September 5, 2010 6:12 pm

Merkel agrees nuclear power deal

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Germany’s government has struck a ground-breaking deal on energy policy that will see the lifetimes of the country’s nuclear power stations extended substantially – and utility companies in exchange paying towards the development of renewable alternatives.

Agreement was reached late on Sunday on extending the lifetimes of nuclear power stations by between eight and 14 years according to their age, officials reported. Earlier Angela Merkel, chancellor, had spent the day in a meetings marathon aimed at finding a compromise package to satisfy all in her divided governing coalition.

Germany’s strategy could prove a template for other European countries.

Almost a decade ago, under the Social Democratic and Green party coalition of Gerhard Schröder, the chancellor, Germany set out plans to close the country’s then-19 nuclear power stations by 2021. Ms Merkel’s government pledged to unwind that deal, but ran into internal conflicts on the length of the extension that should be offered.

Ahead of the latest talks, a likely compromise would have added 12 to 15 years to each nuclear power station’s current 30-year operating life. But in a German newspaper interview published on Sunday, Jürgen Grossman, chief executive of RWE, the power utility, said a 20-year extension would be the “best result for the economy”. It would cut fuel costs while not hindering the development of renewable energy, he said.

The energy industry had support from the pro-market Free Democratic party, junior partner in Ms Merkel’s coalition.

But Norbert Röttgen, environment minister and a rising star in the chancellor’s Christian Democratic Union, had called for an extension of just eight years.

The dispute, the latest test of Ms Merkel’s leadership skills, broadened into a wider debate on energy policy in Germany – which has a strong anti-nuclear power lobby but also worries about its strategic dependency on imported energy.

Germany’s energy companies are expected to give to the government part of the windfall profits generated by extending the lifetime of nuclear power stations, with the funds used to invest in renewable energy.

But in his interview with the Frankfurter Allgemeine Sonntagszeitung, Mr Grossman warned that Germany did not yet have the necessary network infrastructure – for instance to transfer power from wind parks in northern Germany to industry in the south.

“If renewable energy is to account for half our electricity generation, a new, intelligent high-tension network will be needed. That would be like making all Germany’s motorways 16-lane,” he said

Relations between the energy sector and government were soured by Berlin’s plans for raising €2.3bn ($2.9bn) a year via a tax on nuclear fuel rods – part of its separate attempts to reduce the country’s public sector deficit. This tax is now expected to be time limited.

Even once a deal is finalised within the government and with industry, the package could run into trouble. The opposition SPD has threatened a challenge in the country’s constitutional court if Ms Merkel’s party sought to avoid pushing its energy plans through the Bundesrat, the second chamber representing Germany’s powerful federal states.

Sigmar Gabriel, the SPD leader, pledged that any extension of the lifetime of nuclear power stations would be reversed if his party regained office.

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