German Nuclear: A Sustainable Path to Energy Independence
By: Thomas Hartloper & Kaden Gulamani
The Ivey Business Review is a student publication conceived, designed and managed by Honors Business Administration students at the Ivey Business School.
An Industry Meltdown: Germany’s Energy Dependence
Following Russia’s invasion and subsequent annexation of Crimea in 2014, U.S. President Barack Obama issued a stark warning to the European Union (EU) to reduce its reliance on Russian energy. Instead, in 2015, Germany further solidified its dependence on Russia for its energy supply with the announcement of the Nord Stream 2 pipeline. Costing roughly €9.5 billion, the new pipeline promised to effectively double the amount of liquified natural gas (LNG) that could be imported from Russia to Germany.
On February 24th, 2022, Russia launched an invasion of Ukraine. Western countries placed hefty sanctions on Russia in an attempt to deter the invasion; and in response, Russia decreased shipments of LNG to Germany (and by extension, other EU member states). Since Germany and other countries within Europe had relied so heavily on Russian LNG to meet its energy needs, Russia’s decision plunged the continent into an energy crisis; in Germany, the average price per megawatt-hour rose from €167.87 in January 2022 to €469.35 in August 2022.
Germany’s Current Solution: REPowerEU
Germany’s energy crisis resulted from its flawed approach to energy acquisition, which was to rely heavily on imports. In 2021 alone, Germany imported 63.89 percent of its energy. Finally recognizing that this approach was detrimental, which most European countries utilized, the European Commission rolled out REPowerEU. The European Commission is the EU’s governing body, responsible for developing and enforcing laws for EU member states; while EU members have breached its laws in the past, they generally conform to them such that they can avoid penalties. The primary goal of this legislation was to eliminate European countries’ dependence on Russian energy. To achieve this goal, REPowerEU included two main prescriptions for Germany (and other member states) — firstly, completely replace Russian-imported LNG with LNG from other international partners, and secondly, increase the proportion of energy that is produced by renewable sources of energy.
How This Solution Falls Short
Gas Has Reached Critical Mass
These prescriptions are successful to the extent that they would help Germany eliminate its dependence on Russian energy. However, they fail to address the root cause of the energy crisis, which is an overdependence on imported energy. Without resolving this underlying issue, Germany leaves itself vulnerable to future energy crises.
As discussed above, the European Commission mandated that Germany and other member states strengthen relations with major gas producers in order to phase out Russian LNG. In addition to following this prescription, Germany decided to invest over €3 billion to build its first LNG ports. While such investments would help Germany decrease its reliance on Russian energy, it would ultimately not be enough to sustain its energy needs since LNG is becoming increasingly scarce. In 2023, the EU is expected to be short of 57 billion cubic meters (bcm) of gas which is around 14.5 percent of total EU gas consumption. However, with Russia cutting off gas exports, the shortfall in supply could further increase by 13 to 20 percent. In such a scenario, Germany would be fiercely competing with other EU members for gas imports, which further reduces the probability of LNG becoming a secure, reliable and affordable source of energy for Germany.
Lastly, as mentioned previously, the main problem with continuing to rely on international partners to satisfy energy demands is that it fails to address the root cause of Germany’s energy crisis – an overdependence on imported energy. Without reducing the proportion of its energy mix that is imported, the risk of another energy crisis would not go away. This is where the second prescription comes in.
Nuclear! Or Not…
The second prescription mandates that Germany replace its current energy sources with renewable sources of energy (primarily, solar and wind) such that it could produce 45 percent of its energy with renewables by 2030. Both solar and wind are highly popular among the German population; a 2016 survey found that 87 percent and 76 percent of citizens think a large amount of electricity should be generated by solar and wind, respectively. Renewables are the European Commission’s ‘perfect’ solution to the aforementioned LNG-related problems; they would not only allow Germany to meet citizens’ energy demands, but they would also allow Germany to become more energy independent.
