Germany’s heavy industry will continue to be largely exempted from paying for the country’s switch to renewable energy, under the terms of a deal agreed between Berlin and the European Commission on April 8. The agreement is part of a blueprint to reform energy policy in Germany, where a decision to exit from nuclear energy and reduce reliance on fossil fuels has led to an expensive boom in renewable energy. The guaranteed high prices paid to clean energy producers are subsidised by consumers and businesses through a surcharge on bills.
But to protect jobs, Germany shields its energy-intensive and globally competitive businesses from the full costs of the switch with a system of exemptions that have cost €5.1bn this year alone. State aid guidelines to be set out in Brussels on Wednesday will allow Germany to continue to grant sweeping discounts to its most energy-intensive businesses. Companies affected by the guidelines include BASF, ThyssenKrupp, Bayer and Linde.
Under draft EU guidelines, German industry would have been forced to pay at least 20 per cent of levies funding the expansion of clean energy, quotes the Financial Times in a special report from Berlin. But after pressure from Berlin, this has been reduced to 15 per cent. There is a further reduction for companies with the highest energy demands, such as steel mills, which will have their contribution to green energy levies capped at 0.5 per cent of gross added value. The EU guidelines will shrink the number of industrial sectors entitled to receive rebates from 179 to about 65. But Germany will continue to offer exemptions to companies that fall outside this list of privileged sectors.
Businesses not on the new list that have significant trade outside the EU and high energy use, will have to pay 20 per cent of the renewable energy levy. In Berlin on April 8, Sigmar Gabriel, the economy and energy minister, said: "In the 80s and 90s the debate was about the cost of labour. Now, at the beginning of the 21st century, it is about the cost of energy. This is not about lobbying from industry but about hundreds of thousands of jobs in our country.” The number of companies exempted from the full costs of the green subsidy will fall from 2,100 to about 1,600. But the overall value of the exemption to industry will remain the same at about €5.1bn.
Mr Gabriel said it was vital to protect the country's industrial base: "When we observe today that Germany’s economic situation is better than most other countries around us, there is one essential reason behind that – industry still has a 23 per cent share of gross value creation, and not as in France around 10 per cent, or in Italy, I believe 15 per cent.” Berlin’s reform of renewable energy focuses on solar power and onshore wind as the most cost-effective clean energy sources.
A limit will be placed on the construction of onshore wind, at 2.5 gigawatts in capacity a year. Photovoltaic power will be capped at the same level. Offshore wind construction will be capped at 6.5GW to 2020. The German government plans to take other measures to reform energy policy in the coming weeks, including looking at payments to utilities to prevent a loss of conventional generating capacity. Utilities such as Eon and RWE have been shutting down or mothballing power plants, blaming the fact that their profits have been squeezed by green energy’s preferential access to the grid.
German ministers will also look at burying power cables to address public protests that have threatened the construction of vital power transmission lines. Ulrich Grillo, president of German employers’ organisation the BDI welcomed the agreement between Brussels and Berlin. He said: "The future regulations secure the chances of keeping industrial jobs permanently in Germany.”
