlier renewables forecast. The country aims to bridge the gap from abandoning nuclear with clean energy, as well as more efficient gas and coal power stations.

The fee German consumers are paying through their power bills to finance renewable subsidies is set to rise by about 50 percent next year, Sueddeutsche Zeitung reported Oct. 9, citing Jochen Homann, head of the Bundesnetzagentur grid regulator. That would push up the yearly power bill of the average German consumer by at least 50 euros, the newspaper said.

Strain on Consumers

Ministers are also concerned that an uncontrolled renewable expansion strains power networks as it may leave consumers without energy when the wind doesn’t blow or the sun doesn’t shine. The economic crisis, which is hurting developers by hampering access to financing, has prompted Spain, France, Italy and the U.K. to curb incentives for the industry.

A new law would have to provide tools so that the expansion is “constant and predictable,” Altmaier said.

It should also allow for the expansion of all clean-energy technologies, enable greater coordination where generators and power lines are built and include incentives for energy storage, he said. Politicians need to help people with power prices that rise as a result of the energy overhaul, Altmaier said.

“We knew from the start that the energy switch can’t be realized for free,” he said. “However, I want to prevent costs that can be prevented.” The minister said he will seek to draft the bill after consultations due to start next month and last through May. He didn’t say if a final decision on the law would be made before or after a national election in September 2013.

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