Bloomberg: Germany faces the challenge of returning to nuclear energy

Last week, the German Der Spiegel magazine explained an emerging situation to its readers, writing, “With Donald Trump’s return to the US presidency, the powerful and reliable figure on the playing field has suddenly become unpredictable”.

This is the feeling of a large segment of the German political class, as their frustration with the United States is as great as their frustration with Russia, and they are keen to reduce their dependence on both.

But while significant efforts are being made to strengthen Germany’s defense capabilities, there are no similar plans to reduce the country’s energy vulnerabilities, leaving Germany as dependent as ever.

Germany imports nearly 70% of its energy needs, and this figure rises to 95% for its natural gas consumption.

This is a precarious situation for the world’s third-largest economy, and everyone knows it. Berlin’s negotiating position is therefore weak, whether in concluding new LNG deals with a White House that prioritizes the United States, or in returning to Russian gas, as many German industry leaders are demanding.

Both paths are costly, and neither brings greater geopolitical and economic independence.

The new German government will have a unique opportunity to act on this issue.

Having already secured a €500 billion ($567.9 billion) debt-financed infrastructure investment package, it can formulate a new energy strategy from scratch, diversifying its procurement and opening up opportunities for startups and investment.

However, the next coalition’s energy plans are actually similar to those of its predecessors: relying on natural gas as a bridge technology until renewables become viable as the sole provider, which is as much a reflection of shallow imagination as it is of a lack of wisdom.

This has been Germany’s energy strategy since Chancellor Gerhard Schröder’s government passed a law in 2002 to phase out nuclear power.

This law has steadily led Germany to an increasing dependence on imported gas and domestic coal.

Under Schröder, nuclear reactors provided about a third of Germany’s electricity.

Angela Merkel accelerated the phase-out of nuclear plants, and Olaf Scholz completed the phase-out in 2023, defying public opinion amid a severe energy crisis.

Now, Germany continues to generate more than a fifth of its electricity from coal-fired plants, double the EU average.

This flawed strategy created an urgent need for gas with dire consequences.

Prior to the Ukrainian war, Germany imported 55% of its gas from Russia.

Life didn’t stop when Germany stopped purchasing pipeline gas from Moscow in August 2022.

The country has been able to turn to other suppliers, most notably Norway, which accounted for nearly half of Germany’s gas imports last year, and the United States, which accounts for 91% of LNG imports arriving via German ports, as well as 16.5% of the European Union’s total gas imports.

EU imports of US LNG have more than doubled since 2021, while the immediate problem has been solved, new ones have emerged.

There has also been a steep price, as ordinary German households are paying an energy bill one-third higher than they did before the war in Ukraine.

The incoming German government’s coalition agreement offers no new answers to the energy dilemma.

Regarding gas, the new administration plans to build new terminals, but is completely vague about procurement, promising only to seek gas supply agreements with international gas suppliers.

This leaves the door open to a return to Russian gas, which many politicians have called for, without clarifying what Germany will do differently to avoid a dangerous dependence on Moscow.

Regarding renewable energy, it has pledged further state-supported expansion, hoping the sector will eventually be able to sustain itself in the free market.

The risks of this strategy were clearly evident during last year’s windless and sunless periods.

A sudden drop in renewable energy production caused wholesale electricity prices to spike.

Tensions with other European countries also forced Germany to suddenly tap into its more stable domestic energy supplies, causing shortages and price hikes elsewhere in Europe.

Grid stability is also a growing concern, with many German companies complaining of an increase in short power outages.

The new German government recognizes that the status quo is unsustainable and wants to return to using more gas as a backup source, despite the associated cost and geopolitical risks.

With Germany’s scarce natural resources, the most logical approach is to allow a return to nuclear power to help phase out coal more quickly, while also providing stable domestic electricity production to support the market.

Experts have indicated that restarting some of Germany’s older reactors could take up to five years, and building new power plants could take up to 15 years.

This may seem like a long time, but with advances in artificial intelligence and increased electrification of transportation, Germany’s need for a stable, emission-free electricity supply will increase rather than decrease.

That’s why tech companies like Google are investing in small nuclear reactors. Germany could consider this in partnership with neighboring countries like France, which derives most of its energy from nuclear power plants, and Poland, which is currently building its own nuclear sector from scratch.

The Christian Democratic Union and the Christian Social Union, led by incoming German Chancellor Friedrich Merz, understand these opportunities in principle, stating in a statement last year that “we cannot rule out the option of nuclear energy”.

The reason this was not mentioned in the coalition treaty is due to pressure from the junior coalition partner, the center-left Social Democratic Party (SPD) led by Scholz and Schröder, which has a long tradition of anti-nuclear sentiment.

Having pledged not to work with the anti-immigration Alternative for Germany (AfD) party, the Social Democratic Party (SPD) is Merz’s only viable coalition partner, allowing him to assert control over the larger party on several issues.

Merz’s dilemma is significant, as opinion polls indicate that a majority of Germans want nuclear power back on the map.

Funding has been allocated for investment in the latest generation of reactors, providing high-paying jobs, long-term investment opportunities, and an incentive for nuclear experts to remain in the country after the last reactors close in 2023, but politically, Merz is constrained by an energy model pioneered and championed by a party that won 16.4% of the vote in February.

Looking at German energy policy over the past quarter century, an old saying comes to mind: Doing something over and over again and expecting a different result is the definition of insanity.

The path to freeing Germany from its external dependencies and internal crisis cannot be done over and over again.

German voters understand this, which is why a majority of them chose change at the ballot box… Now is the time for politicians to listen.