The move comes with steep taxes on the reactors and a delusional energy policy

AngelemerkelGermany’s government saved its 17 nuclear reactors this week with a package of new energy policies. Chancellor Angela Merkel extended (right) the run time of the plants past 2022, but imposed a 50% tax on the profits that will be earned by the life extension. As part of the package, Merkel also committed to lower greenhouse gases by 80% and to get 60% of its electricity from renewable resources by 2050.

Environmental minister Norbert Roettgen, who has opposed the nuclear plant life extension policy, told the Wall Street Journal:

“Nuclear energy has a bridging role, not a future role.”

Is Merkel “delusional”?

Yet, serious energy analysts think Merkel has painted her country into a corner. The head of the World Nuclear Association (WNA) called the policy “delusional.” He said the nuclear industry welcomed the extension of permitted operation, but he also warned of the “unsustainable position” Germany had staked out. WNA Director John Ritch said: (left)

John Ritch "Germany's policy is now headed in the right direction but still rests on delusional foundations. No serious energy or environmental planner believes that a major economy like Germany's can be largely reliant on renewables within the next 40 years."

Ritch isn’t alone. The problem for Germany is that it’s future energy security hangs in the balance.

Patrick Moore, (right) the former head of Greenpeace, and now a keynote speaker for a pro-nuclear group, told this blog in an interview in Cleveland, OH, last week that the plan’s reliance on renewables will force Germany to become more dependent on Russian natural gas to keep the grid up.

moore"Every time Germany builds another wind farm, it buys more natural gas from Russia to keep the grid going. Renewables make Germany more dependent on Russian gas."

What about replacements?

As previously reported here, (see links below) the plan states that reactors built prior to 1980 can operate until 2030. Reactors built after that date can operate until 2036. The plan has no provision for building new or replacement reactors.

As a practical matter, Germany will need to start planning to build those reactors now if it wants to maintain and grow the baseload generation capacity needed to sustain its export driven manufacturing base. There seems little prospects that hard-headed reality, a quality Germans are famous for, is at work in the nation’s energy policies.

German business groups cautioned that the tall order for investment in renewable energy projects will run into a substantial barrier. The transmission and distribution grid in Germany isn’t adequate to handle the variable nature of power from wind and solar projects.

Hans-Peter KeitelBDI Federation President Hans-Peter Keitel (right) told the news media, “huge investments will be needed for such networks.”

Dow Jones News Wires reported that Chancellor Merkel answered the BDI complaint with this statement.

“I admit our targets are ambitious. They are achievable.”

Merkel gave no indication the government plans to use any of the (euro) 2.3 billion/year in new taxes on nuclear reactors to pay for new electric grid infrastructure.

Green groups ‘take no prisoners’ stance

Cashcow cartoonThe government's plan in proposing the tax has two objectives. The first is that the tax is based on the need for revenue and the reactors are fully depreciated cash cows. The second is that the tax collections in a time of economic austerity would make the reactors too valuable to shut down.

This would turn the demand by green groups to close the reactors into a tax issue. It would weaken their position as Merkel could then blame the greens for tax increases to make up for the lost revenue from shut down reactors.

The green groups saw this coming in September 2008 and rejected Merkel’s offer for the taxes and investment in renewables. Green groups have just one non-negotiable demand, and that is to shut down the reactors.

Political opposition to Merkel’s policies erupted in Berlin. Bloomberg wire service reported Sept 27 that the Pswephos polling firm said deep opposition to nuclear energy in Germany could cost Merkel votes in the next election.

pitchforkThe Social Democrats (SDP), who were in power when the original policy to phase out the reactors was enacted, vowed to overturn it if they are returned to power in 2013.

On Sept 12 an anti-nuclear demonstration in Berlin reportedly saw over 100,000 people gather in the streets to protest Merkel’s energy policies.

Green groups are deeply conflicted about the new nuclear policy because the new taxes on the reactors will pay for massive wind and solar energy projects. Environmental Minister Roettgen said (euro) 5 billion will be invested in these technologies. Despite the money, Greenpeace is reportedly going full tilt to protest the energy policies.

Fire sale of 17 reactors?

The four utilities that own the reactors have a more practical response. They want to sell the plants. Bloomberg reported Sept 15 they may sell the assets to avoid a hit on earnings from the new tax. The trump card is a threat to significantly cut dividends.

Stock prices for the four utilities have tanked, but the firms pay generous dividends which many Germans rely on as a safe investment. This threat could backfire with the public demanding the dividends and telling the government to close the reactors and skip the taxes.

Taxes without the renewables?

The German parliament has to approve the energy policies. A pitched political battle is expected over the plan to save the reactors. Merkel’s drive to retain them as part of the energy mix may not prevail despite the give away of billions for an unsustainable energy mix.

Ducks on the lawnIn an outcome in which Merkel does prevail, following a bitter vote, the taxes won’t be used to pay for new wind or solar projects. Instead, it is more likely Merkel will just balance the austerity cuts in her budget with them telling the SDP to stuff it.

It won’t matter to Merkel who owns the reactors as long as they operate and make money for someone. The taxes will find them. The reactors are sitting ducks.

Prior coverage

  • 8/16/10 – Merkel’s nuclear tax backfires
  • 7/27/10 – Germany’s love /hate relationship with nuclear energy
  • 9/27/09 – Merkel’s election saves Germany’s nuclear reactors
  • 9/10/08 – German greens reject fund for renewables
  • 6/10/08 – Teutonic tectonic shift on nuclear energy

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