18 Dec 2014 | Ruby Russell

Proposal for nuclear fund seen by some as no-confidence vote in utilities

A leaked document outlines plans to transfer some provisions German utilities have put aside for nuclear decommissioning and waste disposal to a state-managed fund. The Clean Energy Wire spoke to two policy analysts about the implications of this proposal.

The German Ministry of Environment and the Ministry for Energy and Economic Affairs have outlined plans for a fund that would ring-fence provisions for the long-term costs of nuclear waste disposal, according to a document obtained by the Süddeutsche Zeitung. 

“For the first time we have a signal from the government that a decommissioning fund, separate from the balance sheets of the nuclear operators and controlled by public institutions, is a thinkable approach,” Felix Matthes, an expert on German energy and climate policy at the Öko-Institut, told the Clean Energy Wire.

Utilities owning and operating nuclear facilities - E.ON, RWE, Vattenfall and EnBW - are already obliged to set aside provisions amounting to 36 billion euros to cover the cost of decommissioning nuclear facilities and disposing of radioactive waste. But they have been free to manage the funds as they chose, including investing them in power plants some now see as having a less-than-secure future.

The companies are complying with 2011 legislation to phase out nuclear   power, a key aspect of the German Energiewende, which aims to simultaneously shift to renewable energy and a low-carbon economy. The transition has hit Germany’s utilities hard as their core business of fossil and nuclear power generation must compete with a growing renewable power sector, at a time when power prices have also been hit by reduced demand.

The Süddeutsche Zeitung quotes the document, authored by the state secretaries for economy and environment as saying, "We cannot be sure that all the nuclear power station operators can successfully pull through the changes in the energy market and meet their long-term waste disposal commitments."

Under the proposal, 19 billion of the 36 billion euros in provisions would remain in the hands of plant operators, while 17 billion would be put into a state-managed fund to cover the long-term costs of waste disposal.

Most European countries already require power plant operators to pay contributions for long-term waste disposal into either external funds or segregated internal funds, but Germany has so far failed to  agree on similar legislation, tending towards the view that the utilities were better placed to manage the funds themselves. There have also been proposals for such legislation on a European level.

“We had attempts several times from the European Commission,” said Matthes, “but it always failed because German resistance was so strong – because of this German thinking that it’s better to leave these issues to be managed by strong domestic champions.”

Some experts view the paper as the latest sign that Germany’s major utilities are no longer seen in such light.

“With E.ON dividing into two, the fear arose that if we have a ‘bad bank’ company as one part of the former E.ON there could be a problem in the future with decommissioning financing,” Professor Wolfgang Irrek, an energy expert at the  Ruhr West University of Applied Sciences, told the Clean Energy Wire. Some people have expressed worries that a company holding "old" nuclear and fossil-fuel based assets could eventually face financial troubles and become a burden for taxpayers. 

And E.ON is not the only German utility whose future has raised concerns. “The bankruptcy of RWE is no longer unthinkable given its debt and inability to make changes to its business,” said Matthes.

The proposal also includes the stipulation that in case of insolvency, the utilities would have to settle nuclear decommissioning costs before paying other debts.

The Süddeutsche Zeitung reported that the proposals specified that while the fund would be managed externally, responsibility for carrying out the process of decommissioning and waste disposal would remain with the utilities.

But experts say that while it is relatively clear how much operators would have to pay for decommissioning nuclear plants, the costs for long-term nuclear waste disposal and storage that would be covered by the state-operated fund are hard to predict.

“We cannot be at all sure what costs will be involved in waste management and disposal, including all the steps of transport and conditioning of the waste, as we don't have a concept in Germany for final disposal of highly radioactive waste,” Irrek said. “So we cannot say if the estimated 17 billion is sufficient.”

Irrek added that while the proposed fund would provide much-needed transparency, its effectiveness would depend on the details of any future regulation – such as whether the utilities would be required to top up the fund if more money was needed, or if the taxpayer would be shouldered with the shortfall.

Matthes said that while the proposed fund would not completely protect the taxpayer from the costs of nuclear decommissioning, it would reduce the chances of the state being forced to step in.

The Green Party indicated it would support such a fund in principle, but insisted the proposal was a long way from becoming government policy, with a dig at what has been seen as Minister for Energy and Economic Affairs Sigmar Gabriel’s recent support for the German coal sector.

"So far this is nothing more than the thoughts of two state secretaries on paper,” the Green Party’s member of the Bundestag Bärbel Höhn told the Clean Energy Wire. “I would be surprised if Minister Gabriel, who likes to act as patron saint of RWE and E.ON, actually backed this move in the right direction."

E.ON and RWE declined to officially comment on the leaked proposal but unnamed sources quoted in the Thursday edition of the Süddeutsche Zeitung said that the large utilities aren't in favour of the state-run fund. "If this comes true, utilities will file a new law-suit against the federal government," one source is quoted as saying.

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