Boston, MA -- (SBWIRE) -- 04/10/2014 -- We have long believed Germany's Renewable Energy Source Act (EEG) will almost certainly be reformed and this is now set to occur following the signing of a grand coalition agreement between Angela Merkel's Christian Democratic Union (CDU-CSU) and the Social Democratic Party (SPD) in December 2013. With SPD Chairman Sigmar Gabriel now installed at the head of a new 'super' ministry that will enable him to oversee economic affairs and energy policy, the revision of the EEG is a priority during Germany's current legislative term - with effective reform critical to cutting the huge cost of Germany's ambitious Energiewende (Energy Transformation). Yet, while reform is necessary to stop spiking electricity prices from curbing Germany's industrial competitiveness, we emphasise that Gabriel has a difficult job ahead of him, as he tries to constrain costs of moving from nuclear to renewable, avoid seriously damage the competitiveness of German industry, while at the same time ensuring the Energiewende is a long-term success.

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On December 15 2013, members of Germany's Social Democratic Party (SPD) voted overwhelmingly in favour of forming a government with the Christian Democrats (CDU-CSU), ending three months of negotiations. With the parties having now formed a grand coalition government and adopted a coalition agreement, the reform of Germany's EEG is now one of the most important tasks facing the coalition. With SPD Chairman Sigmar Gabriel installed at the head of the revamped Federal Ministry for Economic Affairs and Energy (BMWi), the revision of the EEG is a priority during Germany's current legislative term - with effective reform critical to cutting the huge cost of Germany's ambitious Energiewende (Energy Transformation). The debate has crystallised around the way in which the country phases out nuclear capacity and transitions to generating electricity using a greater share of renewable sources - without spiking domestic electricity prices and damaging the economic competitiveness of its major industries.

Yet, while reform is necessary, we emphasise Gabriel has an extremely difficult job. While his stated aim is to reform the EEG so as to reduce costs, further integrate renewables and ensure Energiewende complies with EU law, he has already come under fire from opposition political leaders, environmental groups and Germany's business lobby - which has stated that rising electricity prices could lead to the deindustrialisation of the country. Complicating matters further, he is also under pressure from Brussels to reform the industry exemptions component of the EEG, or face fines and legal action due to a state-aid probe.

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