The Cost of Phasing Out Nuclear Power. A Quantitative Assessment of Alternative Scenarios for Germany

In the debate on the phase-out of nuclear power generation in Germany, there is an intense dispute on the effective operating time for the existing nuclear power plants. This paper addresses the question of how alternative phase-out regulations affect both the magnitude of total economic costs and the distribution of these costs across nuclear power plants and competing companies. Based on a dynamic partial equilibrium analysis of power supply options, we quantify the costs of different regulatory approaches as a function over the phase-out time and investigate the implied competitive effects at the company level. We find that alternative regulations leading to the same phase-out date exhibit large differences in total costs which are mainly associated with the respective differences in permissible cumulative nuclear power production. The cost differences diminish to a large extent when authorities prescribe the same cumulative threshold for nuclear power production instead of the phase-out year. Adopting power production as a proxi for the risk of operating nuclear plants, our quantitative figures may then be interpreted as an insurance premium. We show that the distribution of total phase-out costs across companies changes considerably for the various regulation schemes. Energy policy makers, hence, are not only challenged with efficiency but also with equity considerations. Our quantitative results refer to nuclear phase-out scenarios for Germany and its specific plant structure as well as plant-ownership by companies. However, the issues raised in this paper may be important for other countries which also contemplate a phase-out of nuclear power.

Böhringer, Christoph, Tim Hoffmann and Stefan Vögele (2000), The Cost of Phasing Out Nuclear Power. A Quantitative Assessment of Alternative Scenarios for Germany, ZEW Discussion Paper No. 00-23, Mannheim.