Econonomics of Energy and Environmental Policy

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Germany's Nuclear Phase-out: Sensitivities and Impacts on Electricity Prices and CO2 Emissions

Following the nuclear meltdown in Fukushima Daiichi, in summer 2011 the German parliament decided to phase-out nuclear power by 2022. When this decision was taken, a number of model-based analyses investigated the influence this decision would have on electricity prices and CO2 emissions. They concluded that CO2 emissions would be kept at levels that are in line with national reduction targets but that the phase-out would result in an increase in wholesale electricity prices. We show by means of a sensitivity analysis that results crucially hinge on some fundamental model assumptions. These particularly include the development of fossil fuel and CO2 prices, which have a much larger influence on the electricity price than the nuclear phase-out itself. Since the decision of the nuclear phase-out, CO2 prices have decreased and deployment of renewables increased ever since. This partly counteracts the negative effect of the nuclear phase-out on electricity prices, but on the other hand challenges the mitigation of CO2 emissions and security of supply. This underlines the importance of sensitivity analyses and suggests that policy-makers need to consider scenarios that analyze the whole range of possible future developments.
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JEL Codes:P28: Socialist Systems and Transitional Economies: Natural Resources; Energy; Environment, Q48: Energy: Government Policy, D02: Institutions: Design, Formation, Operations, and Impact

Keywords: Nuclear policy, Climate protection, Renewable energy, Electricity market modeling, Energiewende

DOI: 10.5547/2160-5890.3.1.bkno

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Published in Volume 3, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.


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