Germany faces financial crunch for €538.5bn renewable energy programme

The German government is likely to lose aid from its two major energy producers EON and RWE for the country’s €538.5bn renewable energy programme.

German chancellor Angela Merkel has outlined plans to revive the energy sector of the country by replacing all nuclear reactors with renewable energy sources by 2022.

In addition, Merkel has also planned to triple the renewable sector with 10,000MW of offshore wind capacity by 2020.

In late 2012, EON said it would invest €7bn in renewable energy over five years, while RWE said in early 2012 it would spend €5bn in four years, according to bloomberg.com.

The plans have, however, been hit by a roadblock with both the companies planning to reduce their respective investments to narrow down debts and costs by a consolidated €69m.
The move curtails investment in offshore wind projects, which was Merkel’s ambitious plan.

Meanwhile, energy policy is being raised as a political agenda with surging electricity bills as elections take place in September.

In March 2013, EON announced clean energy investment of less than €1bn in 2015, down from €1.79bn in 2012.

On the other hand, RWE is slashing its investment in this sector by half to €500m in the next two years.

In an annual report, EON noted that the company would no longer solely own or operate wind farms.

"Instead, for projects where we find interested partners to be co-owners, we intend to concentrate on making our money through wind-farm design, planning, construction, and operation," the company said.

RWE CEO Peter Terium told Bloomberg earlier in March that it is likely to slow down the development process of wind farms to reduce the investment risk.

Nevertheless, the companies are seeking to expand in overseas markets with EON acquiring assets in Turkey.

It also has plans to raise its stake in Brazil-based MPX Energia to 36% as it plans to purchase 24.5% more stake.

With both the major funders withdrawing the support, the country is now seeking new investors for its renewables programme.