Cost of German Nuclear Phase-Out Provides Lessons

In recent weeks, officials from Entergy have announced the shutdown of two nuclear generating stations. The first was Pilgrim Nuclear Power Station in Massachusetts in October, followed by Fitzpatrick Nuclear Generating Station in central New York just days ago. The U.S. today has fewer than one hundred nuclear units running nationwide and shows no signs of restoring its role as the world’s leader in deploying commercial nuclear power. With the licenses for many nuclear operating units set to expire in coming years, the situation could get even worse for nuclear aspirations in the U.S.

In this light, recent updates about German energy policy seem particularly instructive for U.S. policymakers. Recent reports have begun to place a price tag on German chancellor Angela Merkel’s vow to dismantle all of Germany’s nuclear reactors by 2022 in favor of renewable energy sources. These costs, in short, will be astronomical. In fact, “the price tag could hit 1 trillion euros ($1.54 trillion) by 2040 — almost as much as the nation has spent on reuniting its eastern and western halves over the last 25 years.” Dismantling the nuclear energy reactors alone will cost more than 80 billion euros ($88 billion).

What does this anti-nuclear policy mean for German consumers? Higher power prices, of course. Costs have risen so high, in fact, that Chancellor Merkel has had to curb government incentives for wind and solar energy to stabilize prices for consumers and businesses. Even with Berlin’s best efforts to keep costs down, power prices continue to rise in a nation that already pays electricity prices triple what many U.S. consumers pay.

German utilities are feeling the pain too. The largest of Germany's energy groups, E.ON, lost 3.2 billion euros last year, mostly from costs incurred from phasing out nuclear power. With 18% of Germany’s power still coming from nuclear, more losses are on the way. All of which means even more costly increases for German power customers and the nation’s manufacturing industries that depend on substantial supplies of electricity.

Germany’s official policy pushes renewable power by phasing out nuclear units. U.S. policy takes a different approach, establishing deadlines for carbon dioxide emission reductions that nuclear power, with a ten- to fifteen-year lead time, can’t hope to meet. The strategies may be different, but the results could be largely the same: a nation with limited nuclear power production, a scaled-back fossil fuel power fleet, and a substantial government-supported renewable power sector. The high cost impacts of this portfolio design are becoming clear in Germany. It is doubtful that the cost experience in the U.S. will be much different.

As the Environmental Protection Agency continues to sell to Americans the notion that wholesale changes to power production will result in lower costs, real life experiences in Germany are demonstrating otherwise. Policy makers in the U.S. would do well to take a closer look at the impacts of German energy policy. Unless U.S. lawmakers change the trajectory of our own energy policy, consumers here could soon be seeing similar costs in their own backyard.