IEA Warns Merkel to Reduce Cost of German Clean-Energy Switch

Chancellor Angela Merkel’s government should take steps to contain the cost of the German energy switch from nuclear power to renewables, the International Energy Agency said.

German consumers have so far borne the brunt through power bills that have been inflated by renewable power subsidies while large consumers have been shielded from the increased costs, the Paris-based adviser said in a study released today. The costs need to be “minimized and allocated fairly and equitably,” the agency said in the report.

Merkel has been trying to prevent a voter backlash before the Sept. 22 elections after costs to expand clean energy surged as the country seeks to more than triple the share of renewables in its power mix by 2050 while phasing out nuclear generation. Consumers in Europe’s biggest economy have seen power bills climb this year after a fee they pay for renewables jumped 47 percent to a record.

“The fact that German electricity prices are among the highest in Europe, despite relatively low wholesale prices, must serve as a warning signal,” IEA Executive Director Maria van der Hoeven said in an e-mailed statement. “The German government should maintain its policy course based on a predictable and stable regulatory framework while actively seeking means to reduce the costs.”

While the agency warned against retroactive cuts to subsidies that would discourage investment, it recommended creating incentives for renewable suppliers to connect to the grid where it’s most cost-effective. Germany should also speed up expansion of its electricity grid and strengthen the position of natural gas as the use of more-polluting coal is increasing, van der Hoeven said.

To contact the reporter on this story: Stefan Nicola in Berlin at snicola2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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