Germany’s Nuclear Game of Chicken

I’ve been on the road this week and haven’t had much time to study current events in Japan. I have been thinking about and talking with folks about some of the reactions around the world regarding Nuclear Power. The one most people are still buzzing about is Angela Merkel’s decision to abandon nuclear power in Germany. Last night I finally put on my cynical spectacles and looked at what is happening there in that light.

This was an extremely cagey move by Fr. Merkel’s government. She had been walking away from the government policy of nuclear shutdown since she became Prime Minister. She needed a low cost energy source to keep factories running while meeting Germany’s carbon mandates. This move, while practical from an economic and climate change perspective, was increasingly unpopular with the Green Party members of her ruling coalition. When the events in Fukushima unfolded, massive demonstrations made it clear that the Green Party had some political clout that could have forced her out of the PM chair.

There were a number of steps to the process, but ultimately, Germany has announced that they plan to be nuclear free by 2022. It is interesting to look at this decision and think about different future scenarios. When I did that, I realized how brilliant Fr. Merkel was in this maneuver.

First Scenario: It works!

Germany finds other energy sources, puts in the required transmission lines and maintains low cost energy to compete in the world market. Merkel’s government is the hero of the climate change, but anti-nuclear power, crowd. She will be hailed as a visionary and her government retains power in Germany for years to come.

Second Scenario: An utter failure…

Germany is unable to build needed transmission lines, or obtain power from acceptable sources. Come winter, Russia imposes massive prices for natural gas and cuts supply. Germany is facing rolling black-out and brown-outs. Companies are shut down and unemployment starts to rise. Merkel’s government rides to the rescue by turning to the shutdown nuclear power plants. She is once again the hero for having the fore-sight to keep those plants in her back pocket to maintain low carbon footprints while providing low cost energy.

The Green Party is annoyed, but the Germans were facing a cold, dark winter with no job. She rides into power yet again. She can defer the issue for a number of years by reminding voters about the close call.

Third Scenario: Somewhere in between…

Germany is forced to purchase power from the French nuclear plants and the Czech Coal plants while northern Germany argues with southern Germany about transmission lines and power sharing. She still wins. The nasty carbon problem is in the Czech republic, not Germany. The nasty nuclear plants are in France, not Germany. And the local members of parliament are the ones who face the infrastructure issues.

So, for Fr. Merkel, there was literally NO downside in making what appeared at first blush, to be a very risky decision to abandon nuclear so quickly. To be sure, other European governments are angry and frustrated with Germany’s unilateral decision that could put significant pressure on their resources, but other EU governments don’t elect her, the people of Germany do. She has shut the plants down, but not required an immediate dismantling of them.

If the need arises, she will be able to demand a fairly quick restart. Either way, she looks responsive to the people’s needs and desires. As Germany heads into the summer, electricity needs are lower and the lack of power from those plants already shutdown is more easily managed. By the time she may need to start them back up, the issues in Japan will be many months further down the road with significantly more information. Her ability to justify the needs and demonstrate the differences will help to defuse the political heat.

As much as I hate to see those plants shut down, I have to applaud her astute reading of the situation.

7 thoughts on “Germany’s Nuclear Game of Chicken”

  1. ‘Green Party members of her ruling coalition’: The Green Party is not part of the coalition. Or do you mean ‘green’ members of her conservative party?

    • That’s true, but it’s looking unlikely at the moment that Merkel’s coalition will survive at the next general election; due in autumn of 2013. Certainly the minority party, the FPD is facing a wipe-out. The most probable outcome is an SPD-Green coalition.

      In those circumstances, I can’t see the government allowing maintenance of the reactors in a fuelled state.

      I’ve just come across a fact that seems hugely ironic. Last year, EdF sold it’s stake in EnBW (one of the four players in german nuclear generation). It was bought by the government of Baden-Wurtenburg (the Lande it serves). They own four reactors, two hit by the immediate moratorium, two younger. The deal was for €4.5Bn – a smidgeon under $7Bn.

      Then, in March, the CDU (Merkel’s party) lost in regional elections, to a SDP-Green coalition.

      The new state government daces losses in the billions, if the moratorium is upheld. It’ll be interesting to see if they join the legal case against the Federal government’s nuclear fuel tax and moratorium.

      I’d expect them to be sued by residents and businesses in the state if they don’t, for failing to mitigate losses.

      • Andy,

        Thanks for the update. I’ve spoken with several people that believe that Merkel will probably not survive the next general election, but acknowledged that in order to retain her seat in the immediate situation, she had little choice but to try to placate the rather vociferous Green protests. So neither the right nor the left seem to be happy at this point.

        I expect that there will be a number of lawsuits and counter suits to settle this dust. I had expected that the lack of generating capacity would start to drive things in other directions when the weather turned cold. Sounds like it might happen sooner.

  2. As to the quick restart scenarios – do you think the German nuclear utilities are going to sit around with units in hot standby awaiting dispatch orders from the government? I would suspect that if they had been told they are being shutdown, they would be defueled, moving old assemblies to dry cask, and downsizing non-essential personnel. If they are not allowed to run at baseload as planned and designed, efficiency and profitability is lost, and if I were the CEO I would be seeking huge damages.

    I think Ms. M did a quick kneejerk to try to save her political skin – I don’t assess her strategy as sanguinely as you.

    • You might well be right. Sanguine might not be the right word.

      I do believe that the utilities will put the units into cold shutdown, but given the lawsuits and other efforts, I doubt they move too far into a full defueled scenario. They want to operate these plants. Knowing that winter is a peak usage period, I think it is quite likely that the utilities will be ready to “save the day” when called upon.

  3. Margaret,

    Dan Yurman’s twitter feed is linking to an interesting story:

    RWE has filed what looks to be the first of several court cases against the German government, over the tax it imposed on nuclear fuel. It’s near certain that it will be followed by Eon and EnBW, and there will be further cases over the nuclear moratorium.

    The political/strategic implications look interesting. Most of the commentary I’ve seen seems to think that RWE’s case is very strong – it’s based on the discriminatory nature of the tax and moratorium, as compared to other fuels. That’s contrary to both German and European law.

    It suggests in it’s turn that RWE (and the others?) have decided there’s no “middle ground” with the German government; they’d quietly accepted the tax when it was tied to the life extension of their reactors, but now have gone “gloves off”. There’s also likely to be a very adverse public reaction in the German speaking countries. There will be bad relationships with both Government and the public. Not a situation conducive to investment.

    Reading between the lines, that looks very much to me as though RWE will be de-emphasising investment in Germany in it’s overall generation portfolio. In that context, I’m not sure they’ll be happy to maintain the ongoing costs of a reactor in cold shutdown.

    This could be good news for nuclear development in countries like the UK, the Czech Republic and Poland. Assuming they win, RWE (and EON and Vattenfall) will be notably cash rich (RWE’s balance sheet looked rather stretched before). They’ll be keen, I suspect, to be in a position to sell wholesale power into what’s likely to be a very lucrative German market, as supply gets tight.

    It could be coincidental, of course, but only a couple of days ago, the CEO of “Horizon” – the RWE-EON joint venture for nuclear new build in the UK – confirmed they’ll have finalised thier choice of reactor (AP1000 vs EPR) by the end of the year. We’ve now got 3GW of interconnection capacity into the continental system, now.

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