Energy Price Increases Pose Challenge for Merkel

http://www.nytimes.com/2012/10/17/world/europe/energy-price-increases-pose-challenge-for-merkel.html

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BERLIN — In the aftermath of the tsunami and nuclear meltdown in Japan last year, Chancellor Angela Merkel announced perhaps her most sweeping domestic ambition, a plan to shutter Germany’s 17 nuclear reactors and switch to 80 percent reliance on wind, solar and other renewable sources by 2050.

A year and a half later, the costs of that plan, known here as the Energiewende, or energy transformation, are becoming painfully clear, and they threaten to present one of the steepest popular challenges to Ms. Merkel as she prepares to face a general election next year.

The country’s four main grid operators released estimates this week showing that households will see a nearly 50 percent increase in the tax needed to fund the transformation, meaning that an average three-person household could be expected to see an additional €60, or $78, on their annual electricity bill.

The new estimates have added to an increasingly intense debate in Germany over how much is too much for cleaner energy and who should pay for it.

“Is it those who can really afford it, or those people for whom €60 is a lot of money?” asked Ulrike Mascher, president of the VdK welfare organization, which represents more than a million people nationwide.

Germans already pay some of the highest electricity prices in Europe, at about 25 euro cents, or 32 U.S. cents, per kilowatt hour. By comparison, consumers in neighboring France, which draws 78 percent of its energy from nuclear power plants, pay about 14 euro cents, while Poles pay 15 euro cents, according to European Union statistics.

The German price includes a surcharge that guarantees producers of energy from solar, wind, biofuels and other renewable sources a return on their investment above the market rate, which is widely credited with helping move the country to become a global leader in green technology.

Next year, that subsidy will rise to 5.3 euro cents from 3.6 euro cents per kilowatt hour, hence the higher energy bills for German consumers.

While those upper- and middle-class earners will hardly notice the increase, for a widow on a small monthly pension or a single parent struggling to raise a family on only one salary, the difference can be painful, said Ms. Mascher. She said that about 600,000 homes in Germany had their power cut off last year because people could not pay their bills.

The issue has already divided politicians, and with Ms. Merkel facing a general election scheduled for 2013, the country’s energy transformation is sure to feature as a point of intense debate.

Four months ago, Ms. Merkel pledged a renewed focus on the project, which had become less of a priority in the face of Europe’s pressing sovereign debt crisis. She replaced her environment minister with a loyal ally. Since taking over, Peter Altmaier has increased the visibility of his office and redoubled efforts to speed up needed reforms, such as expanding and updating the country’s grid.

Last week, he proposed changes to the complex law — the Renewable Sources Energy Act, known by its German initials E.E.G. — that governs the surcharge funding with goals of increasing market competitiveness and keeping costs in check.

Under the current law, the more energy produced by renewable sources, the higher the subsidy consumers must fund. This means that the law’s success has caused the green energy sector to grow explosively; the amount of the surcharge has more than quadrupled since 2009. Last year it generated €17 billion, about $22 billion, and analysts expect that it will bring in about €25 billion in 2013.

In addition, the current law allows exemptions for leading power-hungry industries in an effort to maintain Germany’s international competitiveness. More than 730 companies took advantage of the exemption in 2012, according to the Federal Office of Economics and Export Control.

“We need to look at this again and consider whether it was right to have granted exemptions to so many companies,” Ms. Merkel said in Berlin on Tuesday in calling for reforms to the law.

So far Mr. Altmaier’s response has been to encourage Germans to reduce the amount of power they consume, by expanding a program that offers energy-saving tips for lower-income households.

Dubbed simply Energy-Saving Check, the program is run by the Caritas social services organization and has reached about 80,000 households since its inception, said Nicola Buskotte by telephone from Caritas’s headquarters in Cologne.

Organizers recruit from a pool of the long-term unemployed, training them in simple ways to help reduce energy consumption, like turning down the temperature on a refrigerator or replacing an old showerhead with a more economical version, before sending them into mostly low-income households to teach people the techniques.

“That these people are turning every cent over twice is clear,” Ms. Buskotte said in response to criticism that asking welfare recipients to save more is unfair. “But to teach people how they can save €100 a year is useful, not only for them personally, but for the climate.”