Germany outlines deal with EU on green levy for co-generation plants

BERLIN (Reuters) - Germany said it has resolved a dispute with the European Union so that German firms that generate power for their own consumption can remain exempt from a green energy surcharge, Economy Minister Sigmar Gabriel said on Tuesday.

Gabriel said the agreement covers existing plants with co-generation systems combining heat and power production - the so-called "Kraft-Waerme-Kopplungsanlagen" (KWK) - that will continue to be exempt from the surcharge.

"With the agreement, we've created planning security for companies," said Gabriel, the vice chancellor and leader of the centre-left Social Democrats (SPD). His ministry had opposed the EU's demands to impose the surcharge on the companies, which would have cost them some 760 million euros per year.

Future KWK plants, however, will have to pay 40 percent of a green energy surcharge from 2017 for newly built combined heat and power plants under a new deal with the EU.

Gabriel also said, however, that the agreement with the European Commission states that the government would restrict subsidies to combined heat and power plants in firms' factories.

Germany has been discussing the disputed issue of exemptions to the country's renewable energy levy with the European Commission for years. Germany's chemicals and steel sectors in particular are affected. Overall, about a quarter of the power consumed by industry is generated in-house.

Until now, many companies, especially those in energy-intensive industries, have been exempted from paying the green energy surcharge that has helped finance Germany's shift away from fossil fuels towards renewable energy sources.

In 2014, the European Commission said that waivers granted to energy-intensive industry did not constitute unfair competition, but it approved an exception for power generated by industry up to 2017.

(Reporting by Markus Wacket; writing by Madeline Chambers and Erik Kirschbaum; editing by Mark Heinrich)