* New goverment to target longer running times for reactors
* Utilities to raise profits, win time to develop renewables
* Renewable funding may drop while industry seeks efficiency
(adds E.ON CEO comments on nuclear phaseout)
By Vera Eckert
FRANKFURT, Sept 28 (Reuters) - German Chancellor Angela Merkel's majority for a new centre-right government means she can rewrite a national nuclear phaseout deal by allowing reactors to run longer than laid down by her predecessors.
Nuclear operators' shares rose on Monday, the day after the election, while carbon prices crept higher and power fell with oil, as Merkel's conservatives and the pro-business Free Democrats (FDP) aimed for a quick coalition.
The election outcome may be a precursor for more nuclear projects in other European countries and a contributor to lower carbon emissions in Europe, but is no carte blanche for new reactors on German soil, which the public still opposes.
"We need nuclear energy as a bridging technology to keep power prices stable and to comply with our climate protection goals," Katherina Reiche, a senior conservative lawmaker working on reactor safety and the environment, told ARD television.
"We intend to work towards a lengthening of the plants' running times," she said, confirming pre-election plans.
Shares in nuclear operator E.ON (EONGn.DE) were up 3.7 percent and those in rival RWE (RWEG.DE) rose 3.1 percent, making them top gainers in the blue-chip DAX .GDAXI.
The gains could have been bigger, were it not for potentially hefty conditions the government might place on permission to operate the profitable reactors for years longer, said Stephan Wulf, analyst at Sal. Oppenheim bank.
Oppenheim assumes the life cycles will be extended by 15 years on the basis of a benefit-sharing deal, which after tax would leave 65 percent of the profits for the state and 35 percent for plant operators.
E.ON Chief Executive Wulf Bernotat told the Handelsblatt newspaper he was prepared to offer something in exchange for longer life cycles.
"Of course we have prepared for this scenario and are ready to play our part," Bernotat said in an interview to be published in the paper's Tuesday edition.
Seven nuclear plants totalling 6,200 megawatts of power capacity would have had to close in the coming four years without a change of government, and may now be kept open.
Nuclear energy emits virtually no carbon dioxide, which in theory could be bearish for CO2 emissions rights, but analysts said the effect will be minimal in the years through to 2012.
The opposition Green and Social Democratic parties have vowed to uphold opposition to a loosening of the nuclear law and have the potential to mobilise powerful grassroots lobbies.
"There must not be any lengthening of nuclear plants' lives," leading politician Renate Kuenast of the Greens shouted to cheering supporters. The Greens remain a significant force, winning 10.7 percent of the vote on Sunday.
MIX OF ENERGY SOURCES ESSENTIAL
Berlin-based nuclear industry lobby, the Atomic Forum, said in a statement: "Now the arguing over a final repository has to stop and we need to come to a sustainable solution."
Storage of nuclear waste is a politically charged issue in Germany where the suitability of the favoured Gorleben site has been called into question.
German nuclear opposition is part of the political culture in a way unique in Europe, where Finland and France are building new reactors and E.ON and RWE are studying such plans for Britain and are also looking at eastern European projects.
These plans make sense and will not be put into question by longer running times of reactors inside Germany, Wulf said.
The gains in nuclear operators' stocks were in contrast to those of highly subsidised solar firms such as Q-Cells QCEG.DE and Solarworld SWVG.DE. Their generous grants are set to decline under the influence of the free-market FDP, Merkel's junior partners.
The generous feed-in law for renewable energies, brought in by two SPD-Green governments between 1998 and 2005, is likely to be changed or dropped, said Wulf.
But he did not expect this to kick in before 2011 and saw scope for a medium-term run on solar stocks through most of 2010, by which time renewables may have become more competitive.
Coal-biased utility RWE, which also has a high share of nuclear and recently made big moves into renewables, said a mix of generation sources remained essential for Germany, where nuclear accounts for 23 percent of all power and coal for half.
"Apart from renewables, we also do need coal and nuclear," CEO Juergen Grossmann said in a post-election statement. For a factbox on German nuclear plants' life cycle details please click on [ID:nLS3850])) (Additional reporting by Madeline Chambers, Tom Kaeckenhoff, Michael Szabo, Michael Shields, Tyler Sitte, Kirsti Knolle and Maria Sheahan in Frankfurt, Christiaan Hetzner in Berlin and Naomi Tajitsu in London; editing by James Jukwey)