Last time the US built a nuclear power plant, moviegoers were flocking to the first Star Wars flick, and those lucky enough to have mobile phones had handsets the size of their heads. Which makes it rather funny that folks lining up for a 3-D re-release of a Star Wars prequel last week probably fired up their smartphones and saw that the US is finally set to build the first new plant more than 30 years later—the 1970s was the last time a new nuclear power plant was built in the US, before the Three Mile Island incident contributed to athree-decade freeze. But that seems poised to end soon as the US government approved plans to build a new plant in Georgia last week. Ironically, however, while the US’s nuclear winter may be thawing, Germany may be entering a deeper one of its own.
After the tragic March 2011 Japanese earthquake and tsunami caused a major nuclear accident at the Fukushima Dai-Ichi power plant, nuclear energy and its associated risks became front and center globally. German protests against nuclear energy placed increased pressure on German Chancellor Angela Merkel—a longtime nuclear supporter—who ordered seven of Germany’s oldest nuclear reactors “temporarily” shut down for security inspections. Several months later, however, “temporary” became permanent, and the government announced a full nuclear phase-out by 2022 while also outlining a plan to increase renewable energy sources.
Germans are no strangers to the risks inherent with nuclear power. The 1986 Chernobyl disaster sent a radioactive cloud over much of Europe. An exclusion zone was created, and even now, 25 years later, humans are warned to stay away because of still-high radiation levels. But the irony here is that compared to other renewables, nuclear power is an efficient, overall safe and relatively cheap source of electricity.
According to the World Nuclear Information Organization, nuclear reactors have been operating globally for over 14,500 cumulative reactor-years with only three major accidents (Chernobyl, Three Mile Island and Fukushima). Additionally, nuclear design and safety procedures improved immensely after Chernobyl—as evidenced by, ironically, Fukushima. That plant was much better designed than its Soviet counterpart. When the earthquake hit, its three reactors shut down as designed. However, the facility wasn’t prepared for the tsunami (an unlikely event in mostly landlocked Germany), which breached the sea wall and flooded back-up generators powering the cooling system. Even so, despite some partial core meltdowns, the containment vessels remained mostly intact, limiting the release of radioactive materials. What’s more, recognizing the potential failing, later versions of the Fukushima reactor were designed to withstand such flooding. Nuclear power is safer now, not the reverse.
Prior to the ordered shutdown of German power plants, 17 nuclear reactors provided 23% of Germany’s energy. And currently (and likely for the near future) renewable sources simply are unable to generate enough power to make up the shortfall. The result? German businesses have literally been left in the dark—via blackouts. So far, the government’s (hopefully temporary) solution to the blackouts is to import (and pay a premium for) electricity from neighboring France and the Czech Republic in the past and, most recently, from Austria—electricity generated, ironically, largely by nuclear power plants in those countries.
But the price of importing electricity isn’t the only financial concern. Germany’s solar power industry is far from self-sufficient—it’s heavily subsidized by the German government ($10.2 billion in 2011) and yet provided only about 3% of the country’s electricity in 2011. Most of Germany simply doesn’t get enough sun to make solar power a reliable, year-round source of electricity—something even the government is seemingly slowly starting to realize. Wind farms, also subsidized by the government, face challenges tied to location and engineering (for example, one wind turbine recently exploded in Scotland, not to mention their effects on bird and bat populations—if you care about such things). If wind and solar energy were viable alternatives for Germany now, they’d be much further along in their development. However, they remain prohibitively expensive without government subsidies—not to mention blackouts during the transition from one energy source to another. Transition here will take time . . . and money.
History has repeatedly shown negative unintended consequences can follow a government-induced overreaction. Should political winds not shift, it seems Germany could demonstrate this once again. Rather than fear a nuclear fallout, Germany should instead worry more about a possible economic fallout tied to the unintended consequences of phasing out nuclear energy too quickly.
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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.