Adam Smith Institute

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Merkel does a Bismarck

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Having just finished reading Jonathan Steinberg’s excellent 480-page biography of Otto von Bismarck, his legacy of governing - without principle save the retention of power - has apparently been adopted by Germany’s Chancellor, Angela Merkel, who confirmed that all 17 of the nation’s nuclear power stations would close by 2022. With the CDU’s political position weakening, realpolitik has prevailed. The nuclear U-turn was driven by the post-Fukushima surge in support for the Green Party – a likely Coalition partner for the CDU after the next General Election.

However, this controversial decision has wide-ranging repercussions for the EU, whose common energy policy – Germany now being anti-nuclear and France being ardently pro-nuclear – is seriously frayed. Germany will become increasingly reliant on gas-generated power and an expansion of renewables. Both E.On and RWE, Germany’s leading utilities, are furious and may pursue the issue through the courts, unless very large compensation is paid.

For France, this decision provides real long-term opportunities to export nuclear-generated power to other major European countries, including Germany, Italy and Switzerland, all of whom have become anti-nuclear. Expect EdF to build several new plants in Eastern France, as the equivalent of a nuclear Maginot Line. In the UK, Germany’s nuclear U-turn will undoubtedly re-invigorate environmentalist parties.

More specifically, the future of the E.On/RWE Horizon consortium now looks distinctly shaky. Since neither utility can operate nuclear plants in its home market post 2022, it would seem anomalous if either invested £billions to do it elsewhere. This scenario leaves the UK highly exposed and very dependent upon EdF for new nuclear-build. Furthermore, EU gas prices will probably rise sharply due to higher German demand for gas.

Having advanced nuclear physics studies in the inter-war period – fortunately, despite Werner Heisenberg’s efforts, the Manhattan Project surged way ahead in the race for the atomic bomb – Germany’s retreat from nuclear some 90 years later will be a seminal moment.