Germany: Nuclear to be abolished; deeper PV cuts under consideration

Germany will close all of its nuclear power plants over the next decade. This decision was reached by the country’s government "in the early hours of this morning".

According to analysts at Jefferies & Company Ltd, the country’s seven oldest plants, which have been inactive since March, and the "problem" reactor Kruemmel, will be decommissioned with immediate effect. "However," said an industry note, "one of the power stations, probably Phillippsburg 1 in southwest Germany, may be used as emergency backup."

The analysts go on to say that while the remaining operating nuclear plants will still pay the nuclear tax introduced last year – costing operators an estimated €1.3 billion per year – all of Germany’s nuclear plants will be closed by 2021. However, they report that if renewable energy development is slower than planned, three will be kept in operation until 2022.

Solar cuts

While this news is a major blow to the utilities which, say the analysts, will have to dip into a "large part" of their reserves in order to decommission the nuclear plants, the solar industry is also causing them huge headaches.

The analysts explain that the utilities generate most of their revenues by "providing peak power at prices well above base load prices". The industry note continued: "Current, EEX [European Energy Exchange] future peak power prices at €73/MWh are the lowest they have been in any May month over the last five years. The reason is solar."

It added: "To make matters worse, German base load prices at €60/MWh, although higher than this time last year, are still lower than before the financial crisis and at the average level for the last five years. The amount of available German solar could also begin to pressure utilities in neighbors such as France and the Czech Republic."

This will certainly work to add fuel to the utilities’ fires in their bid to reduce photovoltaic feed-in tariffs from next year. While Jefferies & Company say that they have "no firm information" about the proposed reductions, they are certain that the topic was discussed at last night’s cabinet meeting.

Today’s Spiegel Online offered up further details. Citing internal papers, the German news source said that some parties from Germany’s CDU (Christian Democratic Union’s) and FDP (Free Democratic Party) want to significantly reduce solar incentives.

According to the report, solar tariffs will be lowered by up to 34 percent from January 1, 2012, dependent upon how many photovoltaic installations are installed between October 2010 and September 2011. Officially, however, no one wants to confirm the numbers.

Furthermore, the CDU’s economic and technology working group reportedly wants to introduce a rigid cap, continued the Spiegel Online. The sponsored additions should reportedly be limited to 1,800 megawatts annually. This suggestion was submitted to the working group Energy by the CDU and FDP.

Just over a week ago, Germany’s Green Party came out and said it was expecting to see severe photovoltaic tariff cuts implemented at the turn of the year.

Next steps

According to Jefferies & Company the next step will see the German Government meeting with members of the opposition parties today, in order to discuss their proposals.

The Jefferies industry note continued: "Consensus is very important for the government to achieve given their delicate situation in the polls. We believe that all legislation needed to build out the grid, expand renewables and close the nuclear plants will be in place by the end of July."