* Industry suspends projects as minister plans price caps
* Munich utility says may spend money abroad
* Investors, advisers criticise uncertainty
FRANKFURT, March 4 Germany's plan to curb rising energy costs for consumers before a September election may backfire if it scares off the investors desperately needed to fund an ambitious shift from nuclear to renewable energy.
Chancellor Angela Merkel's 550-billion euro ($714 billion) energy shift, dubbed "Energiewende", was unveiled nearly two years ago after Japan's Fukushima disaster and depends on the financial firepower of pension funds, infrastructure investors and utilities, including the likes of Allianz, Munich Re, E.ON and RWE.
But they are taking fright at Environment Minister Peter Altmaier's plan, presented in January, to curb consumer energy prices, in part by lowering support payments for power produced by new wind and solar power installations.
Investors buy solar and wind parks to benefit from state-guaranteed returns on the power produced, so-called feed-in tariffs, creating a stable investment opportunity that has made Germany the world's largest market for solar power.
The proposal, which Altmaier has promised to turn into law before the federal vote, has been cheered by the public, but comes with a catch.
Capping subsidy increases to renewable power producers for two years and allowing subsidies for new installations to be suspended risks destroying a big incentive for investors.
In the end, the proposals may be watered down. But the negative signals they have already sent to the industry have led some players to rethink their commitment to renewables.
Stadtwerke Munich (SWM), the utility that delivers power to the 1.3 million inhabitants of the Bavarian capital, has said the plan creates uncertain conditions and regulatory chaos.
"(Altmaier's plan) breaks taboos as it retroactively changes laws that were the basis for SWM's entire planning and investment decisions in renewables," Florian Bieberbach, chairman of SWM's board, said last month.
As a wealthy municipal utility, SWM has committed itself to no less than 9 billion euros of renewable investments up to 2025. Bieberbach said while SWM would hold on to the sum, it would seek to identify alternative sites in other countries.
A SAFE PLACE TO INVEST?
Munich is not alone. Germany's utilities, on the front line of the battle to exit nuclear and ramp up renewables, are also worried about the message Altmaier's plan sends.
"The new package of measures damages the expansion of renewables as well as Germany's image as a safe place to invest," Germany's number three utility EnBW said in an internal document seen by Reuters.
Surcharges under the existing structure for feed-in tariffs, a major component of the power price borne by consumers, are calculated once a year and jumped 40 percent last October, causing an outcry.
The surcharges are levied on consumers to fund the switch to renewables and away from fossil fuels. They have accelerated sharply as more new installations than expected have been built.
The bill for supporting renewables rose to 20 billion euros in 2012 from 17.1 billion in 2011 and if the system remains unchanged, another huge increase is looming.
Criticism has also come from the financial sector, a vital player in the financing of the renewable shift.
Until now, investors were willing to forego high returns because they could count on a reliable stream of income from renewable units and new networks. But this is changing.
"Large investments in offshore wind parks can only be made if returns are sufficiently reliable and known," said Willi Mannheims, board member at buyout firm VMCap.
"Changes, such as the power price break, are leading to uncertainty, scaring off investors as long as the consequences are not entirely clear."
Advisers to utility companies and other investors bristle at what they see as a hasty move by Altmaier to get a grip on consumer prices before the election.
"Our clients depend on long planning and execution times," said Christian Marthol, a partner at law firm Roedl & Partner. "They have reacted very defensively to the Altmaier paper."
"Intended projects such as wind farms or biomass plants are being put on ice in no time as the plan has created a lot of uncertainty." ($1 = 0.7702 euros) (Additional reporting by Markus Wacket in Berlin and Arno Schuetze in Frankfurt; Editing by Noah Barkin and Helen Massy-Beresford)