Germany Needs to End Renewables Aid Earlier, Pfeiffer Says

Feb 17, 2014 12:29 pm ET

(Updates with Almunia comment in seventh paragraph.)

Feb. 17 (Bloomberg) -- Germany should end its clean-energy subsidy system early to reduce costs and contain rising power prices that threaten industries, according to a senior lawmaker in Chancellor Angela Merkel’s governing coalition.

The government should bring forward plans to auction off aid for new projects and force owners of clean-energy plants to sell power on the market, Joachim Pfeiffer, energy policy spokesman for Merkel’s Christian Democratic Union, said today. Germany currently intends to introduce the measures in 2017.

“The quicker the market determines prices, the better,” Pfeiffer said in an interview at his office in Berlin. Returns for new renewable projects are still “incredibly lucrative.”

The country provides subsidies to clean-energy producers to help expand the industry while phasing out nuclear power. The aid is paid for with a levy on customer bills, driving up power prices for households to the highest in the European Union after Denmark. To ease costs for businesses, large energy users have received power-fee rebates, sparking a probe by the EU.

Canceling fixed subsidies earlier may be “helpful” in negotiations with the EU, Pfeiffer said.

Economy Minister Sigmar Gabriel met with EU Competition Commissioner Joaquin Almunia today in Berlin to discuss planned changes to Germany’s clean-energy law, known as EEG, governing subsidies and power-fee rebates. The outcome of talks with the EU will determine the future cost of power for German companies after the levy on bills jumped 18 percent to 6.24 euro cents (8.55 U.S. cents) a kilowatt-hour this year.

BASF, ThyssenKrupp

Auctioning off aid for new renewable projects may be a way to defuse the dispute on industry aid and “the right solution” can be found, Almunia said after meeting Gabriel. Industries such as zinc, aluminum and steel production will probably also qualify in the future for aid, he told reporters in Berlin.

Merkel’s government is seeking resolution with the European Commission, the EU regulatory arm, by April so companies still get rebates next year, Pfeiffer said. Germany aims to keep part of the aid for energy-intensive companies such as BASF SE and ThyssenKrupp AG, while the cement, aluminum, zinc and copper industries also need support to remain competitive, he said.

The issue of high energy prices is “not just limited to Germany,” he said. “It concerns the industrial competitiveness of Europe as a whole versus other regions.”

Compulsory surcharges paid by German consumers and industry may total about 24 billion euros this year, the most the economy can bear, Gabriel said last month. Business is already delaying or canceling investments in Germany and directing them instead to the U.S., where energy costs are lower, Pfeiffer said today.

--Editors: Amanda Jordan, Randall Hackley