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.