Concessions won in nuclear deal

The German government struck a historic deal with the major power utilities inJune to bring an end to nuclear power in the country. The deal has far-reaching implications. Siàƒ¢n Green talks to E.ON and RWE.

German chancellor Gerhard Schroeder and the country’s nuclear power plant operators struck a historic deal in June that will bring an end to nuclear power generation in Germany. While Germany is not the first country to implement such a policy, it will certainly see the fastest withdrawal if the plans proceed smoothly.

The deal brings to an end 18 months of negotiations between the German energy utilities and Schroeder’s coalition government, and in theory could mean the last German nuclear plant closing by 2021. In addition, the two sides have agreed to cease the reprocessing of nuclear fuel by mid-2005, a blow to BNFL and Cogema, both of which hold contracts with the German utilities affected.

Both sides emerged from talks apparently happy with the outcome, but the general consensus of opinion was that the energy utilities had won a number of major concessions and that the government had conceded too much. J

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The German utilities affected, E.ON, EnBW, VEW and RWE, said that the deal was economically acceptable. Significantly, they will now be able to operate their plants without political interference, and have been given considerable flexibility in terms of which plants they can operate and for how long. There is no final deadline for the closure of the plants.

The agreement sets a finite electricity generating volume for each nuclear plant, totalling 2632.3 TWh for the industry as a whole. This corresponds to an average operating lifetime of 32 years for each plant at a high utilization rate. The Greens wanted a limit of 30 years for all nuclear plants. In addition, the generation volumes set for each plant are transferable to other nuclear plants, providing that it is transferred to a newer unit. This will allow the utilities to operate their more economic and efficient nuclear units for longer than the 32 years prescribed at the expense of older, less efficient units.

“We have been given the opportunity to operate our power plants on a reliable basis,” said Josef Nelles, spokesman for E.ON, which holds stakes in 11 of Germany’s 19 nuclear power plants. “From our point of view, it’s a good deal. If we have no clear basis for operation, it’s a high economic risk, but now we have a clear basis for planning and calculation.”

Striking an “economic” deal was crucial for the German utilities, whose margins are being continuously squeezed by competition and falling electricity prices. Nevertheless, the cost of fuel storage and decommissioning will be high, and the utilities will be losing out on a significant and reliable revenue stream over the next 30 years.

Fuel storage and reprocessing has long been a contentious issue in Germany. Under the deal, the utilities will have to cease the reprocessing of fuel by July 2005 when their contracts with UK company BNFL and Cogema of France come to an end. The government, however, has urged the utilities to terminate these contracts early so that the transportation of spent fuel elements can stop.

Beyond 2005, spent fuel will be stored in interim storage facilities at the various nuclear power plants until they can be transferred to a long-term storage facility. The interim storage facilities will be built by the utilities, while the government will oversee and implement the construction of the final storage facility, which the utilities will finance.

Although E.ON, RWE, VEW and EnBW have funding set aside for decommissioning the nuclear plants, the fuel storage facilities may add considerable cost to their operations. On top of this, there is the question of replacing the baseload generation provided by the nuclear plants.

The obvious choices, according to Thomas Leitl, assistant to Dr. Gert Jàƒ¤ger, a Member of the Board of RWE Energie, are to build new plant based either on lignite or hard coal, fuels that are indigenous to Germany. “Natural gas or renewables are not really an option for base load generation,” said Leitl.

Aside from the cost of constructing new capacity, this raises the question of increased emissions to the environment of greenhouse gases and other pollutants. One significant advantage of nuclear energy is that it has none of the emissions associated with fossil fuel combustion. “This is a problem, of course,” said Leitl. “I think the utilities will have to increase the efficiency of their plants so that the Kyoto agreements can be met.”

The amount of new capacity that will be needed has yet to be determined. RWE, soon to merge with VEW and with interests in six nuclear plants in Germany, is already looking at constructing new power plants. “We are going two ways,” said Leitl. “One is on the basis of lignite because we own lignite mining operations, and the other is to build plants [based on] natural gas, but this would be mainly for [industrial customers].”

Decommissioning and replacing a technology that accounts for one-third of a country’s generation is inevitably going to involve costs, but both E.ON and RWE deny that this will have any impact on electricity prices or competition in Germany. It is too difficult to tell at this stage, said Leitl, when most of the plants will not be closed until 2010 or 2020.

The agreement still has to clear one or two hurdles, however, including its passage into law. There is concern in the government that the Green members of its coalition, some of whom are dissatisfied with the agreement and see it as too lax, may vote against the necessary amendment to the Atomic Energy Law. “That is a political question, it is not up to us,” said Nelles, reflecting E.ON’s statement of June 15 which said: “Restoring consensus is the responsibility of political leaders. The companies remain convinced that nuclear energy should continue to be part of the energy mix for economical and environmental reasons.”

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