German SPD urges fast renewables reform in coalition talks

Germany's Chancellor Merkel addresses a news conference during a EU leaders summit in Brussels

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Germany's Chancellor Angela Merkel addresses a news conference during a European Union leaders summit …

By Markus Wacket

BERLIN (Reuters) - Germany's center-left Social Democrats (SPD) will push for a quick reform of incentives for green energy in any deal to share power with Chancellor Angela Merkel's conservatives, documents showed on Tuesday.

Energy policy is a crucial element of ongoing coalition talks between the two camps but many of the points presented in an SPD paper obtained by Reuters did not appear wholly incompatible with conservative ideas.

The SPD, traditional champions of the coal industry, said in a paper prepared for talks on energy the goal was "agreement on the (main features of) a reform of the Renewable Energy Law by Easter 2014".

Merkel has also said she wants a swift reform to the system of generous incentives which have proved so popular with investors in green power that Europe's biggest economy is straining under the cost.

Her "energy revolution" - to boost renewable power and accelerate a nuclear phase-out and shift away from fossil fuels - is widely seen as one Merkel's biggest domestic policy initiatives. She has given few concrete details of any reforms.

While a boom in renewables has boosted supply of green energy and led to a fall in wholesale power prices, the incentives, or feed-in tariffs, are paid for by end-users via surcharges added to electricity bills.

These additional fees mean German consumers, including industry, pay the second highest power prices in Europe. Export-oriented firms are angry and have even threatened to move abroad if energy prices do not come down.

According to the SPD documents, a general feed-in tariff, which ensures green power is fed into the grid at a guaranteed, above-market price, should be replaced by a 'premium system'.

Under that, producers would be paid an agreed premium to the market price and as much green power as possible should be sold directly on the market.

While industry may be relieved at this move, if it is indeed agreed in a coalition deal, it will be less happy about a reduction in the number of firms exempted from the surcharge for renewable energy.

According to the SPD paper, the number of companies enjoying exemptions could be more than halved to about 1,000.

In addition, utilities may be disappointed by the SPD's position that conventional power plants should receive no subsidies to ensure supply, a demand made by RWE and E.ON. Instead, Germany's winter reserves should be expanded to power plants.

If agreed, this would make a shift to a capacity-based system as demanded by utilities less likely. Utilities would prefer to be paid for their readiness to supply capacity rather than for the electricity produced.

The SPD, which has traditionally championed coal but brought in renewable incentives while in power with the Greens in 1998-2005, said there was a "fundamental agreement" with the conservatives towards reducing CO2 emissions certificates.

This seems to signal SPD support for EU plans for "backloading", designed to limit the supply of CO2 certificates and revive the bloc's main tool to fight climate change.

Members of the SPD and conservative energy working groups met separately on Tuesday before joint preparatory talks. There is no guarantee of a coalition deal and talks, which only started last week, are expected to take more than a month.

(Reporting by Markus Wacket; Writing by Madeline Chambers; Editing by Stephen Brown)

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