In Age of Austerity, France Stays with Nuclear Power

First, an additional tidbit on our coverage of IEA’s World Energy Outlook 2011, where we learned that the rumors of nuclear energy’s demise are greatly exaggerated. Just consider this chart from page two of the “Key Graphs” part of the report. 

As you can see, the IEA sees nuclear’s future more in line with the measured growth of renewables rather than coal or oil’s steady decline.

In its report, the IEA imagines a world without (or actually, with very little) nuclear power. It’s called the “Low Nuclear Case” scenario. And surprise! It’s not the utopia some would have you believe.

The net result would be to put additional upward pressure on energy prices, raise additional concerns about energy security and make it harder and more expensive to combat climate change.

Of course, it’s a projection, so it has to be taken with a grain of salt. But the data coming in from countries that have scaled back their nuclear energy plans show that the IEA is onto something.

First, there’s Germany. As we’ve covered before, their nuclear moratorium has led to higher cost electricity, lost jobs and more emissions.

There’s some evidence that Japan’s shutdown of most of its reactors may be having a negative effect on Japan’s export-based economy. [Financial Times, subscript req’d. “Japan restarts first nuclear reactor since disaster,” Nov. 1, 2011.]

Concerns about stable supply of electricity are prompting some [Japanese] companies to shift production overseas. A rise in fuel costs for utilities to make up for a lack of nuclear power, leading to bigger electricity bills for consumers, is another factor undermining the economy.

A full nuclear shutdown would have a huge annual bill as Japan turns to more expensive fossil fuels.  

Using gas and oil to make up for the loss of all nuclear power reactors will cost more than 3,000 bn yen ($38bn) a year, based on imported fuel prices and utilisation rates in 2009, the government has estimated.

Another country has considered the pros and cons of nuclear power, but when asked about shutting down its reactors replied with an emphatic “Non, merci!”

The French government's fiscal belt-tightening effort won't touch the country's ambitious nuclear energy program, France's energy minister said Wednesday, as he also dismissed any need for France to reduce its nuclear dependency...French energy and industry minister Eric Besson said Flamanville, the follow-up Penly reactor and other French nuclear investments won't be affected "at all" by the country's austerity package.

"The plan is designed to reduce deficits, yet growth engines aren't touched, budgets for the future haven't been dented," Mr. Besson said two days after the government unveiled a €7 billion austerity package.

In fact, it turns out nuclear energy can be especially helpful in times of austerity. First nuclear energy creates jobs—not only in the industry itself—but in wholly unrelated fields.

Mr. [Henri] Proglio [chief executive of Electricité de France] said that 400,000 jobs, direct and indirect, in the nuclear industry would be threatened [if France shut down its reactors] as well as another 100,000 future jobs dependent on nuclear exports. Another 500,000 jobs in energy-intensive sectors like aluminum production could be outsourced to other countries as a result of higher energy costs, he predicted.

Lower cost electricity (generated thanks to nuclear energy) also leaves ratepayers/consumers with more money in their pockets, too. Money they can spend on other goods and services, spreading the wealth.

The French pay, on average, about 30 percent less for their electricity than their neighbors do, he said, ‘‘thanks to our nuclear establishment and hydropower.’’

Of course there is a way out. Something akin to the IEA’s Low Nuclear Case: build more fossil fuel plants.

Mr. Proglio told the paper that it was his ‘‘conviction’’ that France…would need to invest somewhere in the vicinity of $544 billion to build new fossil fuel power plants to replace lost generating capacity if it shut down its reactors.

That, he said, would have to be financed by a doubling of the price of electricity and would bring a 50 percent increase in France’s greenhouse gas emissions.

A doubling of electricity prices, hundreds of thousands of jobs lost and (lest we forget!) higher emissions. Sounds like the IEA is onto something in its projections of a world without nuclear power. And sounds like France has the right idea to not scale back nuclear energy during tough times. Something to keep in mind as more nations, including our own, face budget cuts.

