Merkel’s Coalition to Slow Wind-Energy Expansion to Reduce Costs

Chancellor Angela Merkel’s third-term government will seek to slow the expansion of land and sea-based wind power to cut the cost of the country’s unprecedented switch from nuclear energy to renewable sources.

Merkel’s Christian Democratic bloc and the Social Democrats agreed in talks over the weekend to reduce the target for offshore wind turbines to 6.5 gigawatts by the end of this decade, and to 15 gigawatts by 2030, from 10 gigawatts and 25 gigawatts respectively. Negotiators also backed reducing aid for onshore turbines and forcing owners of most new clean-energy plants to sell power on the market.

Merkel has said the chief priority of her new government will be to overhaul Germany’s 13-year-old EEG clean-energy subsidy law that has helped land Germans with the second-highest power prices in the European Union. Merkel, who will tomorrow resume negotiations with the SPD aimed at forming a coalition by Christmas, said in her weekly podcast that the EEG has led to a “cost explosion” that must be tamed.

Revising the EEG “will be the central project of the grand coalition,” Environment Minister Peter Altmaier told reporters yesterday in Berlin after concluding the agreement with the SPD. As a result, the energy switch will become “more predictable and lastingly affordable,” he said.

Merkel has been looking for ways to reduce the cost of adding renewable generators after deciding to close the country’s nuclear power plants by 2022. German consumers and companies finance clean-energy subsidies by paying a surcharge on their power bills. The fee will jump 18 percent on Jan. 1 and has more than quintupled since 2009.

Solar Subsidies

Negotiators also agreed to slow the expansion of biomass energy, said they will leave subsidies for solar power unchanged and will “review” aid to companies that use a lot of energy, Dominik Geissler, a spokesman for the Environment Ministry, said yesterday by text message. The industry aid had helped inflate bills for private homes.

The two sides have already agreed to temporarily ban fracking for unconventional natural gas until environmental concerns are resolved.

While the new offshore wind targets correct “unrealistic expectations,” the coalition seeks to add onshore wind turbines where it’s windy to reduce the cost of the expansion, Altmaier said. Surging energy expenses are threatening jobs and investments, says Germany’s BDI industry federation, which represents about 100,000 companies from Volkswagen AG (VOW) to Siemens AG. (SIE)

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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