German states water down energy reform but Merkel pleased

BERLIN, April 1 Tue Apr 1, 2014 5:53pm EDT

BERLIN, April 1 (Reuters) - Germany's regional states succeeded in watering down the federal government's plans for cuts in future wind energy projects in conjunction with a landmark renewable energy law reform, Economy Minister Sigmar Gabriel and state leaders said on Tuesday.

Reflecting the significance of the talks, Chancellor Angela Merkel took part in the four-hour meeting in the chancellery late on Tuesday and said the consensus agreement between the state and federal governments formed a good basis for reform.

"We've reached a high degree of unity," said Merkel, who has said getting right the country's "Energiewende", or transition to renewable energy, will be one of the most important challenges of her right-left grand coalition government.

"We've succeeded in taking a giant step forward in making the 'Energiewende' a success," she added.

The government wants the energy reform measures to pass through the lower house of parliament within weeks and even though approval from the upper house, or states chamber, is not needed, its backing will mean smoother sailing for a reform that they hope will become law by August.

"This is a good day for wind energy in Germany," said Torsten Albig, the state premier of Schleswig-Holstein, who had fought hard to blunt reductions in offshore wind energy expansion in the years ahead.

Under the agreement, the federal government will allow more flexibility for new offshore wind energy plants by permitting up to 1.2 gigawatts more capacity by 2020 on top of the 6.5 gigawatts already applied for.

Under Gabriel's previous plan, only 6.5 GW of offshore wind energy could be added by 2020 and if one or more of the approved projects were not built, the upper limit would be reduced accordingly. Now the upper limit will be more flexible so that at least 6.5 GW can be added.

Gabriel also backed down on another key demand by the states. The annual upper limit for onshore expansion is 2.5 GW. The states wanted him to be more flexible and allow new capacity beyond 2.5 GW to be added if existing wind power plants are torn down.

Gabriel is trying to reform the way Germany supports its growing green industries that derive power from sources such as wind and solar, as costs have spiralled higher, burdening private consumers in particular.

Any solution needs to suit the European Commission and German industry, which criticised plans to make them pay the surcharge and share the burden of the country's move to more renewable energy. Germany gets a quarter of its electricity from renewable sources and wants to raise that further by 2020.

The reform, closely watched by power markets, will go before the cabinet on April 8 and could become law in August. Germany's shift to green energy and away from nuclear power and fossil fuels is one of Merkel's flagship policies but the cost of ballooning subsidies is threatening to undermine it.

The reform is aimed at scaling back incentives. The Commission - the EU executive - has said German industrial discounts on green surcharges, worth 5.1 billion euros in 2014, might be justified to keep energy-intensive firms in Europe, but it had concerns. (Writing by Erik Kirschbaum; Editing by Eric Walsh)

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