Germany did it.

While we were out, they shut down their final few nuclear power plants against the grain of common sense, health policy, energy stability and security and, last but not least, climate change.

What a fiasco.

The shuttering of these three facilities is a truly ignoble achievement. Incredibly, it is true that both the government - a government that includes the Green Party for the first time ever - and the German population celebrated this fact. Despite those victory laps we feel very confident that, with time, this episode will be viewed as one of the darker moments of Western statehood and energy policy.

The shutting down of the German nuclear power plants demonstrates that bad ideas can be incredibly difficult to refute, even with very clear evidence about the nature and quantifiable consequences of the mistake. Path dependence and narrow, blinkered ideology can lead to very bad outcomes. If there is a stranger sight than environmentalists all over the world celebrating this development, we do not know it.

The end of Germany's best source for clean, safe and cheap power also demonstrates that bad ideas are not the monopoly of autocracies, poor countries or nasty "imperial" hegemons like the US. We all need to constantly guard against their siren song and, in some respects, this is particularly the case the more educated and "sophisticated" you are as a society.

It is easier to be blinkered when you are convinced of your own virtue and intelligence....

As Germany has clearly demonstrated a few times recently, even rich and cultured and "right thinking" social democracies of Western Europe can make monumental errors and celebrate them while a large proportion of the world shakes their head or, perhaps more realistically, screams in frustration.

There are two questions to explore here:

1. What has happened and what happens now?

2. And then, what does this mean?

On the first point:

The Isar 2, Neckarwestheim 2 and Emsland nuclear power stations produced a small but valuable sliver of Germany's energy mix. The ~6% of 2022 and 2023 had, as recently as 2021 been over 13%.​

We are far from the 1990s when it was well over 30% (see graph) but 13% was a great and stable base to help transition to a heavily renewables dependent economy and also with the added and not insignificant fact that nuclear power is emission free!

Furthermore, the nuclear power plants could step in and provide emergency power when the intermittent and variable green energy like solar and wind vanish or simply diminish.

Now coal is doing that job.

Coal is now producing over 30% of the energy mix, which is leading the way in Western Europe. Truly an embarrassing achievement:

​This percentage is, of course rising, as you can see here:

It is beyond depressing to think that, if Germany had just maintained the nuclear power plants it had in 2011 (before the Fukushima nuclear disaster in Japan that began this whole Energewiende fervor) it would be able to likely phase out all of their coal today.

The fact of the matter is Germany had the chance to really set the pace and be a leader when it comes to renewables, the climate transition and the battle against global warming and decided to do the exact opposite.

Were the Germans to respond they would, no doubt, say all of this is just temporary. They are growing renewables at a tremendous rate and in a very short period will be able to retire most of their coal usage shortly and this will incentivize them to make the transition quicker and with less of a probability to backslide.

However, that sounds good but is unlikely. For one thing, the price of materials for renewable energy is rising quickly and their availability is becoming constrained at precisely the wrong moment. We have covered "Greenflation" before.

Everyone is getting into the renewables game and we are also discovering that it is harder than we previously thought to rely on them to the exclusion of other energy sources, no matter how determined and green we want to be. See our previous work on California, State of, for some good examples.

Given that, here are some facts that are not being widely discussed in Germany at the present time.

Or, put differently, here are the implications of their folly:

The first is that coal isn't just dirty and dangerous for the climate. It is also, surprise, surprise, dirty and dangerous for human beings as well (and all living, breathing creatures, in fact).

Coal kills people every day that it is burned. You can mitigate those effects but it is impossible to remove them entirely.

One wonders why GreenPeace, the German Green Party and the German media don't share charts like the below more frequently.

Much of what Germany is currently turning back to is the dirty (but cheaper) brown or lignite coal variety listed above.

Nuclear power plants can have accidents and they can be very harmful, if and when they occur. But burning coal for power is dangerous every day for human lungs (and cognitive function!) and especially for society's most vulnerable - the poor, the sick, the old and the young.

The more we find out about air pollution, the worse the evidence is. For instance, the latest work is that 10 million people a year die of air pollution. That is far more than have died from Covid-19, for context. Here is a great, great piece on how air pollution hurts wealth AND health in about equal measure. Here is another that reviews the many negative effects, including on cognition.

And here is what power generation looks like in Germany today. Here is the world's largest excavator chewing up the German countryside.

​

It is called the "Bagger 288" and can extract 240,000 tons of coal or 240,000 cubic meters of overburden daily, which is the equivalent of a soccer field dug to 30 m (98 ft) deep.....

At present and in the all time irony of ironies, it is actually chewing up a wind farm as well as some Rhine villages that have been inhabited since the 15th century.​

Second, German power will not just be dirtier and more dangerous for the climate and humans alike, it will also be more expensive.

Quite a bit more expensive in fact. Estimates vary but it would seem that German consumers and businesses will be paying over 40-45% more than what they did pre-crisis. This price hike comes at an inopportune time for beleaguered German industry that is already grappling with the consequences the other huge strategic mistake that the country has made:

Its reliance on cheap but politically dangerous Russian natural gas.

The German nuclear plants were long paid for. They cost money to run but most of the capital investment was made decades ago and so now they were able to provide cheap and reliable energy to German industry and German households based on a previous investment.

That is gone and instead, in a memorable and symbolic twist, Germany immediately began importing French nuclear power as they shuttered their own plants. So, net-net, they were still reliant on nuclear energy, just reactors under a different flag and, as a result, a different and far higher price point.

Amazing.

Further, Germany has to go out and compete on the global market for other sources of energy. A lot of this is natural gas from Qatar or, increasingly, the USA. Either way, the prices will be set by the market (and with added transport costs) and thus higher than what American industry is paying and this will put companies at a competitive disadvantage.

Ask yourself this: If you were a German multinational like Linde or Bayer AG or Volkswagen where would build a new factory or plant?

Third and last, German energy will not just be more expensive and dangerous, it will also be more vulnerable to external shocks.

The decision to shut the plants will have THRILLED Vladimir Putin and those who support him. It demonstrates that, incredibly and despite the lessons of the last year, important European countries can still be very short sighted about their energy security and strategic decision making. Putin likely can't believe his luck. A country that is desperately trying to keep the lights and stay globally competitive is willing to make themselves further exposed to inflation and economic destruction via global energy prices. Wild.

Germany and the EU had an unusually mild winter it is true - and we have celebrated that fact - but as one energy investor drily reminded us recently:

Winters happen every year.

True story.

At the risk of being a bit of a downer, it won't be long until we start to wonder about temperatures and gas storage levels once again. Can Europe get lucky again?

We don't know but the war in Ukraine is, unfortunately, showing no signs of being resolved any time soon. How quickly before German industry could be joined by an increasing number of German citizens arguing that Europe can no longer

All of this is music to the Russian leader's ears and that is not good.

A good month for Putin is not something any politician or environmental group should be congratulating themselves on and that is exactly what this decision has achieved. If nothing else, that should lead to reflection and less celebration in Germany and elsewhere in the environmental world.

Being anti-fragile is always important and is especially the case in an era when great power conflict and zero sum economic thinking has returned with a vengeance.

Vengeance is coming for others as well. That brings us to our final story....

*******

Have questions? Care to find out more? Feel free to reach out at contact@pebble.finance or join our Slack community to meet more like-minded individuals and see what we are talking about today. All are welcome.