The Aftermath of Fukushima - German Nuclear Phase-out Leads to Electricity Price Increases

The Fukushima nuclear disaster cost Germany and its neighbours dear. A study conducted by ZEW shows that Germany's nuclear phase-out led to an increase in electricity costs on the European Energy Exchange by an average of seven per cent in the two years after the accident.

After the reactor accident of Fukushima Daiichi in March 2011, six German nuclear power plants with a total net nominal capacity of 6.3 gigawatts were immediately shut down. In a current study, researchers from ZEW as well as the Universities of Warwick (UK) and Verona (Italy) conducted the first in-depth analysis of the impact of this turning point in power generation.

The focus of the study was on the change in wholesale electricity prices on the German-Austrian electricity market and all neighbouring markets with interconnections to Germany, among which are France, Switzerland, the Netherlands, the Czech Republic, Poland, and Denmark.

In order to determine the price effect, a "hypothetical" value was determined reflecting the presumed price if the six nuclear power plants had not been shut down. The factors taken into account in the study include demand fluctuations for electricity, the price development for hard coal, gas, and emission rights, as well as power exchange with neighbouring countries. The development of the input of volatile renewable energies from wind turbines and photovoltaic systems was also included in the analysis.

Adjusted for these factors, the electricity price on the German-Austrian market increased by an average of seven per cent, or 3.30 euros, per megawatt hour on the European Energy Exchange (EEX) in the two years following the Fukushima incident. The cost effect resulting from higher electricity prices on the wholesale market, which are subsequently reflected in consumer prices, amounts to about 1.5 billion euros in Germany (excluding taxes and the impact on grid charges), and 200 million euros in Austria per year.

This increase in costs largely stems from two factors. First, the nuclear phase-out requires the use of expensive technology. Second, the market power potential of electricity producers on the German-Austrian market has increased due to the overall drop in the generation capacity that is independent of weather conditions. According to the calculations in the study, 15 per cent of the price increases following the Fukushima incident can be attributed to surcharges related to market power. In addition, price increases were particularly high for the night time, reducing investment incentives for storage technologies that are necessary for a successful energy transition. Pumped storage power stations, for instance, benefit from the price difference between day and night. They buy electricity at low night-time tariffs, and sell during daytime, when demand – and prices – are high.

The complete publication can be found at

http://ftp.zew.de/pub/zew-docs/dp/dp14051.pdf

For more information please contact

Sven Heim, Phone +49/621/1235-183, E-mail heim@zew.de