German Chancellor Angela Merkel's cabinet on Tuesday adopted a reform of the country's renewable energy law with a view to slowing down the rise in electricity costs for both corporate players and households in the years ahead.

Germany's shift to renewable energy and away from nuclear power and fossil fuels had been a cornerstone of the government's policies, but ballooning subsidy-related costs had threatened to undermine the large-scale energy transition scheme.

Cabinet ministers backed amendments envisaging cuts in green subsidies and whittling down support for industries struggling with rising electricity bills. However, a decent share of the perks for energy-intensive industries was set to stay in place after Berlin reached a deal during negotiations with the European Commission.

Impossible to please all

Under the adopted reform - which will become law in August - new upper limits would be placed on onshore wind power expansion (at 2.5 gigawatts in annual capacity), photovoltaic energy generation (at 2.5 gigawatts per year) and offshore wind farms (at 6.5 gigawatts to 2020), the government said.

It confirmed it planned to increase the share of renewable sources to 40-45 percent of total electricity production by 2025 and to 55-60 percent by 2035, with a view to offsetting the elimination of nuclear power by 2022.

The draft reform was widely seen as a victory for Social Democrat Economy and Energy Minister Sigmar Gabriel who had intended to balance further growth in renewables with the requirement to keep heavy industry happy with affordable electricity costs.

But the deal comes at the cost of private households who will have to pay for the subsidies still in place.

"Merkel and Gabriel are handing out gifts to companies at the cost of ordinary citizens", environmental activist group BUND (Friends of the Earth Germany) commented on the reform.

hg/msh (dpa, Reuters)