Merkel’s New Coalition Seeks Greater Control Over Renewables

German Chancellor Angela Merkel and her prospective coalition partners agreed to more tightly control the expansion of clean energy to contain costs.

Renewable power will supply 40 percent to 45 percent of Germany’s needs by 2025, and 55 percent to 60 percent 10 years later, according to a coalition agreement reached in Berlin today. Previously the government set a target of at least 35 percent by 2020, with no ceiling, rising to 80 percent by 2050.

The accord is part of a package of policies agreed between Merkel’s Christian Democratic bloc and the Social Democratic Party after five weeks of negotiations to form a new government. Germany is seeking ways to reduce the cost of renewable power after deciding to close down its nuclear plants by 2022.

Setting more precise goals will limit costs and make the expansion more predictable, according to the accord. “The energy switch will only be accepted by citizens and industry if security of supply and affordability can be guaranteed.”

German consumers and companies finance clean-energy subsidies by paying a surcharge on their power bills. The levy will jump 18 percent on Jan. 1 and has surged more than fivefold since 2009.

Germany “in the medium term” should create a so-called capacity market that pays utilities to provide reserve supply when renewable-energy output falls short, the parties said. Such a market should be “‘cost-efficient’’ and open to all technologies.

Confirming decisions made earlier this month, the parties will reduce aid for new onshore wind projects and cut a goal for sea-based wind farms to 6.5 gigawatts from 10 gigawatts by 2020 and to 15 gigawatts from 25 gigawatts by 2030. Aid will be cut continually for all technologies, they wrote.

The parties, which also agreed to slow biomass expansion and temporarily ban hydraulic fracturing for natural gas, won’t change solar subsidies or make retroactive cuts to aid. They will seek to draft new energy legislation by Easter for a parliamentary vote before the summer recess.

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

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

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