* New goverment to target longer running times for reactors
* Utilities to raise profits, win time to develop renewables
* Renewable funding may drop while industry seeks efficiency
By Vera Eckert
FRANKFURT, Sept 28 (Reuters) - German Chancellor Angela Merkel's majority for a new centre-right government means she can rewrite a national nuclear phaseout deal by allowing reactors to run longer than laid down by her predecessors.
Nuclear operators' shares rose on Monday, the day after the election, while carbon prices crept higher and power fell with oil, as Merkel's conservatives and the pro-business Free Democrats (FDP) aimed for a quick coalition.
The election outcome may be a precursor for more nuclear projects in other European countries and a contributor to lower carbon emissions in Europe, but is no carte blanche for new reactors on German soil, which the public still opposes.
"We need nuclear energy as a bridging technology to keep power prices stable and to comply with our climate protection goals," Katherina Reiche, a senior conservative lawmaker working on reactor safety and the environment, told ARD television.
"We intend to work towards a lengthening of the plants' running times," she said, confirming pre-election plans.
Shares in nuclear operator E.ON were up 3.7 percent and those in rival RWE rose 3.1 percent, making them top gainers in the blue-chip DAX.
The gains could have been higher, were it not for potentially hefty conditions the government might place on permission to operate the profitable reactors for years longer, said Stephan Wulf, analyst at Sal. Oppenheim bank.
Oppenheim assumes that the life cycles will be extended by 15 years on the basis of a benefit-sharing deal, which after tax would leave 65 percent of the profits for the state and 35 percent for plant operators.
EUROPEAN PROJECTS UNAFFECTED
"But it is still unclear what concessions the politicians will want for allowing longer life cycles," Wulf said, referring to renewable energy research funds and other targets the government wants the nuclear utilities to support.
Seven nuclear plants totalling 6,200 megawatts of power capacity would have had to close in the coming four years without a change of government, and may now be kept open.
Nuclear energy emits virtually no carbon dioxide, which in theory could be bearish for CO2 emissions rights, but analysts said the effect will be minimal in the years through to 2012.
The opposition Green and Social Democratic parties have vowed to uphold opposition to a loosening of the nuclear law and have the potential to mobilise powerful grassroots lobbies.
"There must not be any lengthening of nuclear plants' lives," leading politician Renate Kuenast of the Greens shouted to cheering supporters. The Greens remain a significant force, winning 10.7 percent of the vote on Sunday.
German nuclear opposition is part of the political culture in a way unique in Europe, where Finland and France are building new reactors and E.ON and RWE are studying such plans for Britain and are also looking at eastern European projects.
These plans make sense and will not be put into question by longer running times of reactors inside Germany, Wulf said.
THUMBS DOWN FOR RENEWABLES
The gains in nuclear operators' stocks were in contrast to those of highly subsidised solar firms such as Q-Cells and Solarworld. Their generous grants are set to decline under the influence of the free-market FDP, Merkel's junior partners.
The generous feed-in law for renewable energies, brought in by two SPD-Green governments between 1998 and 2005, is likely to be changed or dropped, said Wulf.
But he did not expect this to kick in before 2011 and saw scope for a medium-term run on solar stocks through most of 2010, by which time renewables may have become more competitive.
"A replacement of nuclear with renewables at a delayed stage is far more likely than if the nuclear exit deal had been upheld by an adverse election outcome," he said.
"From 2011 on, prices of German renewable equipment makers could be very competitive and they could look at alternative markets such as the U.S. or China."
(Reporting by Vera Eckert, Madeline Chambers, Tom Kaeckenhoff, Michael Szabo, Michael Shields, Tyler Sitte and Kirsti Knolle in Frankfurt, Christiaan Hetzner in Berlin and Naomi Tajitsu in London; editing by Mark Trevelyan)