IEEJ: January 2011

Special Bulletin
September 9, 2010
A Japanese Perspective on the International Energy Landscape (10)Germany Revises Nuclear Power Phase-out Policy and Extends Plant Operations
Ken Koyama, PhD
Director
Strategy and Industry Research Unit
Institute of Energy Economics, JapanOn September 5, the German coalition government led by Chancellor Angela Merkel
announced a basic policy decision to revise an earlier plan for terminating operations of all nuclear
power plants by around 2022 and to extend operations of the 17 existing nuclear reactors. According
to the decision, seven reactors built in or before 1980 will extend operations for eight years and 10
newer reactors for 14 years. On average, nuclear reactor operations will be extended for 12 years.
The basic policy decision represented an about-face for Germany, which had sought to terminate
nuclear power generation under the policy of phasing out operations of existing nuclear power
plants.
The nuclear power phase-out policy was originally decided on by the previous
administration that then Chancellor Gerhard Schroeder inaugurated as a center-left coalition(between the Social Democratic Party and the Green Party) in 1998. The policy had been
implemented through the government’s agreement with the electric power industry in 2000 and theeffectuation of a revised nuclear power law in 2002. When the agreement with the electric powerindustry was reached, 19 nuclear power reactors were in operation. The government then set aceiling on nuclear power generation at 2.623 trillion kWh and allowed electric power companies tocontinue nuclear power plant operations under the ceiling with economic efficiency in mind andgradually terminate the operations to achieve the nuclear power phase-out. Under the phase-outpolicy, Germany terminated operations of two reactors – in Stade (2003) and Obrigheim (2005).
But the nuclear power phase-out policy has been lingering as one of the controversial
problems regarding energy, environmental, economic and industrial policies in Germany. When theChristian Democratic Union and the Social Democratic Party formed a coalition under Chancellor
Merkel to replace the center-left coalition through an election in 2005, behind-the-scene coordinationof views about the nuclear power phase-out policy took place. But the then new coalition
government eventually maintained the policy. Through an election in September 2009, however, theCDU and the Liberal Democratic Party formed a center-right coalition, causing discussions again onwhether the nuclear power phase-out policy should be revised. In fact, Chancellor Merkel took anattitude of specifying the importance of nuclear power plants’ extended operations during campaigns
for the election.
The policy about-face came as Germany was apparently searching an answer to a bigquestion of how the 3E (environmental, economic and energy) policy goals should be achievedsimultaneously. The simultaneous achievement of the maintenance and enhancement of the economy
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and industrial competitiveness in Germany as the largest European economic power, the stabilizationof energy supply and the positive reduction of greenhouse gas emissions has been an important
challenge in Germany. Discussions on the challenge in Germany have focused on how to treat
nuclear power plants (or whether to revise the nuclear power phase-out policy). In a sense, Germany
has made its answer to the big question amid the “nuclear renaissance” that has been growing in theworld and Europe to take a new look at the importance of nuclear power generation.
Germany must secure cheap, stable energy/electricity supply to enhance its economic andindustrial competitiveness, while building the energy supply/demand structure to allow greenhousegas emissions in 2020 to be reduced by 40% from 1990. Behind the nuclear power phase-out policy,
renewable energy sources including wind power and solar energy had been expected to spread
substantially and contribute to the policy goals. But concerns have grown over energy (electricity)
cost hikes amid the expansion of renewable energy uses and over characteristically intermittent
supply of renewable energy sources. Furthermore, doubts have emerged about whether renewableenergy power generation could be expanded to replace nuclear power generation accounting for
more than 20% of electricity supply in Germany. Then, the German government has decided on theextension of nuclear power plant operations apparently as a realistic solution. As Germany is set toadopt a new energy strategy initiative by late September, the nuclear policy about-face may bepositioned as one of the key points for the initiative. But Chancellor Merkel still gives top priority tothe promotion of renewable energy sources as a long-term policy. She has made remarks indicatingthat nuclear energy should be given priority as a bridge to the full-fledged introduction of renewableenergy sources.
Efforts to simultaneously achieve the 3E policy goals are also indicated by a plan to
introduce a new tax on additional profit that the electric power industry would acquire on theextension of nuclear power plant operations. The industry is expected to earn unexpected windfall
profit by taking advantage of extended operations of existing nuclear plants to secure electricity
supply through economically excellent nuclear energy and avoid investment in new power sources
and costs for additional fossil fuel procurement. The government plans to introduce a nuclear fueltax on the windfall profit and incorporate the relevant tax revenue (estimated at 2.3 billion euros peryear) into general financial resources. Although E.ON AG and other electric power companies areopposed to the new tax scheme, the government expects to secure cheap, stable electricity supply(that contributes to industrial competitiveness) and financial resources for contributing to theGermany economy. In addition, the government reportedly plans to require the electric powerindustry to contribute 300 million euros in 2011 and 200 million euros per year between 2012 and2016 to a special fund for the promotion of renewable energy sources. We may view the government
as attempting to make simultaneous approaches on energy, environmental and economic policies
through the nuclear policy about-face.
The German decision to extend operations of nuclear power plants can thus be interpreted
as being of great significance as a proposal regarding the simultaneous achievement of the 3E policy
goals. But there are some uncertainties about the policy about-face. We must take note of this point.
According to German polls, German citizens are divided over the decision to extend operations ofnuclear power plants. The SDP, the Green Party and environmental organizations, known for theiranti-nuclear attitude, have raised objections to the decision. As media reports indicate large-scale2

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anti-nuclear demonstrations planned for mid-September, we must pay attention to the trend of public
opinion. The government reportedly plans to bring the cabinet decision to a vote only in theBundestag lower house and avoid a vote in the Bundesrat upper house where opposition parties
control a majority. Opposition parties have raised objection to the decision and are planning to takecounteractions including a lawsuit to be filed with the Constitutional Court. Furthermore, Germany
plans to hold the next parliamentary election by 2013, indicating that another policy about-face,harsh debates and tough adjustments may emerge depending on election results. In the future
institutional design process, meanwhile, the government may have to coordinate views with theelectric power industry and the like over the above-noted new tax scheme and renewable energy
promotion fund. We may have to carefully watch and analyze the future development of the latest
important change in Germany as one of key moves regarding nuclear power generation in the world.

Contact: report@tky.ieej.or.jp

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