Contrary to these assertions, renewables are not the most environmentally friendly or economical way to produce energy, nor are they the alternative that would best improve Germany’s energy independence; that would be nuclear energy. In addition to being more efficient and economical in the long run, nuclear energy is significantly more environmentally friendly than renewables and would allow Germany to become energy independent.
Nuclear Reactions, Superior Outputs
Energy Output & Its Associated Cost
A common misconception is that because solar and wind farms take less time to construct and are less expensive than nuclear plants, renewables are the smarter investment — after all, the country would be able to produce more energy in a shorter amount of time all with a lower upfront investment. However, when comparing past rollouts of solar and wind to those of nuclear over a ten-year period, the average annual increase of carbon-free electricity per capita (CFEPC) is always significantly higher when deploying nuclear energy. For example, Germany’s CFEPC during its nuclear energy peak (between 1975 and 1985) was 130, which — despite the additional 30 years of research and innovation in the renewable energy space — was significantly more than Germany’s CFEPC during its peak rollout of solar and wind (between 2004 and 2014) which was 85. Given that nuclear’s average net present cost of producing energy is $96 per megawatt-hour (MWh) — significantly less than that of solar, which is $130 per MWh — and that nuclear energy has a superior CFEPC, nuclear is simply a more cost-effective approach to achieving emissions targets.
Environmental Impact
Land use, and more specifically, the amount of land required to produce one megawatt (MW) of power per year’s time, is a key weak point of solar and wind systems. While nuclear power requires a mere 12 acres per MW produced per year, solar and wind require 43.5 and 70.6 acres per MW, respectively.
Further, regarding minimizing hazardous waste, nuclear energy is far superior to renewables; solar panels create 300 times more toxic waste per unit of energy than the high-level nuclear waste produced by nuclear plants. Moreover, since recycling a solar panel is 10 to 30 times more expensive than sending it to a landfill, most opt for the latter choice. Even when solar panels are recycled, the primary component glass is an extremely low-value material. The more valuable components, such as silver, are only used in small amounts. Similarly, due to the lack of recycling infrastructure for wind turbines, it is expected that approximately 720,000 tons of wind turbine components will end up in U.S. landfills over the next 20 years. Without significantly ramping up the construction of proper recycling infrastructure, EU member states face a similar problem. On the other hand, high-level nuclear waste could be safely stored such that zero harm is done to the environment. It is also important to note that nuclear plants last approximately 70 years, while – when factoring in early replacement – solar panels and wind turbines are discarded every 15 and 20 years, respectively. The shorter lifespan (and the problem of early replacement) further exacerbates the waste problem that is becoming problematic as the deployment of wind and solar increases.
With land degradation, habitat loss, and waste reduction being key concerns among environmentalists, the deployment of nuclear power would be a more attractive alternative for Germany insofar as it would align more closely with its (and the EU’s) sustainability targets.
Germany’s Nuclear History
Around the same time Germany began integrating Russian gas into its energy mix, Germany began constructing nuclear reactors; with its first reactor going online in 1962 at a plant in the city of Kahl. In addition to increasing the country’s energy security, the energy infrastructure was a successful alternative to Russian-imported gas. This was up until the Fukushima Daiichi disaster in 2011, which prompted the general population and politicians to vote to phase out Germany’s nuclear infrastructure by 2022. Unfortunately for Germany, this decision was made mere years before it would be made clear that Germany was in dire need of a replacement for its then-primary sources of energy; coal and natural gas. Following the decision to phase out nuclear power, coal and natural gas were deemed to be unreliable or otherwise undesirable sources of energy.
