Regulators pose threat to EU green energy and industry

Mon Dec 16, 2013 11:09am GMT

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* Commission expected to announce formal probe on Wednesday

* Some say investigation alone will shatter confidence

* Carbon targets seen as too weak to encourage investment

By Barbara Lewis

BRUSSELS, Dec 16 (Reuters) - A formal enquiry by EU regulators into German energy subsidies, expected this week, threatens to hand heavy industry a multi-billion euro bill and jeopardises Europe's shift to green energy, campaigners and lawyers say.

Across the European Union, subsidies to help achieve an overall 2020 target to get 20 percent of energy used from renewable sources have been blamed for pushing up fuel costs.

On Wednesday, the European Commission is expected to announce an enquiry into Germany's management of subsidies as it executes its Energiewende, or transition from fossil fuel and nuclear to renewable power.

To help them deal with costs, thousands of German intensive energy users have been exempt from a green surcharge ordinary customers have to pay. The Commission, the EU executive, is examining whether that was unfair and should be paid back.

A 51-page letter from the Commission to the German government seen by Reuters spells out concerns that the waiver was unlawful state aid.

No-one from the German government was immediately available for comment. Hans Juergen Kerkhoff, president of Germany's Steel Association, said the discounts merely served to balance out distortion in global competition and were not illegal aid.

The final outcome still might be benign. Germany could be cleared or just asked to meet certain conditions in order to fall in line with EU internal energy market and competition rules.

But the enquiry alone into one of the most sophisticated green energy laws could shatter investor confidence in renewable energy, such as solar and wind, across Europe and it could drag on for months or even years.

HALT TO THE ENERGIEWENDE?

Doerte Fouquet, a Brussels-based lawyer at Becker Buettner Held, said the implications went far beyond the industry waiver, which the new German government would tackle.

"The problem is that with such a state aid investigation decision, the whole renewable energy system may break down. This could immediately affect running projects," she said.

The European Renewable Energies Federation (EREF), which represents green energy, has urged the Commission to reconsider.

"With an opening of a full investigation procedure, the German Energiewende would come to a halt with immediate effect," Rainer Hinrichs-Rahlwes, EREF president, wrote in a letter to the European Commission.

Some of the green campaigners who are urging a rethink on the investigation, also oppose British plans to fund new nuclear generation, to be built by EDF, which are also subject to Commission scrutiny.

Britain says it needs carbon-free nuclear power if it is to generate enough energy and also to lower emissions.

Like some renewable energy, nuclear is not affordable without help, but nuclear is a mature energy form, whereas renewables are getting cheaper as experience grows.

Both energy forms make more economic sense in the context of a high emissions-cutting goal.

The risk is that both EU emissions and green energy targets are becoming less effective as incentives for investors to put money into new projects. Uncertainty over the Commission investigation would add to a lack of policy direction.

Debate so far on 2030 targets, expected to be published in January, has focused on a 40 percent emissions cut versus 1990 levels, and a 30 percent renewable target.

Although double the existing 2020 goal, 40 percent would require very little new effort as Europe has already nearly met its 20 percent target.

Some academics accuse the Commission of ignoring science.

Kevin Anderson, energy and climate change professor at Britain's Manchester University, said the European Union must aim to cut emissions by around 80 percent by 2030, if it is sincere about capping global warming at the 2 degree limit it has said is needed to avoid the worst consequences.

Anderson, who has advised the British government on energy, has written to Commission President Jose Manuel Barroso accusing the Commission of working "in a vacuum of scientific evidence".

A Commission source said it was policy not to comment on individual letters, but all views were taken into account. (Additional reporting by Foo Yun-chee. Editing by Jane Merriman)

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