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Who pays for Germany’s nuclear phase-out?

Germany's decision a few years ago to phase out nuclear power was an abrupt move. But it still remains unclear who foots the bill for shutting down the nation's nuclear plants, as utilities seek damages from the state.

Germany’s decision a few years ago to phase out nuclear power was an abrupt move. But it still remains unclear who foots the bill for shutting down the nation’s nuclear plants, as utilities seek damages from the state.
Months after a Tsunami resulted in a nuclear disaster at the Fukushima Daiichi plant in Japan, Germany’s coalition government – led by Chancellor Angela Merkel – decided to phase out nuclear power in the country.

Immediately after Fukushima, eight of 17 functioning nuclear plants were shut down, and the government’s decision established a timeline of taking the remaining plants offline by 2022.

Five years later, it’s gradually becoming clear how much this hasty exit could cost. Feeling dispossessed by the move, major utilities have filed a raft of lawsuits claiming damage payments from the government amounting to around 20 billion euros ($22.3 billion).

An eagerly awaited ruling

Complying the government’s nuclear moratorium, Germany’s biggest energy provider Eon had to shut down its power plants Isar 1 and Unterweser. The company has therefore sued both the federal government as well as the state governments of Bavaria and Lower Saxony, seeking damage payments to the tune of around 380 million euros. The state court of Hanover is expected to deliver its ruling on the case on Monday, July 4.

In a similar case, energy major EnBW had claimed damage payments worth some 261 million euros. But a court in the western city of Bonn dismissed the case in April this year, saying that the utility hadn’t filed the lawsuit immediately after the government’s announcement to phase out nuclear power.

Should the court’s verdict be regarded as setting a precedent, Eon could find it difficult to obtain a favorable ruling in its case. That’s because the energy giant had also not initially appealed against the nuclear moratorium, unlike the Essen-based utility RWE which filed a case as early as in April 2011.

In early 2013, a court in the state of Hesse declared the shutdown of the nuclear power plants Biblis A and B to be illegal, as RWE had not been properly consulted before deciding on the issue. Germany’s federal administrative court later upheld the ruling.

Constitutional challenges

But the energy companies take issue not only with the moratorium. They – RWE, Eon and Vattenfall – have also lodged numerous cases at the constitutional court in Karlsruhe against the government’s entire policy mandating an accelerated exit from nuclear power.

The firms claim they are being expropriated without compensation, and that – they say – is unconstitutional.

However, the government has not expropriated the companies’ power plants. And its policy merely reduces the volume of electricity generated. It’s therefore up to the judges of the constitutional court to now decide on the merits of this case.

Should the court rule in favor of the companies, then it is likely that it would set a precedent for other such lawsuits where the utilities are seeking damages. There are huge sums involved in these cases, with Eon alone claiming over 8 billion euros in damages. The corresponding figure for RWE, analysts estimate, stands at 6 billion euros, while that for Vattenfall is about at least 4.7 billion euros. The fourth-largest utility in Germany, EnBW, has filed no constitutional challenges.

State responsible for disposal costs?

Lodging cases before the constitutional court is a pressure tactic, said Green Party politician Oliver Krischer in March. “It’s to obtain concessions over the financing of nuclear waste disposal,” he remarked pointing to the nuclear commission the government had set up to advise it on how to allocate the costs of storage and disposal of nuclear waste as well as the decommissioning of the power stations.

At the end of April, the commission presented its recommendations: The companies have to bear the costs of decommissioning the nuclear power plants. Furthermore, Eon, RWE, Vattenfall and EnBW are to pay 23.3 billion euros into a fund to manage the storage and disposal of nuclear waste.

In return, the state is to take on all the residual financial risks associated with radioactive waste management. A number of scientists and economists argue that the costs would be much higher than the 23.3 billion euros, and that the taxpayers would be on the hook for those cost overruns.

Germany’s parliament is expected to vote on the recommendations after the summer break, and should it approve them, they would come into force at the end of the year.

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