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Merkel's Nuclear Plan Earns Derision as Clean Power Costs Climb
2011-01-04 23:32:50.510 GMT
By Jeremy van Loon
Jan. 5 (Bloomberg) -- The solar panels on Tommy Clever's
house in Berlin generate enough electricity on sunny days to run
his washing machine, vacuum cleaner and other appliances, with a
bit left over to help power the region's factories and offices.
Clever likes the arrangement. He gets 51 euro cents ($0.68)
per kilowatt-hour for any electricity his solar rooftop feeds
back into the grid, which is about 10 times the wholesale price
paid to coal or nuclear plant owners. The payment rate, mandated
by the government, stays in effect for 20 years and gives him an
annual return of about 9 percent on his investment in the
photovoltaic setup, Bloomberg Markets magazine reports in its
February issue.
"It's been better than putting money in the bank," the
39-year-old environmental consultant says.
Such subsidies have made Germany a green-power success
story. It gets more than 17 percent of its electricity from wind
turbines, solar arrays and other renewable resources, up from
about 6 percent a decade ago, according to the German Renewable
Energy Federation. The country has adopted new clean
technologies more quickly than any nation except Denmark, its
smaller neighbor to the north; it has more wind turbines
installed than any country other than the U.S. and China and the
most solar power generation in the world.
What's more, the renewable-energy industry has been one of
the biggest sources of new jobs in Germany in the past decade
and has been boosting exports.
Nuclear Extension
Now, Chancellor Angela Merkel is expressing concern that
the cost might hurt the competitiveness of German industry. To
hold power prices in check, she plans to keep existing nuclear
plants in the mix for longer, abandoning a deadline set by the
previous government to retire all of the country's reactors by
2022. Environmentalists, political opponents and even some
people within her own party say Merkel is backpedaling from
Germany's green-power goals.
"Her policy is all about delaying an important transition
to renewable energy that Germany's future prosperity will depend
on," says Matthias Adolf, a lecturer on international relations
and energy at Berlin's Free University.
The government enacted the new program for the electricity
industry in September. It was the first major energy initiative
Merkel had put forward since taking power in 2005 and the first
change of course since renewable-power legislation was passed in
2000.
Price Supports
While Merkel preserved the preferential pricing, known as a
feed-in tariff, that has encouraged the installation of solar
panels such as Clever's and the construction of wind farms, her
critics say she's setting the incentives too low. Tariffs for
new projects can be adjusted by the government as a way of
controlling the pace of new facility construction and reacting
to changes in the relative costs of renewable energy versus
fossil fuels.
The price supports for solar power were cut three times in
2010. The above-market payments to wind and solar generators are
passed through to consumers in their electricity bills.
Merkel says her plan strikes a balance, protecting German
manufacturers such as Siemens AG and Volkswagen AG from rising
electricity costs that might make their exports noncompetitive,
while also continuing to add green power.
"I think we can say our energy system will be the most
efficient and environmentally friendly in the world," Merkel
said on Sept. 6.
Juergen Trittin, a leader of the Green Party, which was a
partner in the government when the push for renewables began in
earnest a decade ago, says German job growth depends on the
continued expansion of wind and solar.
Green Power Jobs
"We should be getting out of nuclear power faster and
relying more on renewable energy, which has led us to an export
surplus," he said in a speech to the country's parliament in
October.
About 340,000 workers in Germany are employed in the making
and installation of wind turbines, solar panels and other clean-
energy equipment. That workforce has doubled since 2004,
according to the environment ministry. The robust domestic
market for wind and solar has helped German companies such as
Siemens develop clean technologies that sell around the world.
Still, despite the growth in exports, employment in
Germany's clean-energy businesses remains sensitive to changes
in government policy, says Claudia Kemfert, head of the energy
and environment department at DIW Berlin, an economic research
institute.
'Right Policy'
"Supporting renewables is the right policy from an
economic perspective, despite the high initial costs," Kemfert
says. "The renewable industry is the only industry in Germany
that reported an increase in revenue over the past three
years."
In addition to the jobs argument, Kemfert and others say
Germany will benefit as renewables replace coal, gas and oil
that are mostly imported and subject to price swings.
Environment Minister Norbert Roettgen says expansion of
wind and solar will provide Germany with cheap power by mid-
century, when fossil fuels become scarce and expensive.
Roettgen, from Merkel's Christian Democratic Union, wanted the
energy plan to tilt more in favor of renewables. Economy
Minister Rainer Bruederle and members of his Free Democratic
Party lobbied for a longer life span for the country's nuclear
plants and more-aggressive cuts in the preferential pricing for
clean-energy installations.
Merkel's plan includes a goal of adding as much as 25,000
megawatts of wind turbines in the North Sea and the Baltic. That
would be a lot of generation: The 17 nuclear plants in operation
in Germany today have a total capacity of about 21,500 megawatts
and produce almost a quarter of the country's power.
Offshore Wind
Adding offshore wind facilities would represent a next step
for Germany, which lags behind Denmark and the U.K. in this
category. The giant turbines anchored to the seabed require a
bigger upfront investment -- and the likely involvement of large
power producers such as RWE AG. Critics of Merkel's plan
question whether it provides sufficient support to get these
facilities built.
