The German decision to phase out its nuclear power stations continued to rock Europe’s carbon and renewable energy markets last week, with investors increasingly seeing some bleak implications from the move.

The week started off with Angela Merkel’s cabinet in Germany finding support from the opposition party on the nuclear shutdown issue and ended with electricity company RWE warning of the detrimental effect its government’s decision will have on utilities in general and the country’s emission performance in particular.

The German vision of reducing 40% of its CO2 emissions by 2020 compared with 1990 levels is now under pressure, especially given that carbon-capture and storage - a technology that could be retrofitted to fossil-fuelled plants - is several years at least away from commercialisation. The Merkel Cabinet, however, has decided that the nuclear phase-out will happen for certain by 2022 following the crisis at the Fukushima Daiichi complex in Japan.

The outcome of Berlin’s decision, when translated into figures, could mean German utilities need to build as much as 20GW of fossil-fuel-fired plants over the next 10 years to help plug the gap left by the country’s exit from nuclear energy, according to Merkel.

RWE operates five German reactors, of which two are among the seven oldest in the country, and Merkel says she will not allow the country’s oldest plants to restart following safety checks. RWE has been the worst-performing European utility stock of 2011 so far, with a share price fall of 22%, and it has said that it may consider a merger as the country exits from nuclear power and levies on the energy industry slash profits.

The utility, like its peers, will not be in a great hurry to foray into the market on a large-scale basis to buy EU carbon allowances needed for the additional fossil-fuelled energy generation, according to Bloomberg New Energy Finance. Electricity companies may instead opt to wait until the energy turnaround becomes law, so they are absolutely certain.

Welt am Sonntag newspaper quoted Manuel Frondel of the RWI institute as estimating that Germany’s exit from nuclear will cost EU countries as much as EUR 7.5bn ($10.8bn) per year as prices for emission certificates for carbon dioxide rise by EUR 5 per metric ton.

In other news, the UK Department of Energy & Climate Change said in a report commissioned from engineering company Arup that renewable energy may increase tenfold by 2030 if the country can develop its power grids by then. That would be a huge leap forward considering that the country’s National Renewable Energy Action Plan actually detailed a fourfold rise by 2030.

In what could seem like the answer to the food-versus-fuel debate in the biofuel sector, airlines won the backing of a US-based technical-standards group to power their planes with a blend of traditional fuel and biofuel from inedible plants. The fuel may be processed from organic waste or non-food resources such as algae or wood chips.

Following Schneider’s purchase of Spain’s