Over the weekend, there were reports of talks about the creation of a “bad bank” for German nuclear plants, which are to be shut down successively by the end of 2022. Critics charge that the proposal is yet another attempt to privatize profits and nationalize losses. But Craig Morris has a bit more understanding for the firms’ position.

---

At the end of February, the German hard coal sector made a proposal that revealed the sector’s actual situation: a bad bank. We continue to hear many reports about coal making a comeback in Germany, but in reality the uptick in 2013 will prove to be short-lived; coal power is already dramatically down in Q1 2014. And going forwards, hard coal in particular will be squeezed out even during the nuclear phaseout.

Now, the firms that run coal and nuclear plants think the idea might be useful to them during the nuclear phaseout. A quick glance at the idea is enough to make your hair stand on end, and the comments on German news websites (such as here – in German) are filled with outrage:

• The provisions set aside for the dismantling of the nuclear plants would be transferred to a state-owned foundation (the bad bank), which would then use the money for the phaseout.
• The government – meaning “the public” – would then run the risks, specifically if the costs exceed the provisions.
• In return, the power firms would drop their lawsuits against the German government with the ICSID (International Centre for Settlement and Disputes) settlements court in DC. Sweden’s Vattenfall has a minority holding in the Brokdorf nuclear plant in Germany along with Eon and is suing the German government in DC.
• Surprisingly, while Eon and EnBW (Vattenfall is apparently not involved in the negotiations for a bad bank) would be able to hand over their provisions, RWE would reportedly need a capital increase – has the firm spent its nuclear provisions on something else?

The case of Vattenfall is especially interesting. In the fall of 2010, the German government reneged on the original nuclear phaseout agreement of 2002 and extended the service lives of nuclear plants by 8 to 14 years, depending on the plant. In return, the government imposed a tax on the nuclear fuel rods to be consumed – allegedly to prevent windfall profits. But after Fukushima – only a few months later – those power plant extensions were revoked, but the tax remained.

In all likelihood, the four utilities agreed that the foreigner – Vattenfall, the one with the smallest nuclear assets – would “test the waters” and see whether a court case against the nuclear tax could be won. Last month, a German court ruled that the nuclear tax was illegal, so the current negotiations may be taking place against that backdrop.

There are, however, different readings of who wants what now. German economics daily Handelsblatt writes in its newsletter on Monday that “the government in Berlin wants to have the roughly 35 billion euros in nuclear provisions from Eon, RWE, EnBW, and Vattenfall,” the four utilities that run nuclear plants and Germany. This report in English at the Financial Times also makes it sound like the German government has plans of its own.

Technically, of course, the public already runs the risks. If anything goes wrong, the liability of these firms is limited. And while this limited liability has often been decried as unfair, we should keep in mind that the power firms themselves – from the US to Germany – never wanted to build nuclear plants. The nuclear power sector was originally an attempt to make the production of nuclear weapons more palatable to the public. The power sector wanted nothing to do with the technology, which they did not understand and did not trust. Once the government had limited their liability, they essentially began building the kind of power plants they understood but merely boiled the water with nuclear fuel rods instead of coal. Some 50 years ago, RWE in particular felt that nuclear would conflict with its fleet of coal plants. The result is hundreds of nuclear plants of crappy design, with numerous design options having barely been investigated.

The German government thus forced these companies into nuclear decades ago and now it is forcing them out. All of this is unfair to these firms. It’s also unfair to the German public, which never asked for nuclear power but has to pay for the entire mess. Whatever the outcome, perhaps the main argument against nuclear is that it’s hard to do it fairly.

Craig Morris (@PPchef) is the lead author of German Energy Transition. He directs Petite Planète and writes every workday for Renewables International.