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UPDATE 1-Berlin, Brussels near agreement on green energy subsidies-sources

* Berlin faced EU probe over subsidies for heavy power users

* Germany overhauling renewable energy law

* Exemptions to stay in some sectors

(Adds background)

By Markus Wacket

BERLIN, March 17 (Reuters) - The European Commission and the

German government have reached broad agreement over disputed

exemptions to green energy charges that Berlin grants heavy

industry, German industry and government sources said on Monday.

A deal would signal the end to a dispute that has unsettled

energy-intensive industries in Europe's largest economy and left

Germany facing a probe by Brussels over whether the exemptions

gave such companies an unfair advantage.

"We are in agreement on nearly all points," a government

representative told Reuters.

The sources said industries exempt from green power support

costs would be limited to export-sensitive sectors such as

aluminium, chemicals, paper and steel. Large firms with more

than 100 gigawatt-hours (GWh) of annual electricity usage would

also be almost completely exempt from such costs.

The Commission - the EU executive - has said Germany's

industrial discounts on green surcharges, worth 5.1 billion

euros ($7.1 billion) in 2014, might sometimes be justified to

keep energy-intensive firms in Europe, but it had concerns.

Around 2,000 German heavy energy users such as BASF

and ThyssenKrupp have been exempt from a

surcharge to pay for Germany to quit nuclear power and move to

green energy. Ordinary consumers have to pay the levy.

These firms face the possibility of having to pay back the

discounts should the EU rule them unfair. The sources said there

was no agreement yet over whether there would be a repayment -

which would be a deep blow for the firms concerned.

Germany is undergoing Europe's deepest energy transformation

as it exits nuclear power. The biggest task facing the new

government is a reform of the law on renewable energy and how to

pay for the switch.

Chancellor Angela Merkel's cabinet wants to agree the new

rules on subsidies for renewable energy and on industry

discounts from the green energy surcharge in April, in parallel

with an EU decision on new guidelines on green subsidies.

The new German rules were mostly in line with the EU

guidelines, according to a draft of the document.

($1 = 0.7181 euros)

(Reporting by Markus Wacket; Writing by Alexandra Hudson, Vera

Eckert and Sarah Marsh; Editing by Dale Hudson)


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