Reuters International

German Chancellor Angela Merkel attends a news conference following talks with President of Azerbaijan Ilham Aliyev at the Chancellery in Berlin, Germany, June 7, 2016. REUTERS/Axel Schmidt

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BERLIN (Reuters) - German Chancellor Angela Merkel on Wednesday said building more power transport lines remained a top priority to help bring down the cost of the country's energy transition and ensure the future growth of renewables moved in step with new infrastructure.

Merkel was speaking at energy industry group BDEW's annual congress after her cabinet approved reforms to Germany's law on subsidising renewable energy sources.

"Power lines will take centre stage as we link the expansion of renewable energy with that of grids," Merkel told some 1,400 delegates from the utility industry.

"Because there are different protagonists, the state will have to bring those together," she added.

Generous green subsidies have led to a boom in renewable energy, such as wind and solar power, bumping up the share of green energy in the power mix to just over 30 percent.

But the rapid expansion has pushed up electricity costs in Europe's biggest economy and placed a strain on its grids.

Under the reforms, Germany will move away from guaranteed feed-in-tariffs to a competitive auction system from 2017 where producers of renewable energy will receive payments for their power if they win tenders.

While capping annual capacity additions, the government also ruled that only 60 percent of the annual average additions in capacity over the past few years will be allowed in areas of north Germany, a windswept region where there is less demand for power.

"We found that we could not transport away wind power from the north to locations where power is needed," said Merkel, alluding to the industrial south, where big nuclear reactors will be shut down by 2022.

Details of the affected areas and the integration of increasing offshore wind power volumes will be agreed when the draft law goes through the Bundestag lower house of parliament for approval, she said.

Under the proposals, the amount of onshore wind installations will be limited to 2.8 gigawatts (GW) per year until 2019. After that 2.9 GW of capacity will be auctioned annually.

Additional solar power capacity will be capped at 2.5 GW per year, of which 600 MW will be tendered at auction.

Germany's federal network agency this week reported that two central north-south lines will likely be delayed by three years to 2025 and a third will be delayed by two years to 2021.

The main reason for the delays - and for the cost increase - was a 2015 law that required that crucial lines be put underground to quell opposition from local residents.

(Reporting by Caroline Copley and Vera Eckert; Editing by Madeline Chambers and Hugh Lawson)

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