An act of arrogance

This week Germany is shutting down 3GW of CO2 friendly nuclear power while being in the planning stages of building new natural gas power stations to bridge the gap. The phaseout comes at a time of extraordinary high energy prices. What impression will this make on poorer countries suffering from energy scarcity and sometimes experiencing rolling blackouts? Why should these countries take climate protection seriously or admit its urgency if a rich country like Germany is willing to swap an almost CO2 free energy source temporarily for more natural gas and coal?

Sure, there are brave formal commitments of the German government to achieve 80% electricity generation from renewables by the 2030s. Shutting down something today in the expectation of replacing it with something better later is from an economic point of view a naked bet. There is no hedge if the bet goes wrong. It is like relying on a Martingale strategy.

As in finance there is a solvency and liquidity issue in the electricity business. The grid must be held stable from minute to minute. The guaranteed short-term reserves in the form of conventional supply remain the basis for stability for the time being. It is like the cash-at-hand for a business. The German government certainly has made good plans to make its energy grid solvent over the long term. But many businesses have gone out of business due to liquidity issues. I still remember the frenzy during the run-up to 1st Jan. 2000 and the associated worst-case planning should a systematic grid failure occur due to the Millennium bug. I wonder how a restart of the German grid would be possible today given the widespread retirement of baseload supply.

But at the center of my critique is the government’s awful risk management practice. One of the most important property of a good risk strategy is that the level of response to a risk must be independent of the field in which it originates and it must be proportional to the “value at risk”. Yet responses have mostly been the result of political horse-trading rather than cool analysis. This has become particularly obvious during the COVID-19 pandemic.

On the one hand the German government as part of its pandemic response strategy has accepted the death of the order of 100k people from COVID-19 related illnesses. The government has also accepted that around 50 people died during the vaccination campaign with novel mRNA and virus-vector vaccines. The government has repeatedly claimed that it nevertheless had a very prudent and reasonable risk management strategy.

By comparison in more than 30 years of operating nuclear power stations nobody in the German general public has died from their radioactive emissions or of any accident. Millions of tons of CO2 emissions were avoided. Nevertheless, the decision of nuclear shutdown which was made in 2011 within the blink of an eye is tenaciously upheld. Judged by this standard a rigorous Zero-COVID strategy would be long overdue.

It is a stark example of biased risk perception and bad decision making. Overreacting to one risk and underreacting to another one — although the risk profile demands otherwise.

By the end of 2022 overall around 6 GigaWatt of nuclear capacity must be replaced by natural gas for around 10 years. This is equivalent to about 25GigaTons of CO2 emissions. Typical estimates are that approximately 4kiloTons of CO2 emissions cause one excess death globally in the next 80 years. Hence the German CO2 bridge implies around 5Mio additional deaths from a back-of-the-envelope estimate.

This arrogance makes one speechless.

The German government tries to justify its position with another set of arguments, which are as biased as the original decision.

The “huge” cost of decommissioning and final storage of spent fuel. It is unfair to single out one cost factor. Firstly, the enormous decommissioning costs are partly due to ridiculously high safety demands. Given the number of deaths accepted during COVID-19 these ultra-high decommissioning standards are not justified. Secondly, and most importantly, one also needs to consider the benefits: millions of tons of CO2 avoided. This must be compared to the billions of tons of CO2 Germany has emitted from coal and gas and the associated collateral damage.

The “danger” of spent fuel. Nuclear is a compact source of power and so is the spent fuel a compact source of waste. While CO2 from German chimneys is spread all over the planet the spent nuclear fuel can be stored and controlled locally.

A “threat” to the energy transition. It is suggested that large suppliers like nuclear power stations hinder the development of renewable sources and are badly suited for compensation of their intermittency. If the climate threat is urgent and real, then you do not create a natural gas bridge. Nuclear power stations are designed for baseload and they can be adopted, if necessary, to enable faster load following.

Summa summarum: when it comes to nuclear power the government behaves like a “Querdenker” (aka anti-vaxxer).