Germany – A Nuclear Surprise?Monday, June 10, 2013 · Posted in...

Germany – A Nuclear Surprise?

Monday, June 10, 2013 · Posted in Uranium, Uranium Companies · by Peter Epstein
Germany – A Nuclear Surprise?
The FT, Online Edition June 9, 2013 by Nick Butler

This article from the FT suggests that high energy costs that threatened German competitiveness in global markets might cause Germany to revisit its plan to shut down all of its Nuclear Reactors by 2022. Currently, there are about 10 reactors in operation in Germany. A policy reversal like this, as soon as this year, would be supportive of long-term uranium prices. 10 nuclear reactors staying online is a non-trivial number.

The polls show Ms Merkel’s CDU party with a lead but not an overall majority. The current coalition with the Free Democrats could be sustained if they win enough votes. If not, the options are a Grand Coalition with the Social Democrats or a looser alliance involving the Greens.

Energy policy is suffering badly as a result. Investment, particularly in the power sector is badly needed. But for the moment in the complex regional and federal decision making structure through which the fuel mix is set by a combination of regulations and subsidies the decisive voice of central Government is silent.

That affects German utilities such as RWE and EON but also external suppliers who cannot plan or invest in the absence of a clear framework. German business is starting to realise just how expensive the shift to renewables will be, particularly if the mix of low carbon sources excludes nuclear. As things stand the amount of gas used will fall sharply – just when global gas prices are declining. That creates a competitiveness gap.

Some of Germany’s biggest manufacturing businesses, whose operations are energy intensive, are considering moving some of their operations to other countries where environmental commitments are weaker and energy costs lower. Globalisation is now an option for every major manufacturer. That puts jobs at risk along with some of the basic sources of Germany’s economic strength.

If that were to happen the country would not have the ability to sustain the transfers to the East which have underpinned the political process of reunification over the last two decades, let alone to transfer funds to any of the struggling countries of Southern Europe or France. The German economy is strong but not as strong as when the Eurozone was thriving. Continued prosperity is not inevitable. In a country whose industrial base matters, the competitive cost of energy is crucial.

Could a Grand Coalition Extend the Life of German Nuclear Plants?

One provocative answer to the problem is now being floated. The most likely partnership after the election in September is a Grand Coalition of the CDU and the SPD. With a sufficient majority such a coalition could decide to extend the life of some or all of the nuclear plants which at the moment are set to close by 2022.

The timetable could revert to the schedule originally set, after painful negotiations, by Chancellor Gerhard Schröder a decade ago. Ms Merkel controls her own party, and the SPD would probably endorse what was their own policy. Business and the unions would also be on side. That would give the stations at least another decade.

Energy costs would fall because the need for high cost renewables would fall. Longer term energy policy decisions could be left for another decade, by which time technology could have changed the game again. Germany would be able to meet its climate targets more easily with nuclear in place and the federal Government, no doubt keen to demonstrate that its environmental credentials were intact could push for even higher European targets – thereby reinforcing its competitive edge by pushing costs onto others.

As in the UK, competitiveness has become a central dimension of policy thinking in Berlin. We are reaching the point in the economic cycle where officials and politicians look hard for any tools which can support a recovery. A shift in the approach to nuclear in Germany might not be so difficult as one might think.