Germany Nuclear Phase Out Same as Putting 4.4 Million Cars on the Road

We return, once more, to Germany where details are starting to emerge on the real costs of their nuclear phase out.

Let’s start with emissions. According to an estimate by Laszlo Varro, the head of the gas, coal, and power markets division at the International Energy Agency emissions will rise significantly.

Varro estimates that the nuclear phase out in Germany has caused a 25-million-ton annual increase in carbon dioxide emissions. The culprit, in large part, is the new coal power that has come online to meet the shortfall.

25 million tons is sort of abstract, but EPA has a pretty cool tool: the Greenhouse Gas Equivalencies Calculator. It finds more concrete alternatives to “tons of carbon dioxide” like “emissions from passenger vehicles.” Turns out 25 million tons of CO₂ emissions per year is equal to (pick your favorite one of the following):

• Annual greenhouse gas emissions from 4,446,984 passenger vehicles or
• CO₂ emissions from 52,743,297 barrels of oil.
• CO₂ emissions from the electricity use of 2,827,882 homes.
• CO₂ emissions from burning 123,494 railcars’ worth of coal.
• Annual CO₂ emissions of 5.4 coal-fired power plants.

Imagine adding emissions from 4.4 million cars in a country of 80 million. Or the emissions from almost 3 million homes. That’s essentially what Germany’s done with its phase out of nuclear power.

Don’t forget jobs. Obviously, the European economy isn’t doing too well. While Germany seems to be weathering the storm fairly well, losing 11,000 jobs can’t help.

E.ON, the world's largest utility by sales, joined peers in posting weak half-year results as Germany's decision to abandon nuclear power forced it to slash its profit outlook, its dividend and up to 11,000 jobs.

There are also concerns over the nuclear phase out’s long-term drag on Germany’s export-oriented economy. One estimate has energy bills up 20%.

Christian Schulz, senior European economist at Berenberg Bank, said estimates suggested the nuclear shutdown would increase Germany's energy bill by a fifth, which will hit the country especially hard since its economy relies heavily on its energy-intensive manufacturing industry to propel growth.

This sort of things makes you understand German manufacturers’ concerns about competitiveness. But the phase out isn’t sparing consumers either.

German households pay twice as much for power than in France, where 80% of energy is generated by nuclear plants. Klaus Abberger, senior economist at the Ifo institute for economic research at the University of Munich, said energy prices had already gone up since plans to end nuclear power generation and would stay at high for at least the next five years [emphasis added].

So much for “expensive nuclear power.” Perhaps this is behind Belgium’s qualified rethink on nuclear power.

The plan for a shutdown of the three oldest reactors by 2015 and a complete exit by 2025 is conditional on finding enough energy from alternative sources to prevent any shortages.

"If it turns out we won't face shortages and prices would not skyrocket, we intend to stick to the nuclear exit law of 2003," a spokeswoman for Belgium's energy and climate ministry said.

That’s a fair share of caveats. At least this gives  Belgium a face-saving out if they can’t find cost effective “alternative sources” scalable enough to prevent blackouts. Renewables and natural gas may just fit the bill. Or not. Renewables are hard to scale up. Natural gas prices are hard to predict. But Belgium, unlike Germany, at least has given itself time to consider the alternatives.

Germany Counts Cost of Nuclear Shutdown

Nuclear energy. It’s expensive, right? That’s what a lot of our friends at the Union of Concerned Scientists and Greenpeace keep saying.

Alright, then let’s shut down some plants and start saving money, right? Surely, just on a cost basis alone, it makes sense. To be fair, let’s replace the electrons generated using fission with a mix of (more expensive) renewables and (relatively cheaper) fossil fuels. We can use more domestic coal, maybe import some natural gas and use local renewables to drive down electricity prices. That should save ratepayers real money every month. But wait. Something quite similar is happening in Germany and electricity prices have gone up, not down [FT, subscription req’d. Original article: “Electricity Prices Jump in Europe,” March 15.]. Just after the Fukushima accident, as Germany announced it was shutting down several nuclear power plants, the FT reported:

The cost of electricity in Germany, the European benchmark, immediately rose as utilities are likely to burn more expensive natural gas and thermal coal to bridge the shortfall in electricity.

