Germany And Spain Move To Curb Green-Energy Lobby

  • Date: 15/02/13
  • WILLIAM BOSTON, JAMES ANGELOS, ILAN BRAT, The Wall Street Journal

Renewable energy industry up in arms as governments are backing away from promises on their green investments.

More than a decade ago, Germany and Spain created similar laws to aggressively promote the adoption of renewable energy. The two countries were again marching in step on Thursday—this time to fix a web of subsidies and compensations they created for green energy that had the unintended effect of driving up household electricity bills.

With Spain in the grips of recession, the government wants to lower consumers’ light bills. In Germany, Chancellor Angela Merkel faces an election in September and hopes to win points with voters by putting a stop to rising electricity bills. The independent steps have been welcomed by German consumer groups, but have been slammed by businesses as German and Spanish politicians move to finance cuts for consumers by passing on the costs to companies.

Germany subsidizes producers of renewable energy such as solar and wind power in part by imposing a surcharge on household electricity bills. As the industry has grown, demand for the subsidy increased, driving the surcharge higher. In January, the surcharge, which amounts to about 14% of electricity prices, nearly doubled to 5.28 euro cents per kilowatt hour. Large energy-intensive industries are exempted.

That means ordinary consumers shoulder the lion’s share of the costs for what the German government calls its “energy revolution.”

Fearing a voter backlash from anger over the lopsided financing of green energy, Ms. Merkel’s government on Thursday proposed putting a cap on the green-energy surcharge until the end of 2014 and then restricting any rise in the surcharge after that to no more than 2.5% a year. The government also plans to tighten exemptions, which would force more companies to pay, and achieve a cut in green subsidies of €1.8 billion ($2.42 billion). The plan is a quick fix pending comprehensive reform after the election, government officials said.

The proposal represents a compromise by the parties in Ms. Merkel’s center-right coalition between taking small steps before the election and a more time-consuming comprehensive reform of the renewable energy law. The government now hopes to thrash out a bill with Germany’s 16 states by the end of March, eliminating a potentially negative issue ahead of the election on September 22.

“We need a fundamental reform of the renewable energy law, but until we get there we don’t want to make people wait and that is why there is this price cap on electricity,” Economy Minister Philipp Rösler said Thursday after a meeting with representatives of the states.

The Spanish parliament took a similar step on Thursday, passing a law that aims to curb rising household electricity costs by cutting aid to the renewable-energy industry.

Renewable-energy producers “are going to receive less revenue, but these measures are better for consumers” said Energy Minister José Manuel Soria.

Among the changes in the Spanish system, the new law indexes certain subsidies and compensation to an inflation estimate that strips out the effects of energy, food commodities, and tax changes.

Until now, producers have been compensated using a full inflation estimate. The government said the law will cut the costs of the country’s electrical system by €600 million to €800 million a year.

Renewable-energy companies said that the government was backing away from previous promises that it would ensure them a reasonable return on their investments.

“Spain’s government is trying to smash the renewable-energy sector through legislative modifications,” said José Miguel Villarig, chairman of the country´s Association of Renewable-Energy Producers.

The Wall Street Journal, 15 February 2013