* Opposition, states block cutting support for green energy
* Merkel salvages part of energy plans for quick review
* Says there is limit to ending exemptions for industry (Recasts with quotes from news conference)
By Markus Wacket
BERLIN, March 21 Angela Merkel and leaders of Germany's states failed on Thursday to agree on how to control a surge in power prices that has become an electoral liability for the chancellor as she prepares to seek a third term in office.
Merkel launched a 550-billion-euro ($714 billion) "green energy revolution" away from nuclear power nearly two years ago after the Fukushima disaster. But the shift to renewable energy has been accompanied by sharp rises in German electricity costs.
That is partly due to subsidies for renewable energy that are passed on to households via a surcharge. Waivers for power-intensive companies have also been blamed for the rapid increase in the surcharge in recent years.
Environment Minister Peter Altmaier presented a plan in January to curb consumer energy prices in time for September's federal election. It partly involved lowering support payments for power produced by new wind and solar power installations.
But Merkel told a news conference that support for renewable power units would not be cut, backing down on the proposal from her environment minister that had caused panic in the green power sector and threatened to discourage investment.
"Given the discussions that have been triggered, this should reassure all those wanting to invest in such units and operate them," said the conservative chancellor.
But other parts of the plans would be revisited in May, with a view to approving them before summer in time for the vote.
Merkel said wider reform of the law governing renewable energy and the future shape of the power market would be tackled in the next legislature.
Germany is a world leader in renewable energy and derives a quarter of its electricity from renewables, but rising prices have turned into a major political issue ahead of the election.
Merkel wants to reassure voters she is trying to curb the rises and Altmaier has proposed that industry, the renewable sector and taxpayers contribute 3 billion euros to help lower prices for consumers.
This needs the support of the upper house of parliament, the Bundesrat, which represents the 16 states. But it is controlled by the Social Democrats (SPD) and Greens, who have reservations.
Altmaier had wanted to include contributions of 300 million euros from owners of existing renewable power plants.
He failed in his goal to freeze the renewable energy surcharge that energy consumers pay at 5.3 cents per kilowatt hour after it rose in 2013 from 3.6 cents.
The government wanted renewable power producers to come up with 600 million euros to keep the surcharge steady, despite a further expansion of renewable energy plants, while the SPD and Greens wanted the sector to come up with 200 million euros.
The government also wanted industrial consumers to contribute 700 million euros, but Merkel said the chances of achieving this were slim. "There is a limit to what we can do," she said.
Industry has so far enjoyed a raft of special power price brakes and argued that scrapping them would hit Germany's international competitiveness.
The SPD and Greens maintained they want the government to reduce a power tax by 25 percent, which would relieve consumers of about 1.6 billion euros per year in energy costs. The Finance Ministry is expected to oppose that. (Additional reporting by Vera Eckert; Writing by Stephen Brown; Editing by Tom Pfeiffer)