Germany's Moratorium on Nuclear Energy Pushes Up Electricity Prices

The moratorium on nuclear power announced last month by German Chancellor Angela Merkel shortly after the accident at Fukushima Daiichi already is driving up energy prices and raising concern about the reliability of the nation’s electricity supply, according to Bloomberg News. Nuclear energy supplies about one-quarter of the nation’s electricity. Natural gas from Russia is seen as the logical replacement, should Germany follow through on closing out its nuclear plants. The country already imports one-third of its natural gas from Russia.

Merkel’s pledge to speed the exit from atomic power after the crisis in Japan is helping push natural-gas prices higher as Germany scrambles to identify energy alternatives. Gas supplied by [Russia's] OAO Gazprom may be the easiest way for her to meet Germany’s climate goals and keep Europe’s largest economy running.

The statements from Merkel represent a turnabout, which may relate more to politics than issues related to nuclear safety:

Pressured by a regional election loss amid a surge in support for the Greens, Merkel ... said on March 28 that her "view on nuclear energy has changed.” The result is “a nuclear witch-hunt” that may result in more than seven reactor closures, said Lueder Schumacher, an analyst at UniCredit SpA in London. “So far the public debate in Germany has focused on the desire to exit nuclear energy with little thought being spared as to what is actually going to replace it.”

It didn't take long for the policy shift on nuclear energy to affect energy prices:

German power for next year has risen about 10 percent since Merkel’s announcement, reaching its highest price in more than 19 months on April 4. ...Gas for delivery in 2013 cost 7 percent more at the Dutch-based Endex TTF gas exchange yesterday.

One German utility, RWE AG, has filed a lawsuit challenging the shutdown of its Biblis A nuclear plant. The company's chief executive officer said power shortages may be looming. Two days after his company filed suit:

Juergen Grossmann warned ... of “more frequent power outages, say two, three days a year.”

The CEO also expressed concern that “some of the industrial foundation of our country will be lost.” Merkel is scheduled to discuss Germany's energy policy at meeting April 15 with the nation's 16 state prime ministers.

Meanwhile, Germany is supplementing its electricity supply with increased imports from neighboring countries that rely on nuclear energy. According to the German Association of Energy and Water Industries, Germany doubled its imports of electricity from France in the second half of March and currently imports the capacity equivalent of 1.5 reactors from France and the Czech Republic every day.

ENTSO-E, the Brussels-based group overseeing Europe's electricity grid and tracking cross-border flows, confirmed that Germany turned from exporting to importing electricity toward the end of March.