ANALYSIS: German renewables not safe yet

Germany's state premiers have refused to back plans to limit power prices by slashing support for renewables.

In negotiations with Chancellor Angela Merkel, the premiers rejected the proposal by environment minister Peter Altmaier and economics minister Philipp Rösler.

Without the support of the states, the plan will go nowhere, 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.

Top politicians from the federal and state governments only agreed to take off the table a proposal for an additional 1.5% cut in feed-in tariffs (FITs) to plants that are already producing. The measure would have scared off investors and probably triggered a flood of lawsuits.

So is the renewables industry off the hook now in Europe’s largest economy?

Not quite.

In talks until May, federal and state politicians will try to strike a deal on measures to stop electricity prices from rising further. May is the latest point any legislation could be brought in, in time to let it pass both houses of parliament before the general election 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 even the small chance that some last-minute measures could be passed before the election will be enough to scare off investors. It was far from clear after this week’s meeting, for example, whether Altmaier’s suggestion of a five-month moratorium before any FIT payments for new plants will be paid is still a possibility. The measure would be particularly harmful for offshore wind due to the large investment sums involved.

At a news conference, leaders from offshore wind groups stressed that the unsettling of the industry is at its peak.

After Altmaier’s proposals, investors walked away from the financing of at least one offshore project that was almost completed, says Ronny Meier, managing director of the WAB offshore group.

No new offshore investment decisions are expected this year, sector leaders say. Banks and other investors are holding back until they know what kind of support regime will be in place for years to come.

If no deal is struck by May, the climate for the German renewables industry may remain tense. During the election campaign, Merkel and Altmaier will probably accuse the opposition of being insensitive to the needs of poorer people who are affected harder by high electricity prices - using the debate on support for renewables to hit their political opponents.