Germany’s government has decided to shutter all 17 of its nuclear plants (23 reactors); eight plants are now closed for business, six more will be closed by 2021, and the final three will close by 2022. What is lacking is an honest discussion of the rising cost Germans will pay for electricity for what The Economist describes as “the greatest change of political course since unification.”

If Germany wants to close its nuclear plants, so be it. However, it seems to me that by now the German government would have provided its citizens an estimate of future electricity costs that will occur as a result of that decision. I have not found any German government estimates, so I’m going to make an estimate. Willem Post, whose articles appear on, inspired me with his study on the cost of German carbon reductions.

Count the Cost

German Chancellor Angela Merkel’s U-turn on nuclear energy was completed in mid-March with her announcement that all German nuclear plants will close. Merkel also proudly stated that the lost electricity will be compensated for by a mix of on- and offshore wind and solar, while staying below Germany’s CO2 reduction goals. Her plan includes putting a lid on rising electricity demand (603 TWh in 2010) for the next decade.

According to a study by the Breakthrough Institute, the shutdown of Germany’s nuclear reactors, meeting CO2 emission reduction commitments, and flat demand will require the 2010 generation mix to move from 60% fossil, 23% nuclear, and 16.8% renewable (101.7 TWh) to 43% fossil and 57% renewable (343.7 TWh) in 2020. Post’s study, with which I agree, suggests that Germany will also need to build 5 GW of coal (replacing older plants) and 5 GW of fast-ramping, gas-fired combined cycle for grid regulation. With the scenario defined, the costs can now be estimated.

Pre-Nuclear Shutdown Cost of Electricity. In 2010, German investment in renewables was about $41.2 billion. About $36 billion of that went to building 7.4 GW of solar ($4,878/kW) at a real cost of about $0.76/kWh (thanks to the generous feed-in tariffs), which is then automatically rolled into electric rates. In 2010, the adder to German electric rates for renewables was 8.8% of the average $0.33/kWh cost of service.

Transitional Costs. I assume that the decommissioning costs for each nuclear plant are $1 billion, a total of $23 billion. Also, I assume that the projected 53 GW of offshore wind is built at today’s prices, or about $200 billion. Another 0.7 GW of onshore wind will have a sticker price of about $1.4 billion, and the new solar systems, projected at 65 GW, will pencil out to $290 billion, using the 2010 reported cost of equipment installed. The installed capacity of each is estimated from the required generation (TWh) estimate using reasonable capacity factors.

The cost of reorganizing the grid from central nuclear hubs to one with more interconnectivity with neighboring countries and capable of bringing offshore wind from the North Sea to the industrial south will be expensive. I added a very conservative $100 billion to complete that work. Building 50 GW of new gas-fired assets to chase wind and balance solar ($60 billion at $1,200/kW) and 5 GW of new, replacement coal capacity ($125 billion at $2,500/kW) brings the total capital cost investment to $799 billion, or $0.133/kWh, using a levelized annual capital cost of 10%.

Cost of Electricity in 2020. Extrapolating the 2010 feed-in tariff costs to match projected wind generation will add $200 billion to German electricity bills over nine years. In the same way, solar systems will add another $200 billion to bills through 2020. For this discussion, assume the feed-in tariff cost is $45 billion average per year and feed-in tariffs will drop 15% in 2012, as planned. Extrapolating, I estimate the cumulative impact on electricity bills in 2020 as $0.07/kWh in 2020.

Sticker Shock

The sum of these costs produces an estimate of $0.533/kWh for electricity in 2020. If demand grows, so will the future cost of electricity. Stated another way: Germany’s electricity rates will increase about 6% per year for the next nine years. With the country emerging from an economic slowdown, it is reasonable to believe that demand will grow, at least in the short term, so I believe my overall estimate is conservative.

In comparison, the U.S. Energy Information Administration’s 2011 Annual Energy Outlook 2011 (Table 15) notes that U.S. average end-use prices were $0.098/kWh (2009) and are projected to decrease to $0.089/kWh in 2025. The decrease occurs because growth in demand remains a modest 1% per year and increased use of moderately priced natural gas replaces fuels that are more expensive. Germany’s average cost of electricity will be more than six times that of the U.S. in 2020.

In a May 30 press briefing, Merkel stressed the importance of lifestyle changes to consume less energy in order to flatten demand in the coming years. What she failed to tell the German people was the steep price they will pay to become a nuclear energy-free nation.

There is uncertainty in my estimates, but the trajectory of German electricity prices is beyond doubt. As Merkel desires, the high price of electricity will certainly flatten German demand for electricity, and it will suffocate their economy as well.

Dr. Robert Peltier, PE is POWER’s editor-in-chief.