Germany Overreacts To Japan Nuclear Disaster

Angela Merkel

German Chancellor Angela Merkel has ordered a three-month shutdown of nearly half of the country's 17 reactors built before 1980. Several of these reactors may never come back online and that others be phased out ahead of schedule.

The Center believes this is a gross overreaction to the Fukushima nuclear power plant disaster in Japan.

The seven reactors shut down this week were generating 5% of Germany's electricity. Nuclear power provides about 23% of the Germany's total electricity production. Abandoning nuclear power soon would oblige Europe's largest economy to draw more electricity from fossil fuels, endangering the government's ambitious self-imposed commitment to slash greenhouse-gas emissions to 80% below 1990 levels by 2050.  Dropping nuclear power entirely could raise the share of German electricity generated by coal-fired plants to over 60% from 45% currently. That would push up the price of emissions permits issued through the EU's carbon trading scheme, and in turn the price of electricity.

Germany's electricity prices, among the highest in Europe, have already more than doubled in the past decade, thanks in part to the country's aggressive subsidy push into renewable energies. Another traditional alternative to nuclear power, natural gas, burns more cleanly than coal but has its own drawbacks. Some 45% of the natural gas Germany uses to generate electricity and heat homes comes from Russia, and price disputes between the national utility, Gazprom, and its customers in Eastern Europe have endangered that supply several times since 2005.

Turning away from nuclear power would hit utilities' profits and the federal budget, too. The agreement Chancellor Merkel negotiated last fall for power companies to operate their reactors up to 14 years longer than planned would have brought them billions of euros in unexpected profits. And the government stood to take in more than half of that windfall through new levies and taxes. The four utilities with German reactors—E.ON AG, RWE AG, Energie Baden-Wuerttemberg AG and Vattenfall Europe AG—agreed to pay a tax on new fuel rods worth €2.3 billion ($3.2 billion) annually through 2016, which the government earmarked for its budget consolidation efforts, and planned to contribute some €25 billion more to a new fund for renewable energy research. It isn't clear whether that fund will survive the current review. (WSJ, 3/17/2011)