Germany s energy summit has left smiling faces all round, analysts say, balancing the demands of factions across the sector, from green to nuclear. Chancellor Angela Merkel s Monday (03/04) gathering of utility company bosses ended with a big boost for renewable power, but without penalising conventional power generation and Germany s energy giants, blamed by many for soaring household bills.

Even pro-nuclear supporters appear to have been offered a lifeline, despite Germany s commitment to phasing it out which some within Merkel s grand coalition back fiercely. "Overall we view the outcome of the summit as positive for the German utilities," Lueder Schumacher, analyst at Dresdner Kleinwort Wasserstein said in a research note. "There was no heated debate over rising energy prices, which is positive. The debate on nuclear will be continued...and on CO2 allocations the government will adopt a flexible approach."

Merkel s meeting with over 20 utility company leaders ended late on Monday with pledges by the industry to invest in new production capacities to help rein in run-away energy prices in the world s third biggest economy. Both traditional energy producers operating coal, gas and nuclear power stations and players in renewables industries such as wind and solar power were given more money and freedom to develop climate-friendly technologies.

The government said it will invest 2 billion euros (US$2.43 billion) over the next three years to help explore alternatives to nuclear energy, 30 percent more than in previous plans. Opponents to nuclear energy within Germany s coalition government had wanted to keep existing commitments to phase it out off the table at the meeting. But Merkel s pro-nuclear conservatives scored by openly reviving the debate, said Matthias Heck, analyst at private bank Sal Oppenheim.

Abandoning or revising the plan would enable producers to reap more profits from already written-off nuclear plants. "The results of the energy summit are positive throughout and we maintain our buy recommendation for (utility sector leaders) E.ON, RWE and (solar firms) Ersol and Solarworld," Heck said.

Merkel said utilities planned to invest 30 billion euros to revamp and replace power plants and grids by 2012, and companies planned up to 40 billion euros investment in renewable energies. "The investments in thermal plants are in line with earlier plans while renewables need huge investments if they are to close the nuclear gap," said analyst Karlheinz Bozem.

"There is now a reliable framework for both," said Bozem of Munich-based Bozem Consulting Associates.

COALITION DIVISIONS
Shares in E.ON and RWE fell 0.3 percent to 90.89 euros und 1 percent to 71.38 euros respectively at 11.54 GMT, in an otherwise slightly weaker DAX blue-chip index. Merkel spoke of divisions in her grand coalition of conservatives and Social Democrats (SPD) on the planned shutdown of Germany s 17 nuclear reactors, but no decisions were made.

Conservatives want a rethink, or at least longer life cycles for the reactors, which under the current plan must be switched off by the early 2020s, while the SPD sticks to the deal.

Anti-nuclear Environment Minister Sigmar Gabriel of the SPD played down the rift. He reiterated that CO2 certificates covering power generators production in the four years to 2012 would be handed out to the companies in a way that would avoid more price hikes.

Environmentalists had instead wanted auctions for up to 10 percent of the total emissions certificates in order to push up the commercial incentives to reduce CO2. "No talk of CO2 rights auctions or taxes on CO2-related profits, and no further regulatory threats -- it is good news all round," said Berthold Hannes, energy expert at Bain & Company.
(Planet Ark, 05/04/2006)
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