Nuclear power? Yes, please. But at what price?

ࢀ¢à¢€¢à¢€¢ BY TIM PROBERTࢀ¢à¢€¢à¢€¢

The German government is keen to ‘phase out the phase-out’ of its 17 nuclear power plants. Chancellor Angela Merkel announced on 6 September that the nation’s nuclear power plant operations would be extended by an average of 12 years beyond a scheduled phase-out, but deep opposition remains.

War is waging in Germany over the future of its 17 nuclear power plants. On one side is a very loosely aligned collective of Chancellor Angela Merkel’s Christian Democrat Union (CDU)-led coalition government with business leaders and the utilities RWE, E.ON, EnBW and Vattenfall. On the other are the opposition Social Democrats (SPD), the Greens, and the not insignificant weight of pubic opinion.

The nuclear phase-out was secured under the government of Merkel’s predecessor, Gerhard Schràƒ¶der of the SPD, and was considered one of his government’s most significant achievements. However, concerned with rising electricity prices, energy security and curbing carbon emissions, Merkel announced on 6 September that nuclear power plant operations can be extended by an average of 12 years beyond their current 2021 shutdown date.

The Brunsbàƒ¼ttel plant, one of the older nuclear plants now set for an extended life Source: Vattenfall

Merkel’s decision came after a national panel of experts advised that keeping the plants open was the only way of ensuring that climate protection and economic goals were met, and that electricity prices did not soar out of control. The CDU itself is divided on the issue, with green-minded environment minister Norbert Ràƒ¶ttgen concerned that an extension would reduce the pressure on the energy industry to research and develop renewable technologies.

While Ràƒ¶ttgen is politically astute to raise fears over the impact of a German nuclear ‘renaissance’ on renewable energy, there is little evidence to justify his complaints. Renewables in Germany are growing more quickly than in almost any other nation in the European Union (EU), thanks mostly to taxpayer subsidies estimated at some €10 billion ($12.8 billion) a year.

Nuclear power remains mostly unpopular in Germany. According to a recent poll, 56 per cent of Germans want to phase it out on schedule and just 38 per cent favour an extension. One hundred and fifty thousand people across Germany demonstrated against nuclear power in April, while another major protest was planned for 18 September in Berlin.

But the nuclear stand-off is much more complex than ideologically motivated politicians squaring up against money men. The main bone of contention is over how the government can extract its pound of flesh ” an extension to nuclear power plants would be hugely lucrative to Germany’s ‘big four’ utilities.

Writing in the Financial Times, Professor Eric De Keuleneer of Solvay Brussels School of Economics estimated that Germany’s fully amortized nuclear power plants produce electricity at a total cost of a maximum of €15-€17 per MWh against a market price of at least about €50 per MWh for medium-term contracts.

Unsurprisingly, the federal government wants a piece of the action. Merkel wants to clobber the relevant utilities with a €2.3 billion annual levy on nuclear fuel rods. Professor De Keuleneer estimates the levy would amount to €15 per MWh, which would still leave the utilities with a high profit margin, but the government’s proposals have attracted widespread opposition from business leaders.

In an open letter to the government, Deutsche Bank’s chief executive Josef Ackermann ” along with 39 well-known chief executives ” has warned that the new tax would “block required investment” in new energy sources by funnelling money into the general government budget rather than a special fund. The utilities themselves are urging Berlin to drop the fuel rod tax and agree on a share of windfall profits instead.

EU Energy Commissioner Gàƒ¼nther Oettinger has weighed into the debate, saying German energy companies should hand over to the state at least half the profits they accrue from extending the life of nuclear power stations. He said: “It’s quite normal for nuclear groups to protest at the idea of a tax, but they should give the authorities a large part of the sizeable profits accruing from the [extended] operation of nuclear plants. I consider that at least 50 per cent would be appropriate.”

But Merkel has stood firm, saying the nuclear fuel rod tax was “the only proposal on the table” and a key part of reducing Germany’s budget deficit. Utilities may also be forced to hand over more nuclear profits into a special renewables development fund. Another stumbling block is the possibility of the nuclear extension having to be approved by the Bundesrat ” the upper house of parliament, where Merkel has lost her majority ” which could vote against the proposals.

Meanwhile, any future government that includes the SPD or the Greens “will reverse any extension decision this government takes,” says Hermann Ott, a Green member of the Bundestag (lower house). The extension could also scupper Merkel’s hopes of forming a future coalition between the Greens and the CDU. Merkel will be hopeful of avoiding a Pyrrhic victory.

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