Friday, June 15, 2012

Merkel Seeks Accord on Solar, to Spur Base-Load Generation

German Chancellor Angela Merkel will seek agreement on supporting solar power and plans to spur base- load generation that doesn’t vary with wind and sunshine levels following criticism of her proposals to curb industry subsidies.

“The energy overhaul is a major task, you could say a Herculean task, we all feel an obligation toward,” Merkel said today after meeting with 16 state leaders and Environment Minister Peter Altmaier. “We want it to succeed.”

Merkel is seeking to strike a deal with state leaders ahead of the government’s summer recess after they said plans to cut aid threaten thousands of jobs in the world’s biggest solar market by installed capacity. She will meet the leaders every six months to monitor her year-old energy policy.

The government will propose a better way to coordinate the expansion of renewables with the need for base-load generators such as coal- and gas-fired power plants that ensure security of supply, Merkel said. “The keyword is capacity markets,” she said, referring to rewarding companies that offer such supply.

Germany’s 200-billion-euro ($250 billion) energy overhaul involves phasing out atomic power by 2022 and raising renewables to at least 35 percent of total generation. It includes closing nine reactors, building offshore wind farms that may cover an area six times the size of New York City, and building or upgrading 4,500 kilometers (2,800 miles) of power lines.

Installation Boom

States are concerned Merkel’s plan to cut solar subsides in reaction to an installation boom will hurt local producers such as Solarworld AG (SWV), already struggling to compete with Chinese rivals led by Suntech Power Holdings Co. On May 11, the states blocked the central government bill in the upper house.

Utilities including EON AG and RWE AG (RWE) declined to build new gas-fired plants, key to the government’s plans to ensure steady generation as the country relies more on variable wind and solar sites, because of concerns investment won’t be profitable.

The state of Baden-Wuerttemberg requires additional energy storage facilities as well as “flexible” natural-gas fired power plants to secure its energy supply as it shuts reactors, said Winfried Kretschmann, the state’s governor. “The question of capacity markets is to be decided by the end of the year.”

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