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Falling Cost of Renewables Softens Nuclear Shutdown

As renewable energy sources approach cost parity with traditional sources, phasing out nuclear power might in Germany be economically smart.

When Germany decided this year to phase out its nuclear sector, eight of its 17 power plants were mothballed immediately, and Germans learned just how expensive it can be to shut down a reactor: about a billion euros.

That didn't surprise industry analysts, but it also doesn't include the cost of storing nuclear waste. So German power companies — though they'd been ordered to sock away enough cash to decommission their reactors — will probably ask the government for more help.

"Total costs [for all reactors] might yet top the €32.5 billion that companies have set aside for expenses relating to the shutdown," Reuters reported last week. "That is because the costs of storing nuclear waste produced during the lifetime of the 17 facilities are excluded from estimates." (With the euro fetching about US$1.33 this week, that's $43.3 billion.)

The eventual costs of turning off nuclear power should be a major line item in assessing its true costs in the first place. The uncertain (or deliberately ignored) costs of waste storage are one reason Chancellor Angela Merkel decided to shut down German reactors sooner rather than later. What she certainly knew — and what nuclear advocates often fail to mention — is that nuclear power, no less than renewable energy, still needs cushy government support.

The overall cost of building modern nuclear plants also keeps rising, for a number of reasons (including safety regulations and the cost of high-tech reactors), while the cost of renewables falls. Connie Hedegaard, the European Union's climate change commissioner, came right out and said it last March, in the week after the Fukushima disaster: "Some people tend to believe that nuclear is very, very cheap," she said, "but offshore wind is cheaper than nuclear."

She was probably following the Green argument that costs for wind energy, with a sleek new turbines, has fallen below the kilowatt-hour cost of nuclear energy from sleek new reactors.

Whether the sinking costs of renewable technologies have met a historic crossover point with the rising costs of nuclear is controversial (and they probably haven't). But nuclear power plants can suffer from "dis-economies of scale," where prices rise absurdly after a plant crosses a certain size — often because the plant can generate too much electricity for a local market.

EUROPEAN DISPATCHMichael Scott Moore complements his standing feature in Miller-McCune magazine with frequent posts on the policy challenges and solutions popping up on the other side of the pond.

Michael Scott Moore complements his standing feature in Miller-McCune magazine with frequent posts on the policy challenges and solutions popping up on the other side of the pond.

Meanwhile, solar energy prices have a long way to fall: German producers of solar panels complain that Chinese companies have managed to underprice them, which threatens Germany's huge advantage in photovoltaic manufacture. Prices over the last five years have collapsed by about 50 percent because of Chinese competition.

"The dramatic price change for solar modules is admittedly a burden for [Western] firms," the German magazine Manager Magazin wrote in August, "but that means the technology enjoys more demand than ever."

And it means solar energy could start to hold its own on the market: Germany's famous system of price subsidies may be on its way out. One reason for an overcast land like Germany to have such a strong photovoltaic industry in the first place is the so-called feed-in tariff. The federal government guarantees a fixed high price for any producer who can feed solar energy into the national grid.

These tariffs — at four times the price of a normal kilowatt, until a recent cut — make rooftop solar panels worthwhile even to private citizens, and over the last decade they've made Germany a world leader in solar-power generation.

But equipment prices have fallen so quickly that the German solar industry may not have to rely much longer on the tariffs at all. Market analyst Markus Lohr told Manager Magazin that photovoltaic manufacturers have started to bring production up to new economies of scale: "The companies are lowering their own costs by building massive factories," he said. "The age of feed-in tariffs is ending (in Germany), and photovoltaics are already partly competitive."

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