Germany makes big industry pay more for power grid

Germany is to reduce exemptions that big power-using firms have enjoyed from grid fees following EU criticism that they might amount to state aid and anger among consumers that industry was not sharing the cost of a shift to renewable energy.

Chancellor Angela Merkel's cabinet agreed on Wednesday to reduce the exemptions, which last year saved power-intenstive companies around 300 million euros ($444 million).

The exemptions, which affect sectors such as chemicals, metals, glass and building materials, began in 2011 and have helped German industry to remain competitive despite some of the highest power prices in Europe.

However, the European Commission expressed concern they could amount to state aid, while a German court ruled there was no legal basis for the special treatment.

Consumer groups were also angered that some firms were being spared the cost of Germany's transition to renewable energy at the expense of households.

The changes announced on Wednesday introduce a staggered system of payments depending on grid usage, and still offer big power users some relief.

"With today's cabinet decision, the government has laid a new foundation for special grid fees for power intensive consumers," said Economy Minister Philipp Roesler.

"We have given this group of consumers a stable basis for calculating their energy costs and created planning and legal security which are important pillars for Germany's status as a reliable industrial location."

Companies that use more than 8 gigawatt hours (GWh) of power for at least 8,000 hours will from next year have to pay 10 percent of the grid fees. That will rise to 15 percent for those using 7,500 hours and 20 percent for 7,000 hours.

Currently companies using more than 7,000 hours are completely exempt, benefiting around 200 companies.

The government said the new system ensured the continued stabilising role of big companies on the network. Large firms such as BASF have their own on-site power generation units which can feed power into the public grid.

The idea is that through the higher contribution from industry, households and small firms will have to pay less.

Merkel, facing an election in September, wants to make sure household electricity bills are kept in check as the costs of her "green revolution" soar.

However, overall grid fees are bound to rise due to the massive infrastructure changes involved in Merkel's energy policies. She aims to wean Europe's biggest economy off fossil fuels and onto renewables in the coming decades and to phase out nuclear energy by about 2022.

The charges will go towards the construction of new power lines for wind-generated electricity from northern Germany to the south and to reserve power plants for the winter, needed to plug any power shortages and balance out volatile green energy supplies.