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Merkel’s New Coalition Seeks Greater Control Over Renewables

Nov. 27 (Bloomberg) -- 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 treaty. “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. Merkel has said the first priority for her government is changing the EEG clean-energy law, the key legislation underpinning the 550 billion-euro ($750 billion) energy switch.

“We need a comprehensive EEG reform that changes many things and creates planning security for the next 10 to 20 years,” Environment Minister Peter Altmaier told reporters today in Berlin.

‘Systemic Shift’

Germany from 2018 will auction off aid for new clean-energy projects to the lowest bidder in a “systemic shift” in subsidies to the industry, Altmaier said. The parties plan to force owners of new plants sized 5 megawatts or larger to sell power on the market. Smaller units will have to do so by 2017.

It’s unsure whether Altmaier will keep the job of environment minister as Merkel hasn’t yet announced her cabinet.

Germany “in the medium term” should create a 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, similar to how solar aid is handled already, according to the agreement.

Fracking Ban

The expansion of onshore wind may be endangered by the agreements, said Sylvia Pilarsky-Grosch, president of the country’s BWE wind lobby. A new government should back onshore wind expansion targets of “at least” 3 gigawatts a year, she said today in an e-mailed statement.

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 the end of April for a parliamentary vote before the summer recess. As many measures as possible are to enter into force in the second half of 2014, Altmaier said.

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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