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Germany: The High Price Of Phasing Out Nuclear Power

Article illustrative image Partner logo Wind turbines near Berlin

BERLIN - After the initial euphoria, it’s back to earth for Germans. The decision to exit nuclear power was initially quite popular, but today many are having second thoughts. Their main issue with the decision is its resulting cost, which is paid for by households and small businesses but has spared big industrial consumers.

When she decided to quit the atom, just after the Fukushima disaster, Chancellor Angela Merkel had promised that electricity prices would stay affordable. A year later, there is a risk electricity bills will surge to the point where Peter Altmaier, the new environment and energy minister, is working on a project to reform energy financing and subsidies. He intends to present a first draft in the fall for a reform that will take place after the September 2013 elections.

"The implementation of this energy transition has to be reasonable from an economic perspective and acceptable from a financial one," said the minister last week. "In this context, energy prices in Germany cannot differ too strongly and durably from those applied in the countries of our main competitors."

The contrast is manifest between the two banks of the Rhine. A French household pays an average of 140 euros per megawatt-hour for its electricity, whereas a German family has to pay approximately 260 euros.

The problem is that even though electricity prices are set to increase in France, the curve is going to be much steeper in Germany, where there are many more solar or wind projects. By 2050, the country wants to depend on renewable energy by 80 percent for its electricity production. The administrators of the German network have to present the bill for 2013 in mid-October. 

The industry is ready for a fight

This year, the bill adds up to 14 billion euros, financed by the Renewable Energy Act (EEG) contribution paid by consumers. This tax, which is the equivalent of the CSPE in France, is already at 3.6 euro cents per kilowatt-hour in 2012, nearly the double of 2010. According to estimations, it could jump by 40% to reach five cents by 2013. 

"Today, a family of four people pays 150 euros per year for the energy transition," says Juri Horst, from the Institute for Energy Systems of the Future, adding that the Chancellor had promised prices wouldn't exceed 3.5 cents per kilowatt-hour. "At five cents, this amount would reach 210 euros." According to the researcher, the EEG surcharge still benefits from a large social consensus, even if it is currently being criticized by some companies and political parties. 

The industry is already preparing for a fight. The federation of textile industry has just announced that it was thinking of referring the matter to the German Constitutional Court. From the industry's point of view, it isn't the job of small businesses or households to finance the energy transition, but the State's.

The textile industry is a big loser in the energy transition, because it does not benefit from exemptions like steel and aluminum producers do - at least not yet, as the number of beneficiaries is supposed to increase soon.

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About this article source Website:

France's top business daily, Les Echos covers domestic and international economic, financial and markets news. Founded in 1908, the newspaper has been the property of French luxury good conglomerate LVMH (Moet Hennessy - Louis Vuitton) since 2007.

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