On 30 May, in the aftermath of Japan’s Fukushima nuclear disaster, German Chancellor Angela Merkel announced that Germany would close all of its 18 nuclear power plants between 2015 and 2022, which produce about 28 percent of the country’s electricity.
Eight have now been taken offline, and with the winter coming on, Berlin is scrambling to make up the energy shortfall lest the country suffer blackouts combined with the need to import massive amounts of electricity.
Despite Germany’s Kreditanstalt fur Wiederaufbau (German Development Bank) being set to underwrite renewable energy and energy efficiency investments in Germany worth $137.3 billion over the next five years, Merkel’s government has now announced that in addition to going green, it will also build a dozen coal-fired power plants as part of the country’s future energy mix. In order to assure the energy transition, the government also plans to subsidize new natural gas power plants as well.
Now the consequences of the 30 June Bundestag law phasing out nuclear power are impacting. On 19 October Germany’s Minister of Economics and Technology Philipp Roesler somberly told Parliament, “The real work starts now,” adding that the ministry now had the goals “To ensure the security of the energy supply and to protect the environment, within acceptable financial conditions.” Afterwards, Environment Minister Norbert Roettgen told legislators at the same session, “Renewable energy and energy efficiency are the two pillars of the new energy policy.” The next day Roesler in the company of Finance Minister Wolfgang Schaeuble in a joint press conference informed reporters that Germany had sharply lowered its 2012 growth forecast to 1 percent. In April, the month following Fukushima but before the German government decided to phase out nuclear power, the Economy Ministry had predicted a 2012 growth rate of 1.8 percent.
The government’s newly pragmatic approach contrasts with the hopes of many environmentalists, who believe that Germany now has an historic opportunity to embrace renewable power rather than pursuing the retrograde step of commissioning new coal burning power plants.
But government ministers are increasingly concerned primarily with ensuring the security of the nation’s energy supply, even though the 30 June legislation mandated that Germany’s share of energy from renewable sources must increase from 17 percent to 35 percent in 2020 and reach 80 percent by 2050. A modest start has already been made, as since the eight reactors were closed Germany increased its share of electricity produced from renewable energy sources from 17 percent to 20.8 percent.
But the renewable power sources will be costly. On 19 October the German Association of Industrial Energy and Power Users complained that electricity price had increased even though its quality has decreased and noted that next year its members will see their electrical power invoices increase by 9 percent.
As for the economics of the shift, electricity from conventional coal fired plants costs roughly $83 per megawatt-hour, the price increases roughly 50 percent to $124 per megawatt-hour for wind energy, $207 per megawatt-hour for offshore wind power, and $268 per megawatt-hour for solar, the last more than three times the cost of coal-fired electricity.
Despite the fact that renewable energy has such high differential costs, most Germans accept it. According to a recent TNS Infratest survey, 79 percent of Germans polled felt that the “new energy” fees were “reasonable,” with only 15 percent considering them “too high.” Germany Trade & Invest economic development agency photovoltaic-industry expert Tobias Homann said, “With the decision to abandon nuclear power earlier this year, it was clear that the road ahead would be challenging. But Germany is in a very promising position to be the first industrialized country to rely entirely on renewable energy.”
Despite the cost associated with renewable energy Germany is one of the world’s largest producers of wind power, with 27 gigawatts of generating power installed, roughly 16 percent of the world’s current wind power generating capacity in the world, making it Europe’s biggest consumer of electricity from wind power.
In the new austere Germany, the shift to renewable energy sources comes at a bad time for the exports-driven German economy, as increased energy costs can only add to the expensiveness of exports. Needless to say, despite Germany’s commitment to preserving the euro, further uncertainties are introduced into German economic long-range planning.
Economic teething problems aside, Germany’s abandonment of nuclear power and embrace of renewable energy will be closely watched around the world not only by nations but the globe’s nuclear and renewable power industries. While startup costs and transition problems have yet to be resolved, Germany is betting on its future, and future generations using solar and wind power will not have to bury energy wastes with a half-life of tens of thousands of years.
Written by. Dr. John C.K. Daly for OilPrice.com. The opinions expressed in this article are solely those of the author, Dr. John C.K. Daly. For more information on oil prices and other commodity related topics please visit http://oilprice.com