Germany’s Energiewende, its ambitious program to move away from nuclear and fossil fuels and towards renewables is well underway, but the government is still at loggerheads with energy companies over just how the country’s nuclear reactors should be mothballed.
The debate over nuclear decommissioning centers on the issue of who should pay for it. The government argues that the cost of decommissioning and demolishing the plants and of the temporary storage and permanent disposal of nuclear waste should be borne by the parties that have caused it. In this case, that means energy giants E.ON, RWE, EnBW and Vattenfall. They have made good money from nuclear energy over the years, the thinking goes, and now they should step up and shoulder their responsibilities.
A 13 page report on the state of the program published Thursday makes it clear that the government believes the country's four nuclear energy companies are dragging their feet over the final phase-out of nuclear power.
The study, signed off by Ms. Merkel, Horst Seehofer and economy minister Sigmar Gabriel, leaders of the CDU, CSU and SPD parties, which together make up Germany’s left-right coalition, is a battle cry against the nuclear companies, which have fought with the government over the program.
It says "the unresolved issues relating to the realization and financing of the demolition of nuclear power stations and the disposal of radioactive waste" should be settled this year. They want all measures, including legal measures, to be put in place after parliament's summer recess.
The German government is clearly concerned that the four energy companies are not setting aside enough money to mothball their nuclear plants safely. They claim to have set aside reserves worth a total of €36 billion, but it is increasingly doubtful that this will be sufficient and that the companies will actually be able to mobilize the promised funds. Some of the money that has in theory been set aside for nuclear decommissioning has been spent on other troubled divisions such as such as coal-fired power stations.
The government appears to have lost faith in the companies. It has appointed auditors from Warth & Klein to conduct an investigation into these provisions, to determine whether the cost assumptions made are complete and whether the provisions have been made correctly. The auditors will also take a close look at the groups' assets. Representatives of Warth & Klein have begun visiting the companies in the last few days.
The government will make an announcement about whether these companies have passed a “stress test” on these provisions, by the end of September.
The companies insist they are in good shape. EnBW says it has "ensured that the group is able to fulfill its payment obligations arising from the provisions in the nuclear power sector at all times and without restrictions" and that the guiding principles for its investment strategy are "a good credit rating, a high level of liquidity and broad diversification of financial investments."
But the government suspects the companies will do all they can to wriggle out of their obligations. E.ON’s chief executive Johannes Teyssen for example announced in late 2014 that the group would be split into two parts. The €14.6 billion set aside for the planned nuclear phase-out are to be transferred to the new company Uniper. If they prove inadequate, only Uniper will be liable after a transition period; E.ON SE, which will deal with future operations, will not be involved.
Meanwhile, Swedish group Vattenfall has already changed its structure so that its liability is limited to Germany. Vattenfall’s Swedish parent company has not been liable for any of its subsidiaries since 2012. This means it would be protected from any failure by Vattenfall's German companies to put up the necessary funds. Vattenfall is also planning to sell its brown coal activities in Germany, reducing the number of assets that could be recovered.
The energy companies fear that the stress tests are politically motivated and they may be right. In March, the economics ministry published a report it had commissioned by law firm Becker Büttner Held that gave an insight into how ministers are thinking.
The report concluded that, at least for some of the provisions, an "external fund solution would be a more suitable means to achieve the objectives". It recommends that some of the provisions should be transferred to a public sector fund, saying that the money could be deposited into the fund "gradually or all in one go".
Although the operators are in principle open to the idea of a public fund, they are insisting on one condition that the government currently appears to find unacceptable: if they are to hand over their provisions, they also want rid of the nuclear power plants. In other words they will hand over their money and nuclear power stations to the government and say: You deal with it.
In return, they are offering to withdraw their lawsuits against the government: the companies are suing the German government over the implementation of a nuclear fuel tax and want several billions of euros in compensation.
Energy companies have paid around €5 billion ($5.67 billion) in nuclear fuel taxes since the government introduced the tax in 2011.
RWE, E.ON and Stuttgart-based EnBW brought the case arguing that the tax violated E.U. law and amounted to an illegal subsidy for renewable energy that had in turn cost thousands of jobs in the energy industry.
RWE is also claiming for losses incurred in a nuclear plant, and Sweden’s Vattenfall is suing over the closure of two nuclear reactors.
It would well make sense for the government and industry to reach some sort of compromise on how to move forward.
Werner Müller, a former German economy minister and head of RAG-Stiftung, a foundation set up to oversee the gradual discontinuation of the mining activities of German group RAG, is campaigning intensively for a foundation that would take over not only the provisions but also the nuclear reactors.
According to sources in the sector, Ms. Merkel is willing to consider his proposals. Informal talks have already taken place between her office, the economics ministry and industry representatives, but the law suits are rolling on and if a deal is to be reached, it will have to reached soon.