Tallying the Unknown Costs of Germany’s Nuclear Power Sector

When the historic vote passed with an overwhelming majority in the Bundestag last week, it was hardly noticed. Yet the new law ends what newspaper Frankfurter Allgemeine Zeitung called Germany’s "30-year war" over nuclear power. After decades of heated confrontation, nuclear energy will no longer be one of the main divisive issues for Germans anymore.

In unprecedented unity, the Parliament voted across all political lines to exit the technology, although no applause greeted the result—513 in favor, 79 against, and seven abstentions—as it was called out.

Until four month ago, the liberal-conservative coalition government had lauded the country’s nuclear power, as safe and crucial as a “bridge technology” toward the renewable age. It had pushed through a 14-year extension for its nuclear plants in the fall of 2010, nullifying the earlier exit enacted by the previous government. With the new law, it has finalized a dramatic shift of course.

The change was brought about by Japan’s Fukushima nuclear disaster in March. Chancellor Angela Merkel caught many by surprise when she suspended operations at the oldest power stations for a safety review. Germany’s then economics minister admitted in a leaked document that this “irrational” decision was needed to cater to voter’s worries. Nuclear power has been a sensitive issue in Germany, particularly since the Chernobyl accident in 1986, the fallout from which drifted to Germany.

A recent study by Berlin-based think tank Green Budget Germany, argues that the nuclear industry over the last 60 years has benefited from state policies and regulations … worth more than US$ 281 billion.

Despite the suspensions, Merkel’s party lost elections in the key state of Baden-Württemberg a month later. Amid the record anti-nuclear protests, the first Green Party state governor came to power.

The exit from nuclear means that the eight oldest reactors will stay offline while the remaining nine will be shutdown successively by late 2022.

The government will invest heavily in the electricity grid, support the development of high-efficiency gas and coal power stations, while aiming to double renewables by 2020. In order to avoid blackouts, one of the old nuclear plants will stay on reserve throughout next winter. Currently, renewables provide 17 percent of Germany’s electricity and nuclear 22 percent.

The nuclear energy industry has often warned that a phase-out would leave Germany dependent on imported electricity and that the German industry will lose its competitiveness if it has to pay more for green electricity. They also stress Germany’s high safety standards and low electricity prices nuclear has provided to consumers.

But now that the nuclear experiment is drawing to a close, it is questionable how cheap nuclear energy has really been.

Nuclear Cost to Taxpayers

In Germany, four large private energy companies run the nuclear plants hence the costs are theoretically not born by the taxpayer.

The German Atomic Forum, a nuclear energy lobby group, on their website it states, "At no time were we supported by [the] government,” and that “In Germany the taxpayer had to pay not a singly cent of subsidies.”

It mentions 16.8 billion euros (US24.44 billion) between 1956 and 2008 in state research funding, but considers that a federal exercise independent from any industry interests.

Nuclear power companies in Germany are obliged to create sufficient amounts of accruals during operation to reserve money for costly decommissioning and nuclear waste disposal at the end of every plant’s life. These costs are in the multiple billions. These accruals are tax free, which many consider to be a state subsidy.

The forum however, argues that this is common practice in the industry, and has been approved by the European Court of Justice, the highest court in the European Union.

However, a recent study by Berlin-based think tank Green Budget Germany, argues that the nuclear industry over the last 60 years has benefited from state policies and regulations, both directly and indirectly. These benefits have been worth more than 194 billion euros (US$281 billion).

Swantje Küchler, one of the study’s authors explains that they took into consideration a “broader understanding of subsidies,” including state practices, institutions, regulations, and laws that have affected the national budget, that have benefited the nuclear industry between 1950 and 2010.

The study includes nuclear fuel that was never taxed until Merkel introduced it in 2010—much to the chagrin of the industry. It also includes the practice of accruals.

While the authors praise the policy of putting money aside, they calculate that although the accruals are not taxed as income, yet can be used for other investments by the companies, netted the power companies about 68 billion euros (US$98 billion).

Besides "smaller" payments the German state has made to, for example the International Atomic Energy Agency, another main item that has affected the German budget for decades, according to the study, has been over 55 billion euros (US$79 billion) spent by the federal government on nuclear energy research, including building Germany's first reactors.

Other federal expenses for monitoring, control and protection of nuclear assets, and precautionary measures for accidents, the Green Budget report mentioned but did not include since other energy producers also benefit and because they are hard to quantify.

Dr. Sonja Peterson, researcher at the Kiel Institute, an economic think tank based in northern Germany, concurs with the scale of these figures, but points out that such costs are hard to quantify.

If the companies had not had these benefits—which taxpayers are unknowingly paying for—the Green Budget reports says price of electricity generated from nuclear energy would likely be nearly double the current rate of 4 eurocent (US$0.06) per kilowatt hour.

Other studies, mentioned by Peterson, calculate consumers would be paying up to 1 euro (US$1.45) more.

External Costs

Several more budget items, which also came out of the federal budget and benefited nuclear operators, were not mentioned in the Green Budget report.

These include many externalized costs paid by third parties, usually taxpayers. These include the environmental damage, negative health impacts, and so on, associated with running the plants, decommissioning them, as well as storing the waste.

In a report for the Worldwatch Institute, professor Steve Thomas from University of Greenwich writes about how the economics of nuclear energy looks very different if considered from a societal point of view, not just a corporate one.

“Most governments advocate the ‘polluter pays principle,’ meaning that those who consume the energy from a nuclear plant should also pay for the wider impacts on society and the environment. … This assumes, however, that future generations will have the funds,” wrote Thomas.

He also points out that in the advent of an accident, it would be taxpayers paying the massive health costs.

One study by the German Childhood Cancer Registry discovered that the closer a child lives near a nuclear power plant in Germany the more likely he or she is to develop leukemia or other cancer.

These uncounted victims so far are not quantified, acknowledged, and compensated, but since Germany has public medical insurance, the general public would pay for it.

Despite the phaseout, Küchler still estimates that over the next 11 years, at least another 100 billion euros (US$145.3 billion) of public funds will go toward the nuclear industry.

And the costs could run even higher. Currently, three of Germany’s big energy companies are preparing to sue the government over the nuclear phaseout. They are arguing that the law passed last week is unconstitutional since it amounts to a violation of their property rights.

“We expect fair treatment and compensation for our financial losses due to the German decision," said Vattenfall CEO in a statement.