Germany to examine energy system in pursuit of lower costs

By Riham Alkousaa

BERLIN (Reuters) -Germany's government will carry out an analysis of the country's expected energy demand and efforts to improve supply as it pursues lower costs and integrates more gas generation, Economy Minister Katherina Reiche said on Wednesday.

Energy prices, among the highest in Europe, and their impact on the economy and industrial competitiveness were among the most high-profile voter issues in the February federal election.

Germany for decades relied on cheap Russian gas, but was forced to accelerate its shift to renewable power by the disruption of the Ukraine war.

The new coalition government has promised measures to lower prices, including cutting electricity taxes and grid fees and introducing gas-powered plants to shield consumers from price spikes when intermittent renewable energy production drops.

"What has been forgotten or swept under the carpet are the system costs. That's why we will subject the energy transition to a quick reality check," Reiche said in a keynote speech at a conference hosted by industry group BDEW in Berlin.

She said the government would examine the country's expected electricity demand, security of supply, the status of grid and renewables expansion to determine whether adjustments are needed.

Reiche said she expects cabinet decisions on lowering electricity tax before the summer break and a plan for implementation by the year-end.

Germany is discussing with the European Commission introducing tenders for five to 10 gigawatts of gas power plants, with a view to holding a first auction, also by the end of the year.

Speaking to journalists on the sidelines of the Berlin conference, she said the long-term goal was a fair, competitive energy system that includes a backup to renewable power when that is not available.

She said the market should not favour any one technology, and all clean and efficient solutions should contribute.

(Reporting by Riham Alkousaa, Editing by Rachel More and Barbara Lewis)