Germany’s European election results: A threat to UK new nuclear-build?


nuclearIn the UK, Labour’s disastrous European Election results, allied to a good performance by UKIP, dominated headlines domestically.

But for those presiding over UK energy policy, the results in Germany were seriously disconcerting.

The combined vote of the CDU and the Bavarian-based CSU was just below 38%. Moreover, the FDP secured a 10% share so that this trio fell just short of 50%. The main left-wing party, the SPD, polled less than 21%.

Germany is currently governed by a Grand Coalition led by Federal Chancellor, Angela Merkel, whose own standing remains impressive. Hence, she is well-placed to secure an overall majority – in league with the CSU and the FDP – in September’s general election.

A CDU-led government, especially with a decent majority, may well decide to scrap Germany’s nuclear phase-out policy that was controversially enacted in 2001.

Germany’s top two energy companies, E.On and RWE, strongly support such a marked policy shift. Undoubtedly, it would materially boost their cash flows: most of their nuclear stations could continue generating power - at low marginal cost - for many years.

E.On and RWE may also undertake upgrades to their existing nuclear plants. And, in time, new nuclear-build may become feasible in Germany, which would require massive investment by both E.On and RWE.

Along with France’s EdF, where net debt reduction is now a priority, E.On and RWE are key to new nuclear-build in the UK. However, a major change in the German energy landscape may cause their investment focus to become more domestically-orientated.

In any event, with nearly £40 billion of net debt, E.On’s own investment plans are being cut back.

Worrying times then for the Department of Energy and Climate Change (DECC) – a reversal of Germany’s nuclear phase-out policy would certainly not be helpful for the prospects of new nuclear-build in the UK.