Pressure on for a nuclear renaissance

Tuesday, September 30, 2008

Like other industrial nations, Germany faces a formidable challenge in covering its future energy needs amid rising raw material prices, the threat of climate change and worries about the reliability of oil and gas supplies.

A decision eight years ago to phase out nuclear energy, which provides a quarter of Germany's electricity consumption, is making it especially hard on Europe's largest economy to meet its three goals: lowering its dependence on imported fuel, cutting harmful carbon gas emissions, and maintaining a plentiful power supply at prices industry and households can afford.

As concern rises in Berlin about possible power shortages and the prospect of Germany missing its ambitious emissions goals, an alliance of conservative politicians and power suppliers is preparing to launch a campaign that would have been unthinkable five years ago. Their goal: to pave the way for a new public consensus about nuclear energy that would enable the next government to scrap the phase-out and let the country's 17 reactors run far beyond their expected shutdown in 2021.

The energy challenge is too tough, they argue, to be confronting it with one hand tied behind one's back.

"Politicians are thinking about it, the public is changing its mind . . . There is a discussion underway that for the first time is opening new perspectives," says Gerd Jäger, the board member responsible for nuclear at RWE, one of three operators of nuclear power plants in Germany.

In an attempt to overcome the public's remaining misgivings about a return to nuclear, RWE, on behalf of the entire sector, has made politicians an extraordinary offer: if the phase-out is scrapped, operators will pay a share of the roughly €10bn additional profits they are expected to make each year into a fund that would finance research into renewable energy, energy-efficient measures, and even guaranteed lower power prices for consumers and business.

"The people and the politicians have been asking us what we would do with the additional profits. What we are now saying is: we are going to give you some of it back," says Mr Jäger. Although he would prefer the fund to be used for research, he is also open to the notion of subsidising power for consumers: "We are ready to discuss any idea politicians may have."

The fund suggestion has received enthusiastic backing from the Christian Democratic Union, the party of chancellor Angela Merkel, herself an advocate of nuclear power, making it likely that the scrapping of the phase-out will rank high in the CDU's platform for next year's general election.

"We must extend the life spans of our nuclear power plants," Michael Glos, economics minister, told the FT recently. "Elsewhere in the world, there is a consensus that safe nuclear plants can be operated for 50 to 60 years. This would mean Germany could use its nuclear power for another three decades."

While countries such as the UK and Finland are intending to build power plants - South Africa is also planning the construction of an advanced modular reactor in 2010 - Germany, under Ms Merkel, has stuck to the phase-out decision. Despite the chancellor's advocacy of nuclear power, the Social Democratic Party, junior partner in her coalition, has blocked any attempt to review the phase-out.

One decisive factor that has emboldened the pro-nuclear camp, however, is that public support for nuclear power has risen sharply in recent months as power prices have rocketed. An opinion poll for the ZDF public-sector channel last month showed 54 per cent of respondents in favour of extending the lives of Germany's existing nuclear power plants, marking the first time a majority had expressed such a view since the phase-out was enacted.

Most independent experts think Germany may just be able to achieve its emissions goals without nuclear, but at a sizeable cost to the economy because of higher prices for fossil fuel and the additional costs imposed on coal and gas-powered plants by the EU's emission certificate trading scheme.

Prognos, a forecasting institute, calculated several scenarios for the government in 2007. The models showed that scrapping the phase-out would cut power prices by up to 25 per cent by 2020 compared with the status quo, saving consumers and business up to €5bn a year and reducing CO 2 emissions by an extra 60m tonnes a year.

In a separate study, the economics ministry has warned that these additional costs would dent the competitiveness of German industry. There is also mounting concern about a power shortage. Dena, the Federal Energy Agency, has warned of a "power gap" as early as 2012 largely because of local resistance to the construction of new coal and gas-powered plants to replace the reactors that are scheduled to come off line.

"We will contribute to the political discussion in the next days and months, but the real window of opportunity to reverse the phase-out will be just after the election," says Mr Jäger, pointing to the few weeks when the victorious parties sit together to negotiate their coalition agreement.

If it failed to scrap the law, the government would face irreversible consequences, he warns. The shutdown of seven power plants with a total capacity of 7,000MW in the life of the next parliament alone would lead to higher prices, a shortage of power in the medium term, and would probably force the country to downgrade its CO 2 emissions targets. Unless Germany chooses to embrace nuclear power after the next election, the phase-out could well become irreversible by the time voters return to the polling booths in 2013.

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