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German vows to insulate industry from costs of culling coal

BERLIN (Reuters) - Germany will protect its manufacturing industry from the impact of abandoning cheap coal-fired power, which Berlin is looking to ditch for environmental reasons, its economy minister said.

German companies want some protection from the rise they fear they will see in electricity prices when coal-fired and nuclear power plants are taken off grid in coming years, warning that they could see increased costs totalling billions of euros.

"We will take clear and responsible steps to compensate energy-intensive companies," German Economy Minister Peter Altmaier told an energy industry conference on Tuesday as a government-appointed "coal commission" gets close to publishing a timeline for phasing out the fossil fuel.

The commission plans to publish its findings on Jan. 25 and no later than Feb. 1, including a timeline for when Germany's last coal-fired power station will go offline. Experts expect that date to be between 2035 and 2040.

If Germany speeds up its exit from coal, the extra power costs could hit 54 billion euros ($61 billion) by 2030, a study conducted for the BDI industry association and DIHK Chambers of Commerce said on Tuesday.

Germany's manufacturing industry is crucial to Europe's economic powerhouse and holds considerable political sway and the BDI, DIHK and BDA urged Berlin to provide a subsidy of at least 2 billion euros a year towards network charges.

"Germany's prosperity largely depends on the competitiveness of energy-intensive companies," BDA employers' association Managing Director Steffen Kampeter said, adding that jobs would be at risk from an "overhasty exit" from coal.


ALTERNATIVE PLANS

"We are in our 10th year of an economic uptrend but if power becomes unaffordable, we cannot retain a functioning industrial basis," Altmaier said at the event, which was organised by business daily Handelsblatt.

Altmaier laid out several ways in which Berlin could insulate manufacturers from the increased costs associated with its commitment to reduce carbon dioxide emissions.

This included extending refunds for surcharges on green electricity to companies, something Altmaier said he expected to be looked upon favourably at a European Commission level as Germany, unlike its European Union neighbours plans to exit all of its nuclear power and much of its coal simultaneously.

Prices for consumers would also be protected if Germany allowed more power imports, including from the Nordic countries, installed mechanisms to reduce power demand at times of low supply, and enabled more digital network technologies, he added.

Flexible gas turbines could also play a bigger role in power generation in former coal mining regions, Altmaier said, adding that the extra demand for gas could be supplied from Russia via the politically sensitive Nord Stream 2 pipeline or met through new liquefied natural gas (LNG) import terminals.

Altmaier has invited potential suppliers including from the United Stated to a summit in February to discuss the LNG option.

But he stressed that Berlin would not be pressured to give up the Nord Stream project, which Washington opposes.

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(Reporting by Vera Eckert, Christoph Steitz and Michelle Martin, editing by Tassilo Hummel and Alexander Smith)