Germany must scrap its green energy law, say experts

BERLIN Wed Feb 26, 2014 9:12am EST

Related Topics

BERLIN Feb 26 (Reuters) - A commission of experts appointed by the German parliament has recommended Chancellor Angela Merkel's government to abolish all subsidies for green energy, highlighting mounting opposition to plans to reform instead of scrap the system.

Economy and Energy Minister Sigmar Gabriel is finalising much-disputed changes to the Renewable Energy Law (EEG) which includes reductions in subsidies for green energy before he presents it to cabinet in early April.

Shifting Europe's biggest economy to energy from the sun and wind and away from nuclear and fossil fuels is a top priority of Merkel's new right-left coalition government.

But the project, which offers some 20 billion euros in green subsidies a year and is paid for by electricity users, has been dogged by the competing interests of industry, a booming green sector and the country's 16 federal states.

The Commission for Research and Innovation (EFI) handed its report to Merkel on Wednesday.

It concluded that the system of feed-in-tariffs, under which green power producers are paid guaranteed, above-market prices to put electricity on the grid, is fundamentally flawed.

It is not a cost-efficient instrument for climate protection and is not producing a measurable effect on innovation, said the report, basing its view on patent filings.

"For both these reasons, there is no justification for a continuation of the EEG," the report said.

The report is unlikely to have much impact on policy.

A spokeswoman for the economy ministry rejected the criticism, saying the law had been a useful instrument to introduce renewable energy to the market place.

Green energy accounts for about 25 percent of German power generation, up from about 7 percent in 2000. The government is aiming for a level of 40-45 percent by 2025.

"The Renewable Energy Law is and remains a core instrument for German climate and energy policy," said the ministry spokeswoman.

Supporters of renewable energy also dismissed the report, saying patent numbers are of limited use as a measure of innovation and that the EEG cannot be blamed for failings in tackling climate change.

Gabriel plans to scale back subsidies for renewable energy by up to about a third over time.

He also aims to reduce exemptions enjoyed by energy-intensive German firms from a surcharge which pays for the subsidies And wants to make firms that generate their own power pay charges to support green power.

German industry, however, seized on the report to support its opposition to incentives for renewable energy.

"I support the conclusions of the Commission in terms of the need to reform the EEG," said Markus Kerber, managing director of the BDI industry association.

"All support for renewable technologies must be designed in a way to help incentives (for companies to be) competitive and innovative," he said.

Export-oriented companies have warned that a sharp rise in the price they pay for power, buoyed by the cost of green incentives, are making them uncompetitive and some have threatened to shift investments and production abroad.

With industry accounting for around a quarter of Germany's economy, its voice matters in Berlin. The BDI has said the government's plans put about 900,000 jobs in Germany at risk. (Additional reporting by Markus Wacket and Vera Eckert; editing by Jason Neely)

FILED UNDER: