Economic support during damages litigation relating to Germany’s “nuclear moratorium”

The Situation

In March 2011, a few days after the catastrophic accident at the nuclear power plant at Fukushima, Japan, the German federal government declared a three-month “moratorium” on eight nuclear power plants in Germany. In the aftermath of the moratorium, three operators of German nuclear power plants filed suits against the federal government and different state governments. Amongst others, German energy company RWE sued the federal state of Hesse for damages of approximately EUR 230 million due to the alleged effect of the moratorium on the power plants Biblis A and B.

NERA's Role

The federal state of Hesse instructed a NERA team led by Director Tomas Haug and Principal Dominik Huebler (together with analysts Georg Arndt, Philipp Kroeger, Zhaoxin Pu and Lorenz Wieshammer) to provide economic expertise in the lawsuit initiated by RWE. NERA was engaged to critically assess the robustness of the claimants’ damage estimates and to review aspects that had been ignored or valued incorrectly.

First, NERA analyzed to what extent the “nuclear moratorium” had influenced the development of electricity prices on German spot and futures markets and calculated the resulting additional profits for RWE’s remaining power plants that offset lost revenues from the power plants Biblis A and B and, which therefore, should have been taken into account in the damages calculation. Our detailed modeling considered price effects as well as volume effects.

Second, NERA examined other aspects which had been disregarded or not adequately been taken into consideration by the claimant. These included cost savings related to Germany’s nuclear fuel rod tax and the opportunity cost of production allowances under Germany’s nuclear licensing regime. Furthermore, NERA provided advice on other economic questions arising in the course of the defense against the damages claim.

The Result

After the first round of hearings, the regional court in the city of Essen declared that it shared the defendants’ view that portfolio effects including price and volume increases must be taken into account and offered a settlement that was considerably closer to the defendants’ than the claimant’s damage calculation.

In December 2016, the operators of the German nuclear power plants announced that they would drop their law suits related to the “nuclear moratorium” as part of a wider settlement package with the federal government that also included questions relating to the financing of future nuclear waste disposal liabilities.

NERA experts regularly serve as consulting and testifying economic experts in litigation and arbitration proceedings. Apart from questions related to nuclear power and electricity market modeling, clients frequently seek our advice on the renegotiation of long-term contracts and various other topics in the fields of energy and infrastructure.