Dismantling of nuclear power in Germany: sectoral and macroeconomic effects

This paper studies the sectoral and macroeconomic effects of cutting the lifetime of existing nuclear power plants from 40 years (base case) to 30 years (phase-out case), given that no new capacity should be added in either case. These scenarios correspond to the positions currently held by the electricity industry and the German government, respectively, in the so-called energy consensus negotiations. Our method of analysis is to use a computable general equilibrium model which encompasses a detailed representation of the electricity supply industry. The nuclear phase-out entails an increase of the electricity price by up to 10 per cent and an ensuing fall in electricity demand by up to 4.5 per cent. The supply gap that remains after the fall in demand is accounted for is filled by additions to fossil-fuelled capacity. The macroeconomic effects of the phase-out are rather moderate on average, but display considerable dynamics which reflects variations along the time axis of the relative weight of expansionary capacity-replacement impulses and contractionary electricity price effects.