Nuclear power nightmare

Germany will close its nuclear power stations by 2020

The decision by Germany to close all its 19 nuclear reactors has economic as well as political ramifications.

The reactors produce one-third of the country's electricity, and replacing them will be costly.

Germany's power industry is rapidly consolidating, with the two biggest players, Veba and Viag, in the process of merging.

This move will add to their costs and hasten consolidation in the industry.

The big generators have already anticipated the decline of the nuclear industry.

They are focusing their efforts on expansion abroad, and diversification into telecoms and other utilities.

Germany's nuclear power stations

KWO Obrigheim (EnBW): 340MW

KKS Stade (Veba): 640MW

Biblis A &B (RWE): 2,407MW

GKN 1&2 Neckar (EnBW): 2,054MW

KKB Brunsbuettel (Veba); 771MW

KKI 1&2 Isar (Viag): 2,270MW

KKU Unterweser (Veba): 1,285MW

KPP 1&2 Philippsburg(EnBW): 2,248MW

KKG Grafenrhenfeld (Viag): 1,275MW

KKK Kruemmel (Veba): 1,260MW

KRB B&C (RWE): 2,572MW

KWG Gronhnde (Veba): 1,360MW

KBR Brokdorf (Veba): 1,370MW

KKE Emsland (VEW): 1,290MW

MW=megawatt, measure of plant capacity

Germany is struggling to liberalise its electricity industry to benefit customers.

Customers pay

The costs of the shutdown are likely to be passed on to consumers, but the increase in competition will soften the blow.

Electricity prices to industry fell by 60% last year after deregulation ended the system of regional monopolies.

Over-capacity in the industry and the ability to buy electricity from other suppliers, especially in France, will also cushion the initial impact.

And the long phase-out, with nuclear power stations continuing to operate for 32 years before being phased out, will allow time to borrow the billions of marks needed for new power stations.

It is not surprising, therefore, that the industry, which had attacked earlier plans as likely to lead to huge job losses, said the deal was "economically acceptable," while the stock market sent the shares of the utility companies higher.

Environmentalists argue that within that time frame, a more efficient use of energy could obviate the need for more power generation.

Certainly, as Germany shifts from a manufacturing to a service-based economy, the energy needs coming from heavy industry will diminish.

Oil dependence

From an economic point of view, the replacement costs of nuclear power are born by the companies concerned, and ultimately their customers.

Over the time period contemplated, that will be a relatively small burden on the economy as a whole, especially if it encourages conservation measures.

However, the cost of replacing one power source with another could be a larger burden on the economy if it involves importing natural gas or oil from abroad to make up the energy shortfall.

It was the huge increase in oil prices in the 1970s that led France and Japan to accelerate their nuclear power programmes.

Oil prices have now reached $30 a barrel again and the rise looks set to continue for the time being.

The need for security of supply for its natural gas also led Germany to invest in a vast pipeline network from Russia.

Germany's strong trade surplus, and its leading position within the eurozone, may make it less vulnerable than in the l970s.

However, with the economy struggling to recover from a decade of weakness, additional costs may be the last thing it needs.

Sweden's experience may be instructive.

Despite a commitment to phase out nuclear power two decades ago, the country has yet to close a single nuclear power station.