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German prices soar as nuclear deal suspended

14 Mar 2011 17:36:08 | edem


Germany suspended its decision to extend the lives of the country's 17 nuclear reactors for three months on Monday, after the explosions at Japan's nuclear reactors prompted new nuclear security questions. The news sent German power prices soaring, with the benchmark Cal '12 Baseload trading more than €2.00/MWh higher than its Friday close - a record session-on-session gain.

German chancellor Angela Merkel said a three-month moratorium will be imposed on the decision to extend the lives of nuclear reactors, after which a decision on the future will be made. "The situation after this moratorium will be different than the situation before," she told reporters in Berlin.

This three months will now be used to assess the safety of the reactors, as well as to determine how to bring Germany into the age of renewables faster, as nuclear power was and continues to play only a bridging role, Merkel stated.

The government made the decision to extend the lives of Germany's 17 nuclear reactors by an average of 12 years last year (see EDEM 6 September 2010). However, the move was deeply unpopular, and developments at the Japanese nuclear power plant have now put additional pressure on the government.

Capacity crunch

However, the moratorium effectively removes capacity from the market, because any nuclear power plants scheduled to close during the next three months before the life extension was made last September, will now be closed as if the extension had never been given.

Last August, German power major RWE transferred 8.1TWh of its power generation quota from the decommissioned Mülheim-Kärlich nuclear power plant to its 1.3GW Biblis B reactor, allowing it to operate for around a year longer by increasing production quotas from 5.9TWh to 14TWh (see EDEM 4 August 2010). Similarly, in May last year, RWE bought 4.8TWh of generation quota from E.ON's Stadte power plant, which at the time was sufficient to run the 1.225GW Biblis A nuclear reactor for an additional six months (see EDEM 10 May 2010).

RWE said on Monday the additional quota from E.ON will allow Biblis A to run until the middle of 2011.

The chancellor said that Germany cannot rely on imports for its electricity security as there is no proof that the countries from where it will be importing have higher safety standards. However, Merkel warned that if Germany wants to go into the age of renewables faster, it must be prepared to alter its infrastructure.

Merkel also said that for the time being the nuclear law - determining the life extensions - will not be altered, but that the next three months will be the time when real honest energy discussions with utilities must take place.

The speculation regarding the possible nuclear life-extension suspension and the rising prices of coal, gas and carbon emission left their mark on German power prices on Monday. At 15:30GMT time, the German benchmark contract Calendar Year 2012 Baseload was seen trading at €55.25/MWh, up a record €2.05/MWh session on session.

"The possible suspension gives the market a lot of uncertainty, and the uncertainty usually means risk premium," a German power trader said. "The possible extension, therefore, could have given an extra element to the bullish energy complex." MV

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