Nuclear power is unpopular in Germany, even as neighboring
France relies on reactors for three-quarters of its electricity
and is building more. The 1986 explosion and fire at the
Chernobyl plant in Ukraine, which sent up a plume of radiation
that rmeached much of Europe, turned public opinion against the
technology.
Only about a third of Germans believe that delaying the
retirement of nuclear units is necessary to help with the
transition to renewables, according to a survey commissioned by
environmental group Greenpeace and conducted by TNS Emnid.
Nuclear, No Thanks
"We don't need a nuclear extension," says Olaf Hohmeyer,
a professor of energy economics at the University of Flensburg.
"It's merely a license to print money."
Hohmeyer says Germany could generate all of its power using
renewables by 2050. As long as nuclear plants are providing
cheaper power to the grid, the incentive to build the offshore
wind-power projects, in particular, will be inadequate, he says.
The country's largest utilities, E.ON AG and RWE, along
with Karlsruhe-based Energie Baden-Wuerttemberg AG and a unit of
Sweden's Vattenfall AB, operate the country's nuclear plants.
They will earn about 6 billion euros ($8 billion) in extra
profit for every year's delay in the retirement of their
reactors, according to estimates from the environment and
resources department of the RWI economic institute in Essen.
About half of that money will go to the government to support
new power generation.
"Chancellor Merkel's energy policy is being written by
Juergen Grossmann, not by the cabinet," the Green Party's
Trittin told the Parliament, referring to the chief executive
officer of RWE.
Special Tariffs
The Greens and the Social Democratic Party created the
system of special tariffs to support wind and solar a decade
ago, when they were together in a coalition government. They
also enacted the deadline to phase out nuclear power and plan to
sue to keep Merkel from delaying the plant retirements.
Most reactor waste is still stored in temporary casks near
each nuclear plant, which adds to the concerns that Germans have
about the technology. Any permanent disposal for highly
radioactive waste is at least two decades away, as the country
struggles to choose and prepare an appropriate site, says
Wolfram Koenig, president of the German nuclear safety
regulator.
One advantage of nuclear power is that it emits almost no
greenhouse gases. Germany is subject to the carbon dioxide
emission reductions that the European Union promised under the
Kyoto Protocol climate treaty. Keeping the country's reactors
online longer means that growth in renewable generation can be
used to retire coal plants. Power demand grows by almost 1
percent each year, even though the German population is
shrinking.
'Shape the Transition'
"Continued use of nuclear energy will help us to shape the
transition to the renewable age in an ecologically and
economically sensible fashion," Economy Minister Bruederle
says.
Electricity costs are already steep in Germany. Residential
consumers in 2009 paid the second-highest average rate among the
27 members of the EU: 22.9 euro cents per kilowatt-hour, less
than the 25.5 cents paid in Denmark but 39 percent more than the
EU average of 16.5 cents.
While the tab for subsidizing renewable power is still a
small part of a typical monthly electric bill -- less than the
price of a Starbucks cappuccino -- that slice is growing. A
surge in solar-cell installations in 2010 means that the total
cost of the feed-in tariffs will jump 72 percent in 2011,
according to calculations by the owners of Germany's high-
voltage transmission system.
46 Billion Euros
Support for solar power alone may cost 46 billion euros
from 2000 to 2030, according to a study by the Wuppertal
Institute for Climate, Environment and Energy.
While these costs are high, they aren't yet crippling, and
Merkel aims to keep it that way. Spain's support for solar
power, by contrast, has become a nightmare for the government.
Spain, which was trying to mimic Germany's approach, set
the tariffs too high, and too much new generation got built. The
country is now reneging, cutting feed-in tariffs that investors
were promised.
In addition to the concern that the price supports won't be
set high enough to get new clean-power facilities built, some
energy experts and environmentalists complain that Merkel is
doing little to integrate renewable-energy facilities into the
electricity grid.
'Huge Transition'
"There is no plan for this huge transition," says Sven
Teske, a Greenpeace researcher.
While Clever benefits from the ability to sell excess power
to electricity distributors, Germany's promotion of renewable
energy may erode profits at E.ON, RWE and other large power
producers. Their nuclear units, designed to operate at full
output around the clock, are a poor complement to wind and
solar, which are intermittent and depend on daylight and
favorable weather.
Sometimes when breezes blow strongly and wind turbines
generate ample power, reactor owners have to pay distributors to
take their electricity, University of Flensburg's Hohmeyer says.
With permission to keep reactors online for longer, big
electricity producers have every incentive to slow the
investment in renewables such as offshore wind, he says.
Germany's chances of continuing to lead the world in
renewable energy may depend on whether Merkel really has struck
the proper balance.
For Related News and Information:
Most-read environment stories: MNI ENV <GO>
Climate-change news: NI CLIMATE <GO>
Top environment, renewable energy page: GREEN <GO>
Stories on energy from agriculture: TNI AGR ALTNRG BN <GO>
Today's main power stories: PTOP <GO>
--Editors: Rob Dieterich, Vince Bielski
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