German nuclear shutdown irrational

This is my latest comment on Fund Strategy.

The German chancellor’s extraordinary decision to shut all of Germany’s nuclear power plants by 2022 illustrates spectacularly how fear has come to dominate the western elites. From any rational perspective it makes no sense.

Angela Merkel’s move can be seen as a panic reaction to the problems at the Fukushima Daiichi nuclear plant. Yet, as a previous blog post on Fundweb (18 March 2011) argued, Japan’s nuclear power stations did remarkably well to resist massive natural forces. In the future they will hopefully do even better.

Any decision to reduce or end nuclear power also has to be set against the costs of alternative supplies. Burning hydrocarbons involves, to a greater or lesser extent, the emission of greenhouse gases. Using renewables to produce energy on any scale is also a huge industrial enterprise. For example, wind turbines need to be manufactured, built in a significant area of land and linked to a network. Erecting power lines across the country is also expensive and arguably unsightly. Burying lines underground is more costly still.

The alternative is to either import more energy, often from nuclear or hydro-carbon based sources, or to reduce consumption. If the latter it is likely that industrial production and personal consumption will suffer.

Indeed much of the discussion underestimates the investment needed to maintain an electricity supply let alone increase it. Substantial investments are needed just to keep grids running at their present level. Yet, with economic growth, extra capacity will undoubtedly be needed.

Those who see energy efficiency as a solution are deluding themselves. The paradox with greater efficiency is that consumers tend to use more energy rather than less. Think of a typical 1970s house, with relatively few electrical and electronic devices, compared with a modern one.

The German plan is to plug the gap from the loss of nuclear power with renewables. Electricity generation from renewables is projected to rise from 17% to 35% of supply. This is possible in principle but it is likely that the cost is being grossly underestimated. Such a move would require a huge investment both in generating capacity and in distribution.

In the event it is likely that Germany will end up importing more energy and perhaps fudging its antinuclear promises. It would be far better if there was an open debate about how best to supply the energy the world needs for a prosperous future.