Merkel’s Atomic Energy Overhaul May Aid Industry at Expense of Consumers

Photographer: Guenter Schiffmann/Bloomberg

Vapour rises from a cooling tower at the E.ON AG Isar nuclear reactor plant in Essenbach, Germany. Close

Vapour rises from a cooling tower at the E.ON AG Isar nuclear reactor plant in Essenbach, Germany.

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Photographer: Guenter Schiffmann/Bloomberg

Vapour rises from a cooling tower at the E.ON AG Isar nuclear reactor plant in Essenbach, Germany.

Chancellor Angela Merkel may rely on German consumers to shoulder the cost of exiting nuclear power as she seeks to shelter companies whose exports are driving growth in Europe’s biggest economy.

Merkel’s coalition will shut 17 atomic plants by 2022 under a plan outlined yesterday, tilting the energy mix toward renewables following the disaster in Japan.

The decision prompted the VIK lobby group to predict a 225- euro ($321) a year increase in power bills for a three-person household, based on a forecast from a committee advising the government that wholesale power prices may rise as much as 85 percent from now.

“Everything’s on the line here for us,” Annette Loske, who heads the lobby representing energy users including steelmaker ThyssenKrupp AG and carmaker Volkswagen AG (VOW), said by phone from the city of Essen. “This electricity price increase specific to Germany can’t be allowed to reach industry.”

Industries from carmakers to chemical producers are pressing Merkel press for exemptions from higher prices they say will make their products costlier than those of foreign rivals. Environment Minister Norbert Roettgen said yesterday he plans to extend breaks in subsidies to more companies that are obliged to pay for cleaner forms of energy.

Photographer: Hannelore Foerster/Bloomberg

Angela Merkel, Germany's chancellor, inspects a model of the Energie Baden-Wuerttemberg (EnBW) Baltic 1 wind farm during the official opening ceremony in Zingst, Germany. Close

Angela Merkel, Germany's chancellor, inspects a model of the Energie Baden-Wuerttemberg... Read More

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Photographer: Hannelore Foerster/Bloomberg

Angela Merkel, Germany's chancellor, inspects a model of the Energie Baden-Wuerttemberg (EnBW) Baltic 1 wind farm during the official opening ceremony in Zingst, Germany.

Germany became the biggest economy to announce a phase out of atomic power after a meltdown at Japanese reactors in March stoked safety concerns, costing Merkel’s Christian Democrats votes in state elections as support for the anti-nuclear Green Party soared to a record.

Policy Reversal

The chancellor, who scrapped plans to extend the lives of nuclear plants by an average 12 years that she pushed through parliament last year, will present as many as six bills to Cabinet next week on the energy shift. These include a revamp of feed-in-tariffs for solar, wind and bio-mass power, new building insulation targets and plans for “smart” power grids.

The reversal will cost as much as 30 billion euros, and the government “hasn’t got a magic wand to wave that money out of a hat,” Joachim Pfeiffer, parliamentary energy and economic policy spokesman for Merkel’s party, said this month.

“It’s the consumer who will pay the bill, who else?” Michael Schaefer, an analyst with Equinet AG in Frankfurt, said last week. “You can’t switch off cost-efficient baseload power generation at the same time as trying to keep prices low.” Baseload is electricity delivered around the clock.

Electricity Costs

German households, already shouldering electricity prices that are among the highest in Europe, pay twice as much as in France, where 80 percent of electricity comes from atomic plants, French Industry Minister Eric Besson said yesterday.

Exiting nuclear could boost wholesale power prices by as much as 50 euros a megawatt-hour, a committee charged by the government with assessing the economic and ethical aspects of atomic energy. At that rate, a three-person household’s annual bill would rise by 225 euros, the VIK estimates.

Baseload power for next-month delivery averaged 58.80 euros a megawatt-hour since Merkel ordered the seven oldest reactors idled in March pending a review that resulted in yesterday’s decision to close them with immediate effect, according to broker prices on Bloomberg. That’s 11 percent higher than in the same period a year earlier.

Germany’s 17 nuclear power plants, operated by EON AG, RWE AG (RWE), EnBW Energie Baden-Wuerttemberg AG (EBK) and Vattenfall AB, supply 23 percent of the country’s power while wind, solar and other more volatile, subsidized renewable sources generated 17 percent last year, according to the BDEW German utility association.

Utilities Fall

EON has fallen 15 percent in Frankfurt trading since the March 11 earthquake and tsunami devastated Japan’s Fukushima Dai-Ichi power plant. RWE has dropped 16 percent. Vattenfall is owned by Sweden’s government and EnBW is more than 93 percent- held by a southwestern German state and local municipalities.

The BDI business lobby wants Merkel’s government to be ready to adjust its nuclear exit plans should energy output and grid expansion fail to meet milestone targets between now and the closure of the last reactor in 2022, Hans-Peter Keitel, the federation’s head, wrote yesterday in a public letter.

“At the moment we have a two-step system of support” for energy-intensive companies, Roettgen told reporters yesterday. Companies that consume as much as 10 gigawatt-hours of power per year don’t get any aid, the environment minister said. “We’re changing that by introducing a linear system” in which companies will get more aid the more they consume, starting at 1 gigawatt hour.

Germany, home to wind turbine maker Nordex SE (NDX1) and photovoltaic panel producer Solarworld AG, would see its renewable sector profit from increased demand. The country’s gross domestic product could be almost 3 percent higher in 2030 thanks to the policy shift, the Berlin-based DIW economic institute said May 19.

Nordex shares soared 13 percent to 6.80 euros yesterday while Solarworld, which is based in Bonn, added 8.8 percent to 9.62 euros.

To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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