This week we have witnessed the incredible announcement by German Chancellor Angela Merkel saying Germany will abandon nuclear power totally by 2022, when it will shut down the last threeremaining nuclear plants that will be in service on that date. Germany has a total of nine nuclear plants providing energy to the grid as of now, accounting for 23% of the energy mix. Merkel’s bet is to replace nuclear power with renewable energies, a move that is expected to harm German industry greatly by increasing its energy bill. In fact, this will be the second most important factor to hit Germany’s industrial competitiveness in a row, the first one being the actual exchange rate of the euro against its clients’ currencies.
Neckarwestheim nuclear plant
Even though Germany is the world’s fourth biggest economy and Europe’s number one, it is not bullet-proof. The last thing the German industrial sector needs is its energy bill rising non-stop or being unpredictable. Because let’s face it, whether you are pro-nuclear or anti-nuclear you know shifting from nuclear power to any other source of energy is an expensive move.
In the case of Germany, the shift will be made towards renewable energies, which are expected to add up to 35% of the total energy mix in 2022 (up from 13% today). In a country where the industrial sector takes more than 50% of the total energy used, the main problem with renewable energies will not be their price, but its unpredictability causing blackouts. The sun not shining, the wind not blowing, or simply a specially cold winter day could cause a blackout in peak hours. When renewable energies are used to cover domestic demand, this unpredictable behavior can be covered with some natural gas power plants, which are fast enough to be plugged into the grid when needed and disconnected shortly afterwards. But industrial demand is far bigger and more important, so that could mean said natural gas plants would have to be on most of the day to avoid power disruptions, which would probably kill Merkel’s objective of slashing carbon emissions by 40% in 2022, meaning she would have hurt German industry for nothing.
So what are the reasons for such a sudden rush in leaving nuclear energy behind?
The answer is very simple (and unfortunately typical): short-sighted electoralism by Merkel’s political party, CDU (the Christian Democratic Union). The CDU lost the state election last march in the Baden-Württemberg Länder, one of the most important ones, to the Green Party. This happened shortly after the Fukushima disaster, so the Green’s anti-nuclear talk was heavily supported by traumatized citizens thinking about similar catastrophes happening in their country. This regrettably obvious, desperate move to avoid losing power by the CDU puts pressure on the German economy unnecessarily. But the worst part is that the anti-nuclear move seems deeply unplanned, with the German government unable to estimate the cost of the nuclear shutdown plan when questioned about it.
But the VIK group, a German association of industrial energy consumers, has done the feared estimation. It is expecting the rise in cost per MW-hour to be as high as 85%. These numbers are based on the 11% rise in energy costs (compared to the same period last year) just after the seven oldest nuclear reactors were taken off-grid. But this brutal price rise is just the icing on the cake, as Germans are already paying double what the French pay for their electricity, even though Germany has historically been a net energy exporter. Imports of French energy to Germany are expected to skyrocket as the Germans try to contain prices. And just a reminder: France’s energy mix is 80% nuclear power.
Now forgive me if this sounds sarcastic, but isn’t it unethical to import nuclear power when you have declared you are against it?And if your problem is nuclear power’s safety, keep in mind that some of the French nuclear plants are very near German territory. The Fessenheim plant, for example, is just 1.5km from the German border. Something similar happens with nuclear plants in Belgium, the Netherlands, the Czech Republic, and Slovakia. All of them are much closer to Germany than Chernobyl is, yet you do not see people shouting about it. Just another example of how anti-nuclear sentiment is clouding the judgement of some people. You are losing your precious energy independence in vain.
If any country has the strength and discipline to successfully perform such an energy somersault, it is Germany, that is for sure. But as always happens (or should happen) in economics, one should think about the cost-benefit ratio of the decision before taking action, because the shift towards renewables will strongly boost already profitable German renewable energy companies like Siemens Energy, Nordex, and Solarworld, just to name a few. But the main question remains: will the boost to the renewables sector compensate for the injury caused to the rest of the sectors affected? The answer, given the wide spectrum of German industry, is probably no.