* Handelsblatt energy conference to take place Jan. 22-24
* Top executives from E.ON, RWE, EnBW to speak
* Main issues: rise of renewables, regulation, financing
By Christoph Steitz and Vera Eckert
BERLIN, Jan 21 (Reuters) - The challenges of shifting to renewable energy, such as costs, regulation, financing, and poor reliability, will loom large for Germany’s energy leaders this week when they meet to discuss the country’s boldest infrastructure project since reunification.
Chancellor Angela Merkel’s decision, after Japan’s Fukushima disaster two years ago, to abandon nuclear energy and switch to more renewable sources like wind and solar power, is being watched the world over as a possible model for others to follow.
With an estimated price tag of 550 billion euros ($735 billion), many analysts believe that if anyone can make the planned transition to more climate-friendly energy, it is Europe’s most powerful economy.
Delegates attending this year’s Handelsblatt energy industry conference, beginning on Tuesday, know the stakes are high - not least for Merkel, who will be judged on the policy when she seeks a third term in national elections in September.
But so too are the challenges, including the costs and disruption to energy firms and consumers, a lack of financing from banks and question marks over regulation, as well as the reliability of renewable energy for an industrialised economy.
“Germany is a country that has taken a very brave step,” said Roberto Cominotto, fund manager at Swiss & Global Asset Management.
Germany has already made progress, and gets more power from renewable sources than any other big industrialised nation.
In 2012, nuclear power accounted for 16 percent of Germany’s energy production, down from a quarter pre-Fukushima, with coal at 45 percent, renewables at 22 percent and gas at 11 percent, according to industry group BDEW.
It is aiming for a contribution of at least 35 percent from renewables by 2020, and 80 percent by 2050.
Being at the forefront of change has its advantages.
“It is a country that is first in line when it comes to attracting investments,” Swiss & Global’s Cominotto said.
However, Germany is also undertaking a hugely costly infrastructure project at a time when banks are cutting back lending and focusing on building their own capital positions to meet tough new regulations.
The fact renewables are currently not competitive against conventional forms of energy - at least without big subsidies - has scared off many investors.
And there is still a question mark over the reliability of renewable sources of power, which experts say could never be banked upon to provide round-the-clock supplies on their own because the weather is too erratic.
A study drawn up by the Swiss Prognos Institute in November projected a possible gap of 8 gigawatts (GW), or 9 percent of the assumed maximum amount of energy required by 2020, if nuclear plants were phased out as planned and not replaced by equally reliable alternatives.
This could result in supply disruptions - hugely damaging for a industrialised economy.
Critics are also concerned about the disruption for energy firms and the financial burden for consumers, as well as regulations to encourage renewable power, which they say have often been implemented in a way that increases both.
Subsidies mean renewable technologies have not necessarily been installed in the most efficient places, while generous 20-year returns on investment run counter to normal economic conditions, according to Ulf Boege, former German cartel office president.
“The regulatory moves triggered by the energy strategy shift impact on the supply and demand mechanism in such a way that the newly liberalised power and gas market deteriorates into a planned economy,” he said.
Big industrial users, in turn, are given breaks which have shielded them from some of the costs to finance the move to renewables, but this has put even more pressure on consumers.
For Germany’s utilities, the shift has also caused problems as wholesale power margins have become unprofitable for gas to be burnt in power plants, because sporadic oversupplies of green energy weigh down wholesale prices, while gas is expensive.
This is getting ever nearer to destroying the business model of companies meant to invest in renewables, namely the big sector leaders such as E.ON and RWE.
In the meantime, Germany has opted for more coal-derived power, due to the need for basic round-the-clock supply. This is currently lowest in price, but, ironically, most polluting.
$1 = 0.7486 euros Editing by Mark Potter