Germany to Massively Invest in Energy Sector

German Chancellor Angela Merkel said Monday night that the country's big energy companies had pledged billions of euros of investment in the sector in coming years to help Germany reshape its energy policy.

"The business world has promised to invest 30 billion euros in infrastructure and new plants by 2012," Merkel said. "We can expect investment of 33 to 43 billion euros ($40 to $52 billion) in renewable energy sources," she added.

Merkel was speaking at the close of a meeting with industry leaders on formulating a new energy policy, which she hopes will make Germany less reliant on foreign suppliers and help contain rising energy prices.

Leaders at the meeting also stressed the need to reduce energy consumption and improve efficiency. German Environment Minister Sigmar Gabriel said on Tuesday morning that Monday's talks focused on "how (Germans) can save energy while maintaining the same standard of living."

Gabriel added that while the government could possibly help to keep gas and energy prices capped, it was clear that they could not be dropped.

Furthermore, Gabriel said on German public television Tuesday morning that energy suppliers would work together on developing power plants that produce fewer environmentally harmful emissions. Gabriel said a coal-powered plant would be created by 2014 that would generate no CO2 emissions.

More funding for energy research

Merkel said the government would -- between now and 2009 -- set aside two billion euros for funding energy research in a bid to bolster the country's use of renewable energy. Merkel's stated aim is to draft a new energy policy by the end of next year that will map out Germany's approach until 2020.

"We agree that our objective should be to limit our dependence on imported energy, to prevent increases in the energy price and to take into account the environmental challenges," Merkel said.

She said three working groups would be formed to draft the new energy policy and industry players and the government would hold a follow-up meeting in September.

The conservative chancellor's decision to hold an "energy summit," as Monday's meeting has been dubbed here, is seen as motivated by rising energy prices and Russia's gas war with Ukraine, which affected supplies to Europe.

Economy Minister Michael Glos and Environment Minister Gabriel said earlier that heavy reliance on mineral oil meant that Germany and the European Union would remain dependent on "politically unstable supply regions."

Oil still Germany's primary energy source

Mineral oil remains the main source of German energy, supplying 36 percent of the country's energy needs. Gas serves as the second biggest source at 22.7 percent. The country imports roughly a third of its gas from Russia.

Merkel said leaders at the meeting also touched on nuclear energy and discussed ways of replacing it. "We will speak of this again in the coming months, with a measure of controversy I suppose," she added.

Germany's Christian Democrats and Social Democrats, the two parties in Chancellor Merkel's government, are divided over nuclear energy. During the last government, the Social Democrats launched a gradual phase-out under which Germany would shut down all its nuclear reactors by 2020.

That deal is still government policy. But Christian Democrats would like to see the issue re-visited. Social Democrat Gabriel rejects this, but said he appreciates the almost cordial manner with which his opponents were prepared to tackle the problem.

Nuclear energy as import substitute

Merkel is seen as cautious on the politically divisive issue. Industry players are pushing for an extension of the deadline and say nuclear energy cannot be discarded if the country wants to become less dependent on imports.

However, Germany's four largest energy and gas suppliers did say they would work with the government during a nuclear phase-out.

Monday night's meeting comes amid a heated debate in the European Union on protectionism and forging a common energy policy in which Merkel has proven outspoken.

At an EU summit in Brussels last month, she warned: "The (EU) internal market cannot work unless electricity can flow freely and if we can agree on European champions and not think strictly in national terms."

Germany and Italy have respectively accused Spain and France of trying to block foreign takeovers.