Merkel rejects retroactive cut in German FiT

Investor uncertainty to continue until proposals emerge in May

A plan to cut Germany’s renewable feed-in tariff (FiT) by 1.5% in 2014 has been publicly rejected by the country’s leader, Angela Merkel. A FiT cut for existing renewable energy plant was one of several proposals outlined by German federal environment minister, Peter Altmaier, earlier this year.

Together, Altmaier’s proposals were designed to "put the brake on electricity prices". Yesterday, Merkel had to admit that the disadvantages of her minister's proposal outweighed its advantages.

Merkel publicly acknowledged the problems with Altmaier’s plan after a summit meeting with the premiers of Germany's 16 Länder about renewable energy and electricity networks. Altmaier’s proposals have added new and unexpected uncertainty to the German offshore wind, just as the sector appears to be gaining momentum.

Yesterday’s summit resulted largely in an agreement for more discussions. A key issue for debate is the extent to which German industry should continue to benefit from reduced renewable energy levy rates. As the cost of funding Germany’s transition to a renewables-based energy sector has grown, the fact that households are shouldering more of the burden than industry has become contentious.

Talks will continue on whether any other short-term measures can be undertaken to keep consumer electricity prices under control, including the option of limiting "for instance with respect to new plants in the wind sector," said Merkel. The implication is that FiT rates for new wind plants could be reduced before the next scheduled revision of the renewable energy law due at the start of 2015. Merkel did not specify whether such a move would include new offshore wind capacity.

The ultimate goal of the upcoming discussions will be to agree on a package of measures by the end of May. This package will not include proposals formajor reform of Germany’s renewable energy law or electricity market reform, which is widely accepted as necessary. Fundamental issues will be taken up only after Germany’s federal election in September.

Wind energy agency WAB is disappointed by yesterday’s meeting. The prospect of new measures being announced in May means uncertainty remains and the problem of few new contracts in the offshore sector is likely to continue, said WAB managing director, Ronny Meyer.

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