Business, Economics and Jobs

Can Germany kick its nuke habit?


Power cables are pictured in front of the Nuclear Power Plant 'Isar 2' next to a holy cross on October 12, 2010 in Essenbach near Landshut, Germany.


Alexandra Beier

BERLIN, Germany — Call it a post-nuclear hangover.

This summer, Germany became the first major industrial nation to commit to abandoning nuclear power following the meltdown of Japan's Fukushima reactor in March.

It all started with a three-month nuclear moratorium, announced by Chancellor Angela Merkel in March, followed by an effort in the German parliament to deal with the issue.

Seven of the country’s oldest reactors have now been permanently shut down. An eighth is offline due to ongoing technical problems. The remaining nine plants are to be phased out by 2022, instead of 2036.

The upshot: so far, Germany has lost about 10 percent of its power-generation capacity, officials said.

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The phase-out was hasty, some say. And by some measures, it has backfired.

Despite extensive support for renewable energy, Germany is now producing more carbon emissions. At a time when its economy is already slowing down, businesses are bracing for brown-outs and higher energy prices.

Nuclear operators are promising legal challenges in hopes of reversing the policy through the courts, or at least forcing the government to pay billions in compensation. And one of the country's biggest companies is threatening to move operations abroad.

“I would have proposed a slower phase-out," said Wolfgang Pfaffenberger, a professor at Jacobs University in Bremen who specializes in energy issues. "There will be a problem of reliability of the grid. Southern Germany is particularly dependent on nuclear power so there could be difficulties, a real bottleneck leading to power cuts in the winter."

Germany was quick to get out of the atom-smashing business. Lawmakers rushed through a legislative package of eight bills authorizing it before the summer break. Recognizing that the initiative was adopted in haste, perhaps without a thorough understanding of the implications, lawmakers effectively wrote a 'do-over' into the bills. They plan to amend them when they return.

"There are some mistakes in this [legislative package], which happens when you write law in a few weeks," said one German lawmaker involved in the process. "There was a lot of speed involved and it wasn't well handled. But then, if you write 800 pages of law so quickly, there are going to be some mistakes."

Not everyone agrees that the approach was too fast. Dorothee Landgrebe, head of environmental policy and sustainability at the Heinrich Boell Foundation, a Green party think tank, says the move is anything but rushed.

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“We, the coalition of Social Democrats and Greens, already decided in 2002 to phase out nuclear energy by 2022," she said. "Merkel expanded the life spans by eight to 12 years last autumn, due to pressure from lobbying groups. So now it is the reversal of the reverse.”

Landgrebe is referring to a move by Merkel's coalition government last fall to extend the life of the country's nuclear reactors by 14 years before slamming on the brakes just a few months later: That was because of the earthquake and tsunami in Japan and important upcoming state elections.

Christian May of London-based Media Intelligence Partners described the policy turnaround as a “knee-jerk,” echoing some in Merkel's coalition.

“In the wake of Fukushima, the Greens mobilized themselves against nuclear power across Europe, but this move doesn’t take into account the huge strides in safety," he said. "Plants which we might consider as being problematic are about 30 to 40 years old and bear little resemblance to ones designed today. In addition, fallout doesn’t take account of borders, so Germany will be forced to buy-in more energy from the international markets, thus disadvantaging itself.”

With a quarter of German energy coming from nuclear power plants, the move is proving more difficult than imagined. A loss of electricity supply during the cold winter months could be a real worry, according to the German energy agency (DENA).

And despite being a green measure, the result of the nuclear shutdown has been an increase in Germany’s carbon emissions as more fossil fuels are burned to make up the shortfall in electricity production, analysts say. Already, the environmental groups and the Greens have turned their attention to opposing new coal plants needed to make up the shortfall in energy and controversial carbon capture and sequestration technology — a pilot project to store carbon dioxide emissions from coal-fired plants was approved by the German government this year.

“Coal and lignite have always been controversial when it comes to carbon dioxide," said Matthias Lang, an attorney at Bird & Bird's Dusseldorf offices who specializes in energy law. "In the longer term, getting more wind power, particularly offshore wind, is required. The real challenge with renewables is storage: In some ways the political question is to make a decision between the risk of nuclear meltdown and increasing carbon emissions. If carbon really is such a problem, well, we will now be creating more — for a while anyway."

“Germany has, in several ways, overreacted on the nuclear front," he added. "There hasn’t been any terribly scientific analysis of risk so much as there has been a political will to close the older plants.”

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Meanwhile, legal fights loom. A constitutional challenge filed in April by the federal states against the nuclear extension that took effect Jan. 1 is still pending. Nuclear operators E.ON and RWE have challenged a nuclear fuel-rod tax that also took effect Jan. 1 — worth €2.3 billion ($3.3 billion) annually and widely considered the incentive for the nuclear extension — in a Munich court. E.ON officials say that they are now preparing a constitutional challenge to accelerated nuclear phase-out on the grounds that it hurts their property rights and that they need compensation for their shareholders.

“There are good reasons to argue against the legality of the shutdown," said Lang. "That applies to both the original shutdown of the older plants immediately after the Fukushima accident as well as the staggered shutdown as part of the exit package. Whether, or to what extent, the legal arguments against the shutdown will ultimately prevail is difficult to say, as we are talking about an unusual situation with limited precedents. I would not exclude that the courts will consider at least parts unlawful.”

The shutdown has also presented economic challenges. E.ON this month posted its first ever quarterly losses (€1.15 billion) and announced cuts of up to 11,000 jobs. New nuclear taxes, costs associated with reactor closures and write-downs on plant components were noted as a contributing factor.

In early August, German Pharmaceutical and chemical giant Bayer issued a warning that it was considering leaving Germany due to high energy prices.

"It's an obvious thing to say, really: energy prices are an important part of a company's costs, particularly in energy-intensive industries where the share of energy costs can reach up to 30 or 40 percent — think of chlorine production, for instance,” said company spokesman Rolf Ackerman.

Bayer has 111,400 employees, 54,300 based in Europe and 35,000 in Germany, with a total sales valued at €35.1 billion in 2010.

Ackerman says Germany’s cost-base was already disadvantageous for heavy industry before the nuclear turnaround, but that this move will exacerbate it.

"German energy prices are about 60 percent higher than in France and are among the highest in Europe," he said. "Such a big difference must be taken into account. The transformation of energy production will cost a lot of money, so energy prices will rise.”

Bayer, he said, prioritizes energy efficiency and the company also manufactures products that promote green energy, for example, light-weight materials for more efficient wind turbines and insulation materials that reduce the energy consumption of buildings.

"In general, we are supportive of the move toward renewables," he said. "What we are saying is, such a complex move as the transformation of energy production shouldn't be rushed.”

— Jason Walsh contributed reporting from Dublin.