Nuclear Phase out: Risks of Distortion of Competition between Individual Nuclear Plant Operators

The period until nuclear reactors are shut-down and how to determine it remain a point of contention in the negotiations for a regulated nuclear phase-out. Opponents of nuclear energy, on a political level primarily represented by the governing Green Party (Die Grünen/Bündnis '90), demand a maximum period of 25 to 30 calendar years until the final shut-down of nuclear plants. Those in favour of nuclear energy, however, in particular private companies owning nuclear plants, insist that reactors should remain in operation for 40 "full-capacity" years. This issue is so hotly debated because the final decision will determine not only when the last nuclear plant is shut down, but also the overall costs which will arise as a result of the nuclear phase out. Indeed, the choice to go for one or other of the phase out options will determine the potential costs faced by individual owners of nuclear power stations and will thus have a significant impact on the competitiveness of energy providers. In a recent study, ZEW has investigated how an earlier nuclear phase-out might affect the magnitude and distribution of costs faced by companies in possession of nuclear plants. The costs implicated in an early phase-out were measured and compared to a reference scenario, in which nuclear plants would continue to be used 40 "full-capacity years" (see graphic 1).

In the case of a nominally equal number of years, the "full-capacity years" phase-out option would allow energy providers to keep nuclear plants in operation for longer than the "calendar year" option. The former would result in a lengthening of past and future plant standstill periods. This might lead to a considerable reduction in the economic losses suffered as a result of the phase-out and thus reduce the potential costs in damages. According to those in favour of a shorter phase-out period, the disadvantage of the "full-capacity year" option is that the point at which the nuclear plants will be finally taken out of operation will be pushed ever further into the future. If it is organised in such a manner as to ensure the same final phase-out point as the calendar year option, the "full-capacity year" option may, however, also have further cost advantages in comparison to the "calendar year" option. Despite the subsequent reduction of the operation period in the "full-capacity" option, some nuclear plants will be allowed to remain in operation longer than they would be allowed to in case of the "calendar year" option. This would be the case where plants have not operated at full capacity in the past. It would result in a cost-reducing use of capacity.

Alongside the level of total costs, the length and the reference basis are also decisive factors in determining the distribution of costs within plant-owning companies. Almost all of the 19 German nuclear plants are owned by Hamburger Elektrizitätswerke AG (HEW), Energie Baden-Württemberg AG (EnBW), Isar-Amperwerke AG, Bayernwerke AG, Neckarwerke Stuttgart AG (NWS), PreussenElectra AG, RWE Energie AG and the Vereinigte Elektrizitätswerke Westfalen AG (VEW).

Table 1 provides an overview of the potential costs faced by each company in case of the various phase-out options which include "30 calendar years", "30 full-capacity years" and "26 full-capacity years". The latter option would result in a final exit from nuclear energy at the same point as the "30 calendar years" option (2019).

At the same time as the total costs increase, the costs faced by individual firms as a result of an early phase-out are reduced where the "30 full-capacity years" option is chosen over the "30 calendar years". As a result of its involvement in a large number of nuclear plants, PreussenElektra AG is to face by far the highest costs in absolute terms as a result of the phase-out. The absolute figures are less clear, however, when it comes to the potential distortion of competition amongst electricity producers as a result of an early phase-out. High absolute costs become relative when one considers the size of companies (e.g. measured in turnover from electricity). Table 1 indeed illustrates the extent of costs faced by each company and the potential increase in electricity prices which would be implemented by each of the companies if they were to attempt to amortise these extra costs against their total electricity sales throughout a 20 year period. Even if it seems unlikely that companies will manage to fully amortise costs in such competitive times, this is still a good indicator of the fact that the alternative nuclear phase-out procedure may result in distortion of competition. It appears that Weser GmbH, HEW, NWS and PreussenElektra AG would be particularly hard hit by the "30 calendar years" phase-out option. In contrast, the "30 full-capacity years" option would lead to a significant reduction in the variation in cost increases – the problem of competition distortion would thereby be lessened. The companies will benefit from the "full-capacity" option to different extents, depending on their age and the operational structure of their nuclear plants. This explains the different rankings in terms of the costs of the "30 calendar year" option.

The alternative options for the phase-out of nuclear energy therefore affect each and every energy provider to a quite different extent. This indicates that owners of nuclear plants should not be considered as a single entity when it comes to the phase-out options. Policy-makers therefore have the task of finding the option which will not only result in the slightest damage possible, but which will also be competition neutral and affect competing companies to an equal degree.

Contact

Dr Christoph Böhringer, Phone: +49(0)621/1235-210, E-mail: boehringer@zew.de