Industry warns over German move to cut green energy subsidies

German manufacturers are at risk of losing energy exemptions worth billions of euros, prompting warnings that factories will be unable to compete with US rivals that are benefiting from the shale boom.

One of the most contentious proposals being discussed as part of Germany’s coalition negotiations is the removal of exemptions that have shielded companies from the cost of moving to renewable power, which were worth €2.3bn to energy-intensive companies last year.

So far, German households and some companies have shouldered the cost of moving to green energy through surcharges on their energy bills, which have contributed to the country having the second-highest bills in the EU.

The coalition negotiators want to reduce the subsidies for green energy but also spread the cost more evenly by making energy-intensive companies pay the renewables surcharge.

Kurt Bock, chief executive of German chemicals conglomerate BASF, warned that German jobs could be lost if the company were to lose its exemption.

“If politicians burden us with such a fee, then there is a danger that production will be transferred somewhere else,” Dr Bock told Der Spiegel. “We need to decide, do we want to secure jobs or do we want a so-called fair burden-sharing?”

Mr Bock’s comments follow a stream of warnings from European executives that low US energy prices are increasingly forcing them to shift manufacturing investments across the Atlantic, where the abundance of shale gas has led to lower energy prices.

The German negotiators also underlined Europe’s cautious approach towards shale, agreeing to a moratorium on fracking until more data were available to determine its impact on drinking water.

The latest increase raises the total annual cost of Germany's renewable energy feed-in tariff to €23.6bn in 2014, from €20.4bn this year.

The working group document warns: “The Energiewende [shift to renewable power generation] does not come for free. In recent years, the total costs have grown faster and greater than expected – more than is conducive to its success.”

Angela Merkel, the German chancellor, has declared that reforming Germany’s transition to renewable energy is a key priority of the incoming government.

“Above all we must curb the explosion in costs of renewable energy subsidies. One of the first major projects of the new federal government will be an amendment to the renewable energy legislation,” Ms Merkel said in her weekly podcast.

Negotiators from her Christian Democratic party and the opposition Social Democrats have agreed to reduce their 2030 targets for offshore wind generation from 25 gigawatts to 15 GWs in order to save money, according to an internal working group document.

It comes as new data revealed that the US has more than doubled its energy-linked exports since 2009, overtaking transport equipment and cars as the country’s largest source of export revenue. Foreign sales of US hydrocarbons and chemicals hit $133bn in the first half of the year, according to Census Bureau data analysed by Citi.

“Any natural gas-intensive industry basically has no future in Europe,” said Seth Kleinman, head of energy strategy at Citi. “The US has a massive strategic and structural advantage for any industry that is energy-intensive going forward,” he added.