Germany chems warn Merkel's new govt on energy costs, urge reform

07 November 2013 17:04  [Source: ICIS news]

LONDON (ICIS)--Germany’s chemical industry trade group VCI is worried that the country’s new government will not act decisively to curb rising energy costs, it said on Thursday.

Chancellor Angela Merkel’s Christian Democrats – who won September’s election but do not have a majority of seats in parliament – are about to form a coalition government with the Social Democrats.

A key topic of the parties' coalition negotiations are reforms to Germany's costly system of subsidising renewables through high electricity prices. C
hemical and other industrial producers are pressing for a wholesale reform as high electricity prices hurt their international competitiveness. 

However, VCI said that none of the reform proposals put forward by the parties so far would “break the electricity cost spiral” chemicals and industrial firms are facing.

VCI president Karl-Ludwig Kley said that the political parties seemed to want to re-enact a modified version of the current system of surcharges, called “EEG Umlage”, which electricity consumers have to pay to help finance the development of renewables, rather than reforming the system.

Various pressure groups were “acting massively” to influence the policy-making process, he said. Thus, instead of the hoped-for overhaul, Germany may end up with only minor reforms, resulting in “disastrous consequences” for the country's chemical and industrial production, he said.

While worldwide energy prices were stagnating, Germany would be facing additional increases in its energy costs in coming years if the system is not meaningfully reformed, Kley added.

Kley is also CEO of German specialty chemicals and pharmaceuticals firm Merck KGaA. The company recently started up an on-site power unit at one of its German production sites to reduce its exposure to the public electricity grid.

The EEG system is especially hard on Germany’s many small- and medium-sized (SME) chemical producers. Larger energy-intensive producers have been granted EEG-exemptions, but most SMEs are not exempted.

Frankfurt-based VCI represents the interest of about 1,650 chemical firms.

Additional reporting by Tom Brown

By: Stefan Baumgarten
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