The Economics of German Nuclear Power

Michael Ramadan
March 12, 2016

Submitted as coursework for PH241, Stanford University, Winter 2016


Fig. 1: Renewable Energy. (Source: Wikimedia Commons

After the Fukishima nuclear disaster in March 2011, The German government vowed to shut down its nuclear power plants within 20 years. Nuclear power accounted for 20% of Germany's energy needs; so German officials understood that this would be no easy task. German officials planned to initiate a strategy called "Energiewende" (translated to energy turnaround) that would phase out nuclear power in favor of renewable energy demonstrated in Fig. 1 that would cut greenhouse- gas emissions by 40% by 2020 and 80% by 2050. [1] This feat, although admirable, has several economic hurdles German officials must face in order for this initiative to be successful.

The Economics of Energiewende

Overall German citizens admire the goal to reduce greenhouse gas emissions and pollution in their country; however, the costly side effects of this endeavor have frustrated many. The renewable energy law passed in 2000 has led to fixed higher prices for solar and wind producers. From 2009 to 2014, average electricity prices have increased by 60% for companies. [2] This price increase is also felt by consumers. To encourage a switch to renewable energy, the German government set a fixed price for electricity fed into the grid from renewable sources. Because the market price for electricity is lower than the fixed price for renewable energy, consumers are paying the difference in the form of a subsidy. [3] This surcharge has tripled since 2010 and now accounts for 18% of the average German household's electric bill. [2] To stall job losses, Germany exempts companies that depend entirely on electricity production from paying the subsides; however, it is unclear how long the German government can continue this policy.


Although the intentions of Energiewende are good, the economic costs associated with this strategy poses many struggles for the German people.

© Michael Ramadan. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.


[1] K. Bruninx, et al. "Impact of the German Nuclear Phase-Out on Europe's Electricity Generation - A Comprehensive Study," Energy Policy 60, 251 (2013).

[2] M. Karnitschnig, "Germany's Expensive Gamble on Renewable Energy," Wall Street Journal, 26 Aug 14.

[3] "Sunny, Windy, Costly and Dirty," The Economist, 18 Jan 14..