Germany Counts Cost of Nuclear Shutdown

Nuclear energy. It’s expensive, right? That’s what a lot of our friends at the Union of Concerned Scientists and Greenpeace keep saying.

Alright, then let’s shut down some plants and start saving money, right? Surely, just on a cost basis alone, it makes sense. To be fair, let’s replace the electrons generated using fission with a mix of (more expensive) renewables and (relatively cheaper) fossil fuels. We can use more domestic coal, maybe import some natural gas and use local renewables to drive down electricity prices. That should save ratepayers real money every month. But wait. Something quite similar is happening in Germany and electricity prices have gone up, not down [FT, subscription req’d. Original article: “Electricity Prices Jump in Europe,” March 15.]. Just after the Fukushima accident, as Germany announced it was shutting down several nuclear power plants, the FT reported:

The cost of electricity in Germany, the European benchmark, immediately rose as utilities are likely to burn more expensive natural gas and thermal coal to bridge the shortfall in electricity.

Then, there are even more expensive options like renewables.

Increasing the share of renewables in electricity and heat is likely to be expensive for some time to come. Onshore wind is currently about 50% more expensive per unit of energy than conventional power sources, while offshore wind is about 250% more expensive.

And now, according to VIX, a German trade group, electricity prices for industrial users are expected to rise next year. It’s particularly poor timing:

Germany's big electricity consumers said on Wednesday they expected their power bills to rise by an average 9 percent for 2012, burdening industry amid a weakening economy and rising finance costs.

Not only that, but cutting nuclear energy out of the mix may be reducing not only the quantity, but the quality of electricity available. The knock-on effect? Horror of horrors! A decline in German manufacturing and export prowess.

…[VIK Chairman Volker Schwich] also said that network frequency changes have become more evident since the withdrawal of the huge nuclear facilities, which had ensured stability. This could hit sensitive industrial production, even if it is not noticeable by household customers.

‘It's not about a candle-lit dinner but complex production processes whose stability, long before a publicly noticeable network black-out, can be threatened,’ he said.

…He said this was unacceptable for an export nation.

There are many cost/benefit trade-offs to consider in energy choices. But here’s hoping that Germany’s rush to ditch nuclear power finally ends one enduring myth: that nuclear energy is just too expensive. As we pointed out before, done right over the long term, it’s one of the cheapest baseload generating options.

Finally, a side note on current prices. While it is true that German electricity prices (to be precise, contracts for baseload electricity in 2012) are down lately, this seems more due to the anticipation that European growth will remain slow this year, as this article notes. I.e., it’s not due to the German nuclear shutdown, which had the opposite effect on prices. 

Also, the press release from VIX, in German, is here. I found Google Translate got me pretty close to the original.