Germany goes back to black in snub to green power

FRANKFURT Tue Jun 21, 2011 10:51am BST

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FRANKFURT (Reuters) - Germany is set to turn back to coal, gas and imports to fill the energy chasm left by its fast-track exit of nuclear power, refusing to boost green power and threatening its efforts to lower emissions.

The government permanently shut eight nuclear power plants immediately after the Fukushima crisis in Japan, and is closing the remaining nine in stages up to 2022.

However, Europe's largest economy is shying away from pushing for renewable energy to replace those plants, even though opinion polls show people are willing to accept higher bills to support green power.

In 2006, Germany envisaged producing 35 percent of its power through renewable energy by 2020, and has retained this target even though it is shutting 13 percent of its generation capacity.

Analysts and industry experts see a return of conventional power and imports as a stopgap, endangering the country's goal of reducing greenhouse gas emissions by 40 percent by 2020, compared with 1990 levels.

"It seems Germany will replace lost nuclear generation by coal and gas, and imports, rather than adding new renewable capacities," Societe Generale analyst Didier Laurens said.

Nuclear electricity production stood at 140.6 terawatt hours (TWh) last year, data from the German Atomic Forum showed.

Production from renewable energy sources, meanwhile, was 102 TWh, but is expected to rise by only 115 TWh by 2020, according to the German government. This target has not changed.

"Now a new concept is needed," said Wolfgang Pfaffenberger, a scientist who specialises in energy at Jacobs University in Bremen, Germany.

"The government basically said a couple of days ago 'we set our energy concept in 2010 and that remains valid', but that doesn't work any longer of course."

According to Morningstar Equity Research, winners of this production gap could be those companies hit by the decision to take nuclear offline in the first place: coal and natural gas plant owners such as RWE (RWEG.DE) and E.ON (EONGn.DE).

Yet Germany also faces the self-imposed task of reducing emissions, a target it will miss now it can no longer rely on nuclear power, researchers say.

Its goal of cutting CO2 emissions by 40 percent by 2020 is much more ambitious than the EU-wide goal of a 20 percent cut.

"Since Germany is excluding the nuclear option as a gradual alternative of fossil fuel-based forms of energy, it will continue to emit large amounts of CO2," Hans-Werner Sinn, president of the Ifo institute, wrote.

"The climate goals announced by (Chancellor) Angela Merkel at the Heiligendamm summit will not be reachable," he added.

That is just one reason why more measures to boost renewable energy would be necessary.

After the initial enthusiasm about Germany's decision has faded, the question remains whether the exit of nuclear really equals the rise of renewables, since a clear commitment by the German government is lacking, industry specialists say.

The German government continues to lower so called feed-in tariffs -- money utilities must pay to generators of renewable power until they cost the same as conventional forms of energy -- to the subsidy-dependent renewable industry.

Solar power, still much more expensive than wind, has seen steep cuts in incentives. This has driven many German solar companies into loss-making territory, insolvency or the arms of hedge funds.

The situation in the wind sector is similar. The government last month pledged to speed up the approval process for constructing offshore wind parks, but sources told Reuters the ruling coalition plans to cut incentives for wind power by 1.5 percent per year.

"The main divide we are talking about is centralised power versus decentralised power," said Peter Thiele, executive vice-president of the European solar activities at Sharp Corp. (6753.T), one of the world's largest solar cell makers.

"Big utilities can build large power plants -- centralised forms of power. We need to emphasise the benefit of decentralised power,"

"Whether it's about centralised power -- and pampering the big utilities -- or decentralised energy, German politicians need to make a decision."

(Additional Reporting by Stephen Jewkes in Milan and Jonathan Gleave in Madrid; Editing by David Hulmes)