EU energy chief warns against German renewable subsidy cuts

Oettinger Energy 2020.JPG

Germany should not introduce cuts to already guaranteed renewable subsidies, European Energy Commissioner Günther Oettinger has said, warning that such a move would seriously hurt investor confidence.

Political parties and energy groups are all in favour of reforming Germany's renewables law, a step likely to be taken after next month's general elections, but concrete proposals have been scarce.

Investors have repeatedly warned that cuts in already agreed renewable subsidies, which are guaranteed over roughly 20 years, could damage investors' willingness to spend badly needed cash on Germany's energy shift towards alternative power sources, estimated to cost about €550 billion.

"We strongly advise against retroactive measures," Oettinger said during the annual Handelsblatt Renewable Energy conference on Monday (25 August).

"That means all those that have installed solar panels, biogas plants or wind parks should receive the level of support that was guaranteed at the time of installation."

European countries including Spain, the Czech Republic and Bulgaria have all implemented retroactive taxes on existing operators of renewable energy installations, leading investors to harshly criticise such moves.

The European Commission is preparing to review EU rules governing energy subsidies. The new state aid guidelines for the energy sector are expected to be unveiled after the German federal election, according to the Greens in the European Parliament.

Germany’s largest wind farm opens

Meanwhile, Germany’s largest offshore wind farm opened on Monday, launched by economy minister Philip Rösler. Located 100km off the island of Borkum in the North Sea, the 80 turbines will power up to 400,000 households, according to Bard Energy, which developed the project.

“Offshore wind farms are, in our view, an indispensable component for ensuring the success of the energy turnaround and, moreover, have the potential to become successful German exports in the future,” said Lutz Diederichs, director of commercial banking at HypoVereinsbank, which helped to finance the project.

Backloading vote in the autumn

Oettinger also said he expected the European Council to reach a decision in October or November on a proposal to temporarily withdraw permits from the bloc's Emissions Trading System (ETS), a process known as backloading. The European Parliament backed the plan in July.

It still needs the support of a majority of EU member states to become law.

"We will now likely realise backloading," Oettinger said, but cautioned it would not significantly raise carbon prices, pointing out that investors would be aware that the permits would be re-introduced later.

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

At the same time, Chancellor Merkel announced new ambitious targets for renewable energies, saying those should account for 35% of German power in 2020 and 80% by 2050.

Renewable energy 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.

The  country’s transition to renewable energy may cost Germany up to €1 trillion by the end of the 2030s, according to Peter Altmaier, Germany’s environment minister, who has outlined plans to rein in subsidies.

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