How much more than 33 cents a kilowatt-hour would you pay to eliminate all nuclear plants? How much less electricity would you use to achieve that goal?
Those are the real questions facing German consumers and industry with the government’s decision to force all nuclear plants to shut by 2022.
The government says it can close the plants, which produce about a quarter of the country’s electricity, and either replace their power with renewables or reduce demand with more efficiency – and do it without increasing carbon emissions or eviscerating Germany’s export-oriented economy.
Energy markets are giving the German plan few chances of succeeding as touted, in no small part because Germany wants to substitute intermittent wind and solar power for baseload nuclear power. That won’t work with current technology, but a lot of money is expected to be spent trying to make it happen – and more when it doesn’t.
Witness the bump in stock prices for companies expected to profit from Germany’s Fukushima fears: utilities (many nuclear) in surrounding countries, LNG and coal interests, and renewables and transmission vendors who foresee a rapidly growing market.
The electric distribution grid has to keep power coming at all times to match demand at a controlled voltage. Digital appliances, like computers, are particularly sensitive to voltage variations. Renewables feed power to the grid when the wind and sun permit.
The ideal would be massive storage capacity so electricity could be stored when renewables generate it and discharged to the grid when it’s needed. No such practical capacity exists yet. So grid operators have to pay backup power sources to stay on standby to compensate for flickering renewables. That usually means keeping low-efficiency (but fast-acting) natural gas turbines spinning to connect as needed.
In Germany, however, generous feed-in tariffs (FITs) offered over the last 20 years have already brought so much solar and wind to the grid – unpredictable power that the grid companies must take by law – that grid operators have had to use even nuclear plants to load-follow and balance. Industry experts say the German grid is already fragile and has come close to blackouts, especially as operators try to accommodate wind power at night. This is more than a German issue. European grids are interconnected, and blackouts aren’t confined by national boundaries.
Germany got 6.5% of its total power from wind in 2009, and 1.1% from solar. The subsidy numbers have shifted over the years, but wind operators now get a basic 9.2 euro-cents (13 U.S. cents) per kilowatt-hour for on-shore wind and 13-15 euro-cents/kWh for off-shore wind. Solar operators were getting around 55 euro-cents/kWh for rooftop solar panel output and 46 euro-cents for ground-mounted facilities (79 to 66 U.S. cents); the current government has pared that to 29-21 euro-cents (despite predictable howls from the solar industry).
But subsidy levels are locked in when facilities begin operating, Germany’s committed subsidies to renewables owners were €10 billion in 2009 and are estimated to exceed €20 billion in 2012.
The latest government plan will also require speeding investment in new transmission lines to bring more wind power from the north, where it blows, to the industrial south. Moreover, more renewables means more backup power has to be generated – or bought from other countries.
All this has already helped push the average German consumer’s electricity costs to three times what the average American pays. German householders average 33 US cents/kWh, with 41% due to taxes and other levies. In the continental US, electricity averages 10-11 cents.
German industry will be a key determinant of the nuclear phase-out’s success. About half of German electricity goes to industry, which is heavily export-dependent. Business observers say higher energy prices, especially with the strong euro, could hurt Germany economically. German industry already prides itself on production efficiency – the latest government decision demands even more.
How much more will the nuclear withdrawal cost? Enormous numbers are being batted around. The government anticipates about a €2 billion (US$2.9 billion) loss of revenue per year; the industry federation estimates costs to the economy of about €3.5 billion (US$5 billion) annually, and think tank German Energy Agency forecasts consumers will see their bills rise 20%. Green politicians dispute that, claiming renewables will really save money and the changeover will cost households only about €1.50 a month. Other economists are talking €10-20 per month.
Some political observers are asking whether this decision is just – for all the rhetoric – a clever political strategy by Chancellor Angela Merkel to sideline the contentious nuclear issue and keep some nuclear plants operating for the next decade while the political landscape shifts and the fiscal realities sink in.
But government officials now insist this decision is genuine and irrevocable. Expect to keep hearing from nuclear opponents that Germany is trailblazing for all industrial economies. If Germany can eliminate nuclear power, so can everyone else, they’re saying.
The risk of that kind of talk: remember California in the late 1990s, which blazed a much-ballyhooed trail on electricity markets. A few pessimists warned California's market design ignored some basic realities. They were ignored, and in a few years, California's trail led straight to economic disaster and stopped the momentum for power markets cold.
© 2011 Margaret L. Ryan