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Angela Merkel to push back against EU if green energy support questioned

Wednesday, 25 June 2014 - 7:19pm IST | Agency: Reuters

German Chancellor Angela Merkel said on Wednesday she would push back decisively against the European Commission if it raises further objections to Germany's system of green power subsidies.

Berlin and the Commission have been at odds over the German system by which consumers pay a surcharge to finance renewable energy while heavy industrial users are exempt. The Commission raised new sticking points on Monday, which led to Germany offering to change its planned reform at the last minute. "You can't simply start to question support systems which have been in place for years without thinking about how we make the transition. We'll campaign for that decisively in Europe," Merkel told the Bundestag lower house of parliament, which is due to vote on the renewable energy act on Friday.

"We'll only have planning security for investments with a clear framework overall and of course that also means we need to have clear agreements with the European Commission," she added. The government now proposes that industrial companies which generate their own power on site in new renewable or combined heat-power plants pay a higher surcharge than previously planned. That will hit industrial firms, which now produce around a quarter of the electricity they use on-site. More and more firms in commerce and trade are now generating their own power too.

While existing plants will continue to be exempt until the end of 2016, after which a new rule is due to take effect. In the new draft, industry producing its own electricity in new renewable or combined heat-power plants will pay 30 percent of the current 6.24 cents per kilowatt hour surcharge in 2015, rising to 35 percent in 2016 and 40 percent from 2016.

Merkel said exemptions from the surcharge had helped to keep Germany's economy competitive, adding that for the population to accept the cost of shifting to renewable energy from nuclear power, it had to ensure the protection and creation of jobs. Chemical and steel companies, which are big electricity users, have attacked plans to amend the surcharge system, with BASF saying they send a "disastrous signal" which "casts doubt on Germany as an investment location".

The chemical industry body VCI said the plans jeopardised investment in the upkeep and expansion of existing on-site power production plants. The steel industry and the BDI industry body have called for at least existing power plants to be protected. German energy industry group BDEW on Wednesday criticised the row between the Commission and Berlin, urging the parties to settle their differences so further reform could be tackled.

Issues still to be resolved include how to deal with imported electricity but European Energy Commissioner Guenther Oettinger urged Germany to pass the reform this week anyway so that industry has time to apply for exemptions for next year. Asked if Germany should postpone the law, Oettinger said: "That won't be possible. Why? Because members of parliament have a summer recess and the matter certainly can't wait until September or October to be decided."

Merkel said that the shift to renewable energy would remain a "Herculean task" even after the renewable law has been passed. Germany's Economy Ministry on Wednesday laid out various scenarios for the development of energy prices, on which the amount of the renewable energy levy depends. They showed the surcharge could fall to between 5.8 cents and 6.6 cents per kilowatt hour in the next three years from 6.24 cents now.

But that does not necessarily mean a lower price for customers; the ministry said that would depend upon whether energy providers passed on lower wholesale prices. Based on an assumption the market price for electricity is 4 cents per kilowatt hour, a level most experts expect, the surcharge would dip to 6.1 cents per kilowatt hour next year before rising to 6.2 cents in 2016 and 6.4 cents in 2017.

The surcharge has risen in the last two years; in 2012 it was 3.6 cents and in 2013 it was 5.3 cents. 

(Additional reporting by Noah Barkin, Stephen Brown, Gernot Heller and Markus Wacket; Writing by Michelle Martin, editing by David Evans)

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