Germany amends green-energy regime to curb rise in prices 

The German government has amended renewable-energy laws meant to help make the country nuclear-free but that have sent power prices rocketing—squeezing consumers and the country’s formidable export machine.

The cabinet approved amendments on Tuesday that it said would contain soaring electricity costs while seeking to protect German jobs in the industrial sector. The changes include less ambitious targets for wind power and a cut in subsidies for certain forms of green energy.

Chancellor Angela Merkel’s “energy transformation,” a bold and initially popular experiment to make Germany the first major industrial economy to run largely on green energy, has met strong resistance from companies and households faced with steep rises in power costs.

The project revolves around subsidies that are financed by end users via a levy and meant to encourage a buildup in renewable energy capacity. Overall, the government expects such subsidies to reach €24 billion ($33 billion) this year, compared to around €21 billion a year earlier.

The levy, first imposed in 2000, has more than tripled since 2010, driving retail power prices ever higher. As part of the new reform, the government has pledged not to increase the subsidy from its current level through 2017.

Analysts on Tuesday criticized the government’s plans, saying the reform doesn’t go far enough in tackling high power prices.

“The reform won’t slam the brakes on retail power prices,” said Claudia Kemfert, an academic and energy expert at Berlin-based research institute DIW. She said that some heavy industrial energy users would continue to be exempt from the levy at the expense of private households, who are bearing the brunt of rising electricity costs.

Allowing power-hungry businesses to dodge the levy has also angered the European Commission. The European Union’s executive arm last year launched an investigation against Germany after complaints from other energy users who claimed their burden was inflated by exempting heavy industries.

Germany says the exemptions are crucial to keeping its energy-intensive industries competitive, but Brussels fears that too many businesses might have benefited from what it considers state aid. While the exemptions originally focused on such sectors as steel and machinery engineering, they were later expanded to include less obvious beneficiaries, such as railway operators.

Germany’s energy and economics minister, Sigmar Gabriel, said Tuesday that the government would reduce the number of exempted companies to around 1,600 from 2,000 at present. Companies that have previously qualified for exemptions would have to pay 20% of the levy in the future, he added.

The industrial sector financed some €7.4 billion in renewable subsidies in 2013 and Mr. Gabriel said he expects that figure to remain stable despite the reduced number of companies that qualify for exemptions. Private households paid around €8 billion in renewable subsidies in 2013, he said.

Mr. Gabriel expressed confidence that Germany’s proposed reforms would be consistent with new EU guidelines. The commission is expected to announce its new guidelines for state aid in the area of energy and the environment Wednesday.

—Christian Grimm in Berlin contributed to this article.