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07/14/2010

The German government is considering auctioning off the right to keep nuclear power stations running beyond their scheduled closure times in a move that would raise tens of billions of euros.

Chancellor Angela Merkel's center-right coalition wants to suspend the planned phaseout of the country's 17 nuclear power stations by 2020 because that would make it easier for Europe's largest economy to meet its CO2 reduction targets.

Conducting an auction in which power companies would bid for the right to keep their nuclear power stations running longer could generate windfall revenues to help alleviate Germany's budget problems and invest in developing green technologies, proponents of the scheme say.

"It's an interesting proposal which merits serious thought," Environment Minister Norbert Röttgen, a member of Merkel's conservative Christian Democrats, told the Financial Times Deutschland on Tuesday. Other members of the coalition also voiced support for the idea. The auction could be similar to the sale of licenses for third-generation mobile phone frequencies with which the German government raised €51 billion ($65 billion) in 2000.

Greater Transparency

The idea was raised in a study published by the RWI economic institute in March which argued that only the operators of power stations could assess what price they would be prepared to pay to keep their nuclear reactors running longer. The alternative of backroom deals between politicians and industry executives would "leave a sour taste of wheeling and dealing and cronyism," RWI wrote.

Auctions would be more transparent, and requiring companies to pay billions would make the extension of nuclear lifetimes more palatable to voters, the institute argued.

It is unclear however how an auction would fit together with the government's plan to introduce a tax on nuclear fuel rods in 2011, part of its austerity program announced last month.

The opposition center-left Social Democrats (SPD) and Greens, who introduced the nuclear phaseout law when they were in power in 2002, sharply criticized the idea.

"Nuclear lifetimes are about safety, not about government coffers," said SPD General Secretary Andrea Nahles. "Only an acute sunstroke can explain what the government has in mind for nuclear power stations." Auctioning off extra lifetime would amount to "Russian roulette," she said.

Jürgen Trittin, the head of the Greens' parliamentary group and a former environment minister, said lifetimes "aren't a product you peddle in a bazaar."

Greenpeace nuclear analyst Tobias Münchmeyer said: "The risk to people's safety posed by old nuclear power stations is being hawked to the highest bidder." If the government were to go ahead with an auction, it would be vulnerable to accusations of having been bought, he said.

German commentators on Wednesday underline the risks the strategy could pose for the government.

Conservative Die Welt writes:

"It's not surprising that politicians are delighted about the suggestion by economic institutes to auction off the planned extension of nuclear lifetimes. The experience with the auction of mobile phone licenses showed the government that companies are prepared to bid right up to their pain threshold in such sales. This would guarantee maximum revenues for the government. If the state were to auction off production licenses for another eight years of nuclear power, for example, Finance Minister Wolfgang Schäuble could hope for revenues of over €30 billion. This sum far exceeds the revenues from the planned fuel rod tax."

"The idea of auctioning off production licenses has several advantages. Backroom deals in the form of intransparent agreements between the government and energy companies would become unnecessary. An auction is a fair and transparent method of assessing the market value of a product. Of course there must be a political decision on how much longer German nuclear power stations should be allowed to operate."

Berlin daily Der Tagesspiegel writes:

"At first glance it sounds good to use the market to arrange the extension of reactor lifetimes by means of an auction. But it won't allow the government to avoid the task of coming up with an integrated energy concept and taking a political decision. Otherwise the quick cash windfall could end up being pretty expensive in the long term."

"The problems of using nuclear power per se won't be removed. What if new safety problems crop up, new technical shortcomings, new risks? Will the government then be able to shut down reactors even though it earned big money from the sale of licenses to keep them open? What about the cost of disposing of nuclear waste? Will the power companies contribute to that or will they regard that as being covered by the licenses?"

Left-wing Frankfurter Rundschau writes:

"It's not surprising that opponents of nuclear power are up in arms about the idea. Even their complaint that the auction would amount to selling off our safety is unsustainable because safety requirements could be part of the license. Röttgen has found a way to get back into nuclear power without sacrificing his image of only wanting it for a transitional period."