Germany levy reform aims to reduce green energy cost

A reform of the renewable energy law in Germany has been approved. Chancellor Angela Merkel's cabinet has approved the reform in an attempt to stop the cost of electricity from rising following the rapid increase in green power expansion. 

Currently, green energy accounts for around 25 per cent of Germany's electricity. The growth in use of renewable sources has meant that the cost of electricity in the country has been rising. This reform of the law will slow the growth of renewable energy and mean that new investors in the industry will have to take some risk.

Germany's household consumers currently pay the highest cost for electricity in Europe, but the reform should mean that bills increase in cost at much slower price. Some industrial firms are likely to have to spend out more in future for power, however, the changes have allowed the sector to continue taking advantage of many benefits, which will allow it to remain competitive.

The "energy transformation" that Ms Merkel has started in Germany was originally a popular plan that aimed to see the country run largely on green energy and to see an end to nuclear power. Although the use of renewable technologies for energy generation was at first popular and helped towards reaching emissions targets, it has caused steep price increases.

Subsidies are provided that are financed via a levy by the end user, which are intended to encourage an increase in green energy capacity. However, the levy has more than tripled since 2010, meaning that power prices are more expensive than ever. In order to stop prices increasing at such a rate from now on, the reform means the subsidy will not be increased from its current level until 2017.   

While the reform won't stop price rises completely, it should help to stem the speed at which costs increase. However, many have criticised the government's decision to exempt some businesses from the levy, as this means that private households continue to shoulder the financial burden.