Research has revealed that the fear generated by Fukushima was entirely misplaced, which further solidifies the fact that Germany’s decision to phase out nuclear power was a mistake. The radiation you would experience if you were to visit the Fukushima site today is studied to be comparable to the radiation experienced walking through airport security and much less harmful than the natural radiation we experience daily. Despite being baseless, the negative stigma generated by Fukushima is still the largest barrier preventing Germany from being able to leverage nuclear energy to solve its failing energy strategy. With that said, the previously discussed advantages of nuclear have caused many countries to rethink political stances on nuclear power. Dubbed “the nuclear renaissance”, this resurgence in the popularity of nuclear energy has been driven by the previously-discussed advantages of nuclear as well as new materials such as thorium, innovative fission reactors, and the prospect of nuclear fusion. Together, this resurgence has the potential to override the negative stigma in Germany.
Redefining Baseload: Energy Grids of the Future
When designing sustainable energy systems, it is generally agreed upon that they should include multiple types of energy sources and keep them highly diversified. This was the mantra of energy systems in the EU, like in the UK under Margaret Thatcher. Yet this quickly changed as oil and gas prices dropped heavily and became the base of the UK’s energy grid load, hence becoming the baseload of its total energy production. This style of organizing energy systems defines baseload as the cheapest available option, however, the concept has become much more complicated in recent years with the development of renewables.
According to the traditional definition of baseload, solar power should be the foundation of modern energy networks as it is the cheapest. The problem is solar power cannot be controlled in the same way that LNG can. Moreover, there’s no way to ensure a consistent, reliable outflow of energy production from solar power alone. Considering this, when modern energy systems are being developed they need to have a balance of controllable sources, like coal or nuclear energy, and variable sources, like solar and wind; they cannot rely solely on either controllable or variable sources of energy. With this in mind, nuclear energy is something every country should consider when selecting which controllable source of energy to implement as its baseload energy. In conjunction with the aforementioned advantages of nuclear energy, it is also an attractive replacement for Germany’s coal plants, the last of which would go offline in 2028.
France has demonstrated that using nuclear energy as your baseload energy is not only possible but preferred. Currently, the country derives over 70 percent of its energy from nuclear sources, which has allowed the country to transition from being a net importer of energy to a net exporter of energy. In other words, France has become energy-independent. Nuclear energy also acts as an additional revenue stream for France, bringing in approximately €3 billion of revenue every year.
With Germany committing €177 billion in 2022 to their climate budget, €35.5 billion of which is going towards subsidizing rising electricity costs, and another €20 billion dedicated to the construction of sustainable energy sources, it is clear that Germany has the economic capability to invest in nuclear energy. In conjunction with the potential to mimic France’s successful deployment of nuclear energy, which not only allowed them to become energy-independent but has proven to be lucrative, this access to capital makes an investment in nuclear energy a financially feasible venture.
Strategically Advancing Towards a Nuclear Economy
To move towards a sustainable future with nuclear energy, there are three strategies the government should implement. Firstly, Germany should partner with another country with successful nuclear energy facilities, such as France. Such a partnership would be ideal for Germany; engaging in technology transfer and deriving learnings from the successes and failures of its partner’s deployment of nuclear energy would allow Germany to better integrate nuclear energy into its energy mix. Secondly, it is crucial for Germany to address the common misconceptions about the safety and sustainability of nuclear power plants, which have caused Germans to lose faith in nuclear energy. As discussed previously, this loss of faith is the largest barrier preventing the reintegration of nuclear power into the country’s energy mix. Working with media centers, scientific institutions and political figures to educate the population about the aforementioned advantages of nuclear energy would facilitate the adoption and acceptance of a nuclear energy-powered country. Finally, Germany should look to invest in the research and development of novel nuclear technologies, with which nuclear energy could continue to (and has already) become more effective, safe, and economical. In addition to increasing the likelihood of Germany being able to successfully integrate nuclear energy into its energy mix, such an investment would further facilitate the public’s adoption of nuclear energy.
Why Germany’s Future Should Be Nuclear
Nuclear power is more clean, efficient, and cost-effective than any other source of energy. In conjunction with the successful application of the aforementioned strategic decisions, the restarting of Germany’s nuclear programme is the most effective way for the country to reach its sustainability targets and achieve energy independence.
