Energy giants warn against nuclear tax

Germany nuclear fuel rod tax threatens E.ON and RWE earnings, curbing investment in renewable energy, low-carbon power stations, and smart grids amid unclear energy policy and debates over nuclear lifetime extensions and energy security.

Germany's largest energy companies have lashed out at the government about controversial plans to introduce a nuclear tax that will cost billions of euros each year.

Both E.ON AG and RWE AG have warned the government that the potential fuel-rod tax, which will cost energy companies 2.3 billion euros US $2.95 billion a year until 2014, will result in reduced investment in renewable energy and smart grid projects, even as Berlin later pursued an energy price shield for consumers.

Nuclear plants account for more than a quarter of Germany's electricity generation, but all of the country's plants are scheduled for closure by 2021 unless an agreement to extend their lifespans can be made, potentially leaving many consumers missing out on cheaper power during tight supply years.

Speaking at the release of the company's half-year financial results, E.ON CEO Johannes Teyssen expressed concern at the government's lack of a clear energy policy under various 'green' governments in recent years and its plans to introduce the nuclear tax.

"There has long been a lack of clarity about the direction of Germany's energy-policy," he said. "This needs to change. As the federal government stated, Germany needs a non-ideological, technology-neutral, and market-based energy strategy amid rising heating and electricity costs facing households that includes an environmentally and economically sensible decision on the future of nuclear energy in this country. Only then will Germany make a real start towards its energy future.

"Ten months later what we are seeing is that there still no clarity about the clear direction of German energy policy and thus no clarity about the future of nuclear power in Germany either." Teyssen argued that nuclear energy is vital to Germany's economic and success and energy security and would continue to hold this position "if our highly secure and reliable nuclear power plants were allowed to operate as long as is usually the case in many other countries. In this regard, we are prepared to share the benefit of a lifetime extension. But, any benefit sharing must be balanced. I explicitly warn of charges of such a magnitude that the operation of nuclear power plants could become uneconomic, given the nuclear price tag many cite today. Germany's proposed nuclear tax would be such a negative and unacceptable charge."

Last October, it looked likely that Germany's government was going to extend the life of older nuclear plants in what some officials called a nuclear U-turn to avoid a looming energy crisis.

E.ON's warnings have been echoed by RWE CEO Juergen Grossmann, who said: "In a generally uncertain environment in the energy industry, RWE is confronted not only with the German government's plans to introduce a nuclear fuel tax, but also with continuing uncertainty about the announced energy concept. For this reason, the Group now has to review its medium-term goals up to and including 2013. Such a tax would substantially diminish our earnings power — and thus our financial scope for investment in renewables, low-carbon power stations and smart grids."

Grossmann called on the government to clarify its nuclear position.

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