Germany resists EU plans to slash renewable energy subsidies


A leading Social Democrat warned yesterday (6 November) that the EU planned to investigate German renewable energy discounts for industry, a move that could end up hitting a raft of companies operating in Europe's biggest economy.

The European Commission is reassessing green subsidies as technologies such as onshore wind and solar power become more competitive with conventional energy forms (see background).

The Commission has also promised to analyse the impact of energy costs on industry.

But in Germany the VIK industry lobby for heavy energy users urged government to stave off EU action, warning it could saddle companies with billions of euros in additional costs and "destroy Germany's industrial core".

Hannelore Kraft, state premier of North Rhine-Westphalia, acknowledged that firms operating in Germany would need to move quickly to set aside provisions if EU Competition Commissioner Joaquin Almunia opens a probe.

Germany collects surcharges from power users to help fund operators of solar and wind power installations. Heavy electricity users such as cement, steel and some chemical plants are exempt to keep them from being priced out of the global market.

Brussels believes this could distort competition.

"We see big risks," Kraft told reporters in the state capital Duesseldorf. "If companies have to build reserves, this could cause a precarious situation for some of them."

Kraft and Environment minister Peter Altmaier, who are leading the negotiations on a new German government's energy policies, are due to travel to Brussels on Thursday to meet with Almunia and discuss the matter.

Spokespeople in Almunia's office declined comment.

Altmaier, of Chancellor Angela Merkel's conservatives, said he was convinced that Brussels shared his interest in upholding Germany's economic strength, but added that some of the 2,300 companies in the exemption scheme may not deserve the breaks.

"We must concentrate on companies that compete in the global market (safeguarding their competitiveness), but scrutinise other cases," he said.

A scrapping of the renewable funding discounts could have a big impact on manufacturing companies, which gave a mixed response to news of the Brussels plans.

Steelmaker ThyssenKrupp declined to comment while copper refiner Aurubis said it was confident it was not among candidates to be struck off the list, due to its high energy use and presence in global markets.

Chemical company Evonik said it was not building up any pre-emptive reserves as the outcome was unclear.

Document denial

A document made available to Reuters on 5 November suggested the government was prepared to reduce the discounts by more than €1 billion euros.

The German government denied any plans to do away with the discounts, with the environment ministry describing the document as "an information paper at a technical level, which the minister did not approve".

"It was not part of [coalition] negotiations and will not be implemented in this shape," the ministry said in a statement.

Energy policy is a central theme in ongoing coalition talks between the conservatives and the SPD. Both parties agree on the need to reform Germany's renewables law (EEG), which has led to runaway energy costs for consumers.

VIK said a reform of the EEG was extremely urgent. They hope that such a reform will lower energy costs, reducing the need for industry discounts and retaliatory action from Brussels.

"State aid proceedings would force Germany to levy full renewable support charges on companies with immediate effect and maybe even retroactively," it said.

"In such a case companies would be faced with additional payments amounting to many billions of euros, which would destroy Germany's industrial core."

The green energy subsidy system has become a victim of its own success, as consumers are hit by ever rising surcharges to fund generous 20-year price guarantees to operators of renewable installations.

A problem for Europe

Across Europe's 15 oldest member states (EU15), transmission charges, taxes or renewable subsidies account for roughly half the average household bill, VaasaETT energy research group said.

Danish households, for example, pay Europe's highest electricity bills at around 31 euro cents per kilowatt-hour because more than half of the cost, or 55%, is made up of taxes, according to a report into energy bills by VaasaETT.

In the UK, Prime Minister David Cameron has promised a review of green subsidies as part of efforts to curb prices, after the opposition Labour Party pledged to freeze prices if elected in 2015.

From Italy to Romania, politicians are under pressure from electorates squeezed by economic downturn, are promising to cap energy prices or at least draw their sting.  Last February, the government in Bulgaria collapsed following protests over high electricity bills.

Recently, the powerful employers’ group BusinessEurope called on European Commission President José Manuel Barroso to radically shift the EU's energy policy away from climate change mitigation towards cost-competitiveness and security of supply. [more]

But a EU summit dedicated on energy with the objective of lowering prices and boosting the Union’s industrial competitiveness, held on 22 May, ended up without major decisions. [more]

EU Energy Commissioner Günther Oettinger this week unveiled a document on state intervention in power production that warns EU energy prices will continue to rise unless governments take steps to reduce green subsidies.

As most renewable energies are still more expensive than fossil fuels, a variety of support schemes have been put in place to accelerate their uptake and meet the EU's goal of sourcing 20% of its energy from renewable sources by 2020.

>> Read our LinksDossier: Supporting renewable energies: The 'transition' schemes

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