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UPDATE 1-Germany scraps plan to cut wind industry subsidies-sources
June 24, 2011 / 10:19 AM / in 6 years

UPDATE 1-Germany scraps plan to cut wind industry subsidies-sources

* Lower-than-planned reduction in incentives - sources

* Tariffs still needed to make wind power economical

* Nordex shares up 1.1 pct, PNE Wind up 0.9 pct

(Adds detail, background)

By Markus Wacket

BERLIN, June 24 (Reuters) - Germany will not cut the wind industry’s subsidies as fast as planned, government sources said, in a move aimed at encouraging investment in that form of renewable energy.

The sources, at top-level talks at the German chancellery on Thursday, said the annual reduction in feed-in tariffs (FIT) for land-based wind energy systems would remain at 1 percent from 2012 rather than doubling to 2 percent.

The government had previously called for faster cuts in tariffs, threatening the business of German wind companies such as Nordex and PNE Wind (PNEGn.DE).

“A slight positive for Nordex given recent share price weakness, but not to be exaggerated,” Commerzbank analyst Ben Lynch said, adding it was not a game-changer for wind turbine makers.

The nuclear crisis in Japan’s Fukushima plant in March, caused by a massive earthquake and tsunami, prompted Europe’s biggest economy to resolve to pull out of nuclear power by 2022 and catapulted renewable energy back into the public eye.

But since then industry experts and investors have criticised Germany’s failure to spell out how it will make a clear shift to renewable energy.

The German government will continue to gradually cut support to the solar sector -- necessary to make it competitive with conventional forms of energy.

But current plans foresee that when nuclear production goes entirely offline by 2022 the gap will not be filled with renewable power, but rather with coal and gas.

By 0903 GMT, shares in Nordex were up 1.1 percent, while PNE Wind was 0.9 percent higher, underperforming a 1.4-percent gain in Germany’s technology index .

Feed-in tariffs are costs paid to generators of renewable energy and are the sector’s lifeblood until it becomes cost-competitive vis-a-vis fossil fuel-based forms of energy.

The government is currently discussing a reform of its renewable energy act (EEG), which sets the incentive structure for renewable energy in Germany.

Under the act, feed-in tariffs are lowered every year to force producers of renewable energy to lower their production costs in order to make renewable energy cheaper compared with conventional forms of energy.

Reporting by Markus Wacket; Writing by Eva Kuehnen and Christoph Steitz; Editing by Mike Nesbit and Sophie Walker

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