Then, there are even more expensive options like renewables.

Increasing the share of renewables in electricity and heat is likely to be expensive for some time to come. Onshore wind is currently about 50% more expensive per unit of energy than conventional power sources, while offshore wind is about 250% more expensive.

And now, according to VIX, a German trade group, electricity prices for industrial users are expected to rise next year. It’s particularly poor timing:

Germany's big electricity consumers said on Wednesday they expected their power bills to rise by an average 9 percent for 2012, burdening industry amid a weakening economy and rising finance costs.

Not only that, but cutting nuclear energy out of the mix may be reducing not only the quantity, but the quality of electricity available. The knock-on effect? Horror of horrors! A decline in German manufacturing and export prowess.

…[VIK Chairman Volker Schwich] also said that network frequency changes have become more evident since the withdrawal of the huge nuclear facilities, which had ensured stability. This could hit sensitive industrial production, even if it is not noticeable by household customers.

‘It's not about a candle-lit dinner but complex production processes whose stability, long before a publicly noticeable network black-out, can be threatened,’ he said.

…He said this was unacceptable for an export nation.

There are many cost/benefit trade-offs to consider in energy choices. But here’s hoping that Germany’s rush to ditch nuclear power finally ends one enduring myth: that nuclear energy is just too expensive. As we pointed out before, done right over the long term, it’s one of the cheapest baseload generating options.

Finally, a side note on current prices. While it is true that German electricity prices (to be precise, contracts for baseload electricity in 2012) are down lately, this seems more due to the anticipation that European growth will remain slow this year, as this article notes. I.e., it’s not due to the German nuclear shutdown, which had the opposite effect on prices. 

Also, the press release from VIX, in German, is here. I found Google Translate got me pretty close to the original.

The Latte Fallacy: German Nuclear Shut Down Proving Expensive

One of the big arguments against nuclear is that it simply costs too much. Well, if the latest reports from Germany are anything to go by, consumers are going to have to pay more without it.

As reported here earlier, Germany has decided to phase out nuclear power and is hoping to shut down all of its plants by 2022. What has been the result? Rising electricity prices.

Since the first nuclear power plant was shut down, the price of electricity on the European Energy Exchange in Leipzig has increased by about 12 percent.

Not only that, Germany has lost  some energy independence too:

Germany has gone from being a net exporter to a net importer of electricity. According to the European Network of Transmission System Operators for Electricity (ENTSOE) in Brussels, Germany now imports several million kilowatt hours of electricity from abroad every day.

This wasn’t the way things were supposed to go.

"According to our calculations, the cost of a kilowatt hour of electricity will go up by only one cent," says Economics Minister Philipp Rösler, head of Merkel's junior coalition partner, the Free Democrats (FDP). For an average household, this would correspond to the price of only one latte a month, says Environment Minister Norbert Röttgen, of Merkel's Christian Democrats.

One latte a month. Doesn’t sound so bad. Well, the real price increase could be five times as much according to a study by the Rhenish-Westphalian Institute for Economic Research (RWI).

…the politicians' estimate of the costs of expanding renewable sources of energy is far too low…RWI experts estimate that the cost of electricity could increase by as much as five times the government's estimate of one cent per kilowatt hour.

Another study by the “semi-governmental” German Energy Agency anticipates an increase of four to five cents, in line with the RWI estimate. Finally, a third estimate from the Economics Ministry sees more than a “latte a month” increase. 

An internal estimate making the rounds at the Economics Ministry also exceeds the official announcements. It concludes that an average three-person household will pay an additional 0.5 to 1.5 cents per kilowatt hour, and up to five cents more in the mid-term [emphasis added]. This would come to an additional cost of €175 ($250) a year. "Not exactly the price of a latte," says Manuel Frondel of the RWI.

It’s just more evidence that when it’s done right, nuclear energy is one of the most cost effective ways of generating electricity.