Achtung Baby: Real Dangers of German Denuclearization

Chalk this one up as a victory of politics over common sense. Imagine adopting an energy policy that (1) leaves you vulnerable to the whims of vainglorious and unreliable energy suppliers, (2) raises the costs of energy provision, and (3) pollutes the environment more as you return to coal burning, and (4) opens you up to litigation for forsaking agreed-to contracts to maintain nuclear power plants. As it so happens, one of the most rational nations on Earth, Germany, is doing precisely that.

In the wake of the 2011 Tohoku earthquake in Japan, European countries have reassessed their use of nuclear power. The French who already rely on nukes for about three-quarters of their power sensibly shrugged off this concern, correctly reasoning that they were not in the earthquake-prone Pacific ring of fire and had more robust designs. They've even built more plants since. The Germans, however, took fright for reasons that are obscure to me. What, then, have been the negative implications of Germany's decision to phase out nukes by 2022? Let us count the ways...

1. Heightened reliance on energy from a dodgy chap with Cold War fantasies - so Vladimir Putin is a swell guy for frightening EU countries and boosting bond prices. However, he is hardly a reliable economic partner. As Germany mothballs more nuclear plants, its reliance on Russia will increase unless it significantly boosts production from alternative sources--fracking, renewable energy, etc:

Germany, faced with the possibility that restricted energy supply from Russia could undermine its efforts to end nuclear power, needs to reduce its reliance on Russian energy and compensate the loss with renewable energy, Steinmeier said. Germany, which imports one-third of its natural gas from Russia, has decided to phase out all of the country's nuclear reactors by the end of 2022 in the wake of the nuclear accident at the Fukushima Daiichi power plant that broke out in Japan in 2011.

2. Increased costs of energy provision will hit German industry squarely in the gut - as one of the world's genuine manufacturing powerhouses, Germany is set to endure a largely self-inflicted setback. German researchers have modeled the impacts of denuclearization and state:

The model analysis with the electricity market model MICOES shows that the nuclear phase-out has a visible effect on the wholesale electricity prices that will increase compared to the situation with a lifetime extension of nuclear power by 11% in 2015 and 23% in 2020.

3. The quite frankly idiotic German phase-out not only increases environmentally unfriendly coal burning in Germany but also coal and nuclear production in neighboring countries that are ramping up to fill German energy demand. Net result? Zero improvement in cleaning up the air in Europe or making nuclear power "safe" as production is shifted to neighboring countries whose technologies are generally less advanced than Germany's (with the exception of the French):

Previously a net exporter of electricity, Germany now imports as much electricity as it sells abroad. Removing so much German electricity from the market has benefited power companies in neighboring countries that rely heavily on coal and nuclear power, thereby undermining Germany's environmental goals and its nuclear safety concerns.

Although abandoning nuclear power is expected to eventually clear the way for the development of renewable energy, in which Germany is already a world leader, the environmental effect so far has been problematic. Last year's shuttering of eight of the country's 17 reactors has led to an increase in carbon dioxide emissions of 25 million tons annually in Europe, said Laszlo Varro of the International Energy Agency, a European intergovernmental organization.

4. You get your pants sued off by reneging on commitments made by previous governments to run nuclear plants - Germany is hardly our idea of a country high in "political risk," but it may be so in energy. Sweden's state-owned power company Vattenfall has taken the German government to task for doing just that:

In May 2012 the Swedish energy company Vattenfall filed a request for arbitration against Germany at the International Centre for the Settlement of Investment Disputes (ICSID), housed at the World Bank in Washington, D.C., because of Germany’s decision to phase out nuclear energy. Vattenfall relies on its rights under the Energy Charter Treaty, an international trade and investment agreement in the energy sector.

This treaty, like many international investment agreements, grants foreign investors the right to bypass the domestic courts of the host country and to directly file a complaint to an ad hoc international tribunal to challenge proposed government regulations. Vattenfall is expected to claim well over €700 million in compensation in response to the closure of the nuclear power plants Krümmel and Brunsbüttel.

So much for German rationality in all walks of life. They have added to their energy costs, boosted their carbon emissions, reduced their trade surplus as energy imports rise, shifted externalities to neighbors who sell Germany power produced by coal and nukes, and rely more on the wiles of an unpredictable chap named Putin. It's a lose-lose-lose-lose proposition that constitutes the real dangers to denuclearization.