Merkel will discuss power tax cut

Germany’s federal and state governments will discuss lowering a tax on electricity as an alternative way to keep power prices from rising – but Chancellor Angela Merkel is sceptical whether the country’s 2014 budget can afford such a measure, her spokesman said.

Cutting the electricity tax is the latest twist in a fierce debate in Germany over whether renewables support should be hammered to protect electricity consumers.

“Of course, due to the wish of the states this will be discussed further,” Merkel’s spokesman Steffen Seibert said during a government press conference.

Just before that, Bavarian state premier Horst Seehofer told news magazine Der Spiegel that he now supports proposals by the opposition Social Democrats and Greens to lower the power tax, after talks failed last week between Merkel and state premiers about a government proposal to rein-in power prices by harsh cuts to renewable feed-in tariffs.

Seehofer is a member of the Christian Social Union (CSU), the Bavarian sister party of Merkel’s Christian Democratic Union (CDU), and part of her centre-right government.

Without the support of German states, the federal government currently can’t push through major changes to the country’s renewable support regime, as the opposition Social Democrats and Greens, which control the Bundesrat (the upper house representing the states), could block the legislation even if it passes in the lower house, the Bundestag.

Adding the large state of Bavaria, that majority in the Bundesrat would be even bigger. Bavaria, like the opposition, had opposed proposals by environment minister Peter Altmaier and economics minister Philipp Rösler for retroactive cuts in support to renewables installations that are already producing. Merkel on Thursday said such ideas are now off the table.

Bavaria also opposed plans by Altmaier and Rösler for an across-the-board cut in FITs to onshore wind to €0.08 per kWh from around €0.09 now, as that could be detrimental to the construction of new wind parks in low or moderate wind locations in southern Germany, where investment costs are higher.

In talks until May, federal and state politicians will try to still strike a deal on measures to stop electricity prices from rising further. May is the latest point any legislation could be introduced in time to let it pass both houses of parliament before general elections in September.

Most political and industry observers think an agreement before the elections is unlikely, and the issue will have to become part of a major overhaul of Germany’s renewable energy law during the next administration.

But the climate for the renewables industry is likely to remain tense as the debate on power prices and support for renewables will probably carry on during the election campaign.