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01/09/2016

Minister: German ‘green revolution’ could cost €1 trillion

Energy

Minister: German ‘green revolution’ could cost €1 trillion

wind turbines at dawn.jpg

Germany’s transition to renewable energy may cost up to €1 trillion in the next two decades, the environment minister said on Wednesday (20 February), piling pressure on his opponents to back plans to cap power price rises before the election.

With an eye on the September vote, Peter Altmaier, one of conservative Chancellor Angela Merkel's most trusted ministers, has outlined plans to rein in subsidies for renewable power which have pushed up consumers' electricity bills.

However, his plans may be doomed as the opposition Social Democrats (SPD) and Greens have reservations and could block legislation in the Bundesrat upper house.

"The costs of our energy reform and restructuring of energy provision could amount to around €1 trillion by the end of the 2030s," Altmaier told the Frankfurter Allgemeine Zeitung newspaper.

"We have maybe our last big chance to lay the right foundations to make this a success. That means the energy switch must be economically justifiable and must be affordable."

Soon after Japan's Fukushima disaster in 2011, Merkel announced an accelerated phase out of nuclear plants and proposed ambitious green energy targets. Renewables are due to account for 35% of German power in 2020 and 80% by 2050.

High subsidies have boosted German solar and, to some extent, wind energy but have been partly financed by a surcharge on households. Many firms have warned that they may grow less competitive in global markets as a result.

To keep power affordable, Altmaier wants to cap increases in subsidies for renewable power for two years and suspend feed-in tariffs to new installations, so saving an estimated €300 billion. Energy intensive firms, largely exempted from surcharges, may also have to pay.

Altmaier’s plan last week won the support of Merkel's coalition partner the Free Democrats (FDP), despite some initial criticism.

Traders closely watching developments

Power and carbon traders are watching developments closely. Germany's EID Energy Intensive Industry group, including chemicals and steel firms, attacked the plans.

"Politicians want to turn the cap on the renewable energy surcharge into reality by making its most energy-intensive industry shoulder the burden,' said EID spokesman Utz Tillmann.

That branch would have to pay a large part of the planned €700 million per year, Tillmann added.

"We need a cost brake that will limit the costs of renewable energy equally for all consumers for the long term," he said.

Altmaier said last week he would try to secure an agreement in March with Germany's 16 federal states, whose support he needs to get a law through the Bundesrat. So far the SPD and Greens have rejected the plans.

Background

In May 2011, Germany announced that it would shut all its nuclear reactors by 2022, following the Fukushima nuclear disaster in Japan.

Eight of Germany's oldest 17 nuclear reactors were permanently shut soon afterwards and another six are slated to be taken offline by 2021.The remaining three reactors, Germany's newest, will stay open for another year until 2022 as a safety buffer to ensure no disruption to power supply.

Just two months previously, Chancellor Merkel had taken an unpopular decision to extend the life of ageing nuclear stations in Germany. But facing widespread public hostility to the energy source after Fukushima, she back-tracked.Before the phase-out decision, Germany got 23% of its power from nuclear plants.

Timeline

  • 2020: EU pledged to increase the share of renewables by 20% on 1990 levels
  • 2021: Six German nuclear reactors due to close
  • 2022: Germany's last three nuclear reactors due to close

Further Reading