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Merkel advisers urge Germany to end clean-energy subsidy program

Germany should scrap its clean-energy subsidies because the system has driven up electricity costs for consumers and hasn’t spurred innovation or reduced greenhouse gases, a group of government advisers said.

Adding renewable-energy plants in Germany doesn’t cut Europe’s emissions because they’re released elsewhere, the Commission for Research and Innovation said in a report handed to Chancellor Angela Merkel today. The uncapped aid provided by the system known as EEG – about 23 billion euros ($31 billion) last year – doesn’t encourage new technologies, it said.

“The EEG isn’t a cost-efficient instrument for climate protection nor does it have a measurable impact on innovation,” the commission said in the report. “That’s why there is no basis for the continuation of the EEG.”

The criticism puts pressure on the government as it studies the EEG, which was introduced 14 years ago and has helped raise the share of renewables to about 25 percent of power generation from 7 percent in 2000. Merkel has said she’ll prioritize a transformation of the energy industry in her third term after rising costs for wind and solar farms helped make consumer power bills the highest in the European Union after Denmark.

The European Commission, the EU’s regulatory arm, is pressing Germany to auction off aid instead of granting fixed, uncapped subsidies, Merkel said today, according to a transcript sent by the government’s press office. “The EEG in its current form will be replaced by an auctioning system and will therefore also qualitatively change,” she said.

Economy Minister Sigmar Gabriel is putting the finishing touches to a revised EEG in a bid to balance cost-cutting efforts with the phased shutdown of nuclear plants operated by EON SE (EOAN), RWE AG and EnBW Energie Baden-Wuerttemberg AG by 2022.

As well as auctions, planned measures include reducing support for onshore wind farms and biomass energy as well as forcing owners of clean-energy plants to sell power on the market from 2017. Joachim Pfeiffer, energy-policy spokesman for Merkel’s Christian Democratic Union, said earlier this month the plans should be brought forward.