Germany intends to change renewable energy subsidy system – document

Authors: Markus Wacket and Riham Alkousaa

BERLIN (Reuters) – Germany’s coalition government plans to change the way renewable energy is subsidized. Power producers will receive a one-off support to cover investment costs rather than a guaranteed price for the energy they produce, a Finance Ministry document showed on Friday.

The switch to investment subsidies would mark a significant change in the renewable energy market in Germany and would aim to reduce the industry’s dependence on government support.

This means that operators would receive a one-off subsidy to build renewable power plants, but would have to sell electricity based on their own market calculations, bearing much higher financial risk.

“The aim is to shift spending on the development of new renewable energy sources to investment subsidies,” we read in the document, which is part of the ruling coalition’s agreement on next year’s budget, agreed on Friday.

The current subsidy system, introduced some 24 years ago, has made it easier for companies to make investment decisions and obtain favourable loans.

A 20-year price guarantee for solar, wind and biogas producers selling their energy to the grid has helped to boost renewable energy in Germany. Berlin aims to generate 80% of its electricity from renewable sources by 2030.

According to the document, the planned reforms, the exact timetable of which has not yet been determined, are in line with the government’s goal of developing renewable energy sources in the future without subsidies and fully integrating renewable energy sources with the market.

The subsidies have long been criticized by the liberal FDP party, a junior coalition partner, which says 20-year subsidies for renewables make no sense because wind and solar power are set to become a dominant part of the German energy market by then.

“This switch to subsidizing the costs of investing in renewable energy sources is a real revolution in energy policy,” Lukas Koehler, deputy leader of the FDP parliamentary group, told Reuters.

The share of renewable energy sources in Germany’s total electricity consumption rose to 58% in the first half of the year, according to preliminary data published on Monday by the BDEW trade union and the Solar Energy and Hydrogen Research Centre (ZSW).

Economy Minister Robert Habeck said the government would test different models for changing the subsidies, which has been met with criticism from the renewable energy industry and other partners in the ruling coalition.

“A radical switch to subsidising investment costs carries the risk of creating market uncertainty and reluctance to invest, which could seriously jeopardise ambitious expansion goals,” said Simone Peter, head of the German renewable energy lobby BEE.

(Reporting by Riham Alkousaa and Markus Wacket; Editing by Miranda Murray and Jane Merriman)