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BERLIN (Reuters) - German Chancellor Angela Merkel's conservatives and the Social Democrats (SPD) agreed to retain a moratorium on fracking for gas and cut incentives for wind power in areas where it is abundant, if they form a new coalition government.
Merkel's Christian Democrats (CDU) and its Bavarian sister party, the Christian Social Union (CSU), emerged as the largest force from the September 22 election but they need a partner.
They are making progress in talks with the centre-left SPD to form a government later this month and Friday's agreements on energy policy added to the momentum.
Leaders of the two sides told journalists in Berlin they had agreed to put a moratorium on hydraulic fracturing, or fracking, for shale gas.
Ute Vogt, an SPD leader on environment issues in the talks, said that as a result fracking will not be possible in Germany before it is clear that the technology is safe.
"We've agreed to a moratorium," she told reporters.
Shale gas fracking has so far been banned in Germany and the stance of the potential new government reinforces prospects that unconventional gas exploration will not be pursued in the country. The next election is not due until 2017.
Fracking, which involves pumping water and chemicals at high pressure thousands of metres below ground to release gas from shale, has created an energy boom in the United States.
But it is criticised by environmentalists, who warn of potential seismic effects and water pollution. Opinion is split on whether to embrace it as a path to cheaper energy.
Katherina Reiche, a leader in Merkel's CDU, said the use of chemicals that could damage the environment should be banned.
Due to environmental concerns, the previous centre-right German government made up of Merkel's conservatives and the defeated pro-business Free Democrats had suspended plans to regulate fracking until after September's election.
The Free Democrats (FDP), the German party that championed fracking, fell out of government and were even ejected from parliament after falling below the five percent threshold.
Merkel's government had drawn up legislation laying out conditions for exploration and imposing restrictions on where drilling could take place, but it was put on hold.
If the moratorium is put in place, Germany will join countries including France in deciding against the technology.
The government's stance determines whether oil and gas companies such as ExxonMobil and Wintershall get a chance to assess the potential of shale gas in Germany, which in the long run could use the resource to lower its dependency on gas imports that come mainly from Russia.
In a separate development, the conservatives and SPD agreed to slash feed-in tariffs (FIT) - the higher prices paid by consumers for renewable energy - for wind power in many regions where its production is high, according to a draft agreement.
The draft, obtained by Reuters, says there will be no changes to the FIT support for photovoltaic power production. The changes in FIT, the lifeblood for renewable energy until prices fall to market levels, will affect only new plants.
It said the proposed coalition would examine the exemptions that about 2,000 companies now receive from the renewable energy surcharge, and which has been widely criticised.
Germany is a world leader in renewable energy, currently getting about 25 percent of its electricity from sources such as wind and solar power. The new government wants to reform the Renewable Energy Act (EEG) fuelling the boom.
Even though the FIT has fallen sharply in recent years, consumers and many small companies pay a premium for renewable energy. That renewable surcharge has been rising in recent years, causing concern among consumers and the government, which wants to slow further rises by removing the exemptions from some companies.
The draft agreement said that the government would aim to limit the growth of renewable energy to keep costs from rising.
"To reach that aim we will set binding expansion corridors for the EEG and steer the expansion," the draft agreement said.
The coalition's goal is to achieve a renewable energy share of between 35 and 40 percent - the government target for 2020.
The areas where wind is especially powerful, in particular along the North Sea and Baltic Sea coastlines, will be most affected by the FIT reductions.
"The support levels will be reduced considerably in regions where wind energy production is strongest in order to reduce the excessive support," the agreement said.
The previous government's goal of having 10 gigawatt of off-shore wind energy capacity by 2020 was reduced to 6.5 GW in the agreement between the potential coalition partners.
Writing by Erik Kirschbaum; Editing by Anthony Barker