The impact of the German response to the Fukushima earthquake

- Study of major natural experiment on electricity market
- Complete change in German energy policy implications
- Results not in line with what many people expected
- Significant impact on prices and market, both in Germany and Austria
- Implications for elsewhere

The German response to the Fukushima nuclear power plant incident was possibly the most significant change of policy towards nuclear power outside Japan, leading to a sudden and very substantial shift in the underlying power generation structure in Germany, an enthusiastic leading proponent of renewable power. This provides a very useful experiment on the impact of a supply shock in the context of increasing relative generation by renewable compared to conventional fuel inputs into power production. Our quasi-experimental exploration of a modified demand-supply framework finds that despite the swift, unpredicted change in nuclear power, the main impact was a significant average increase in prices, surprisingly particularly at low residual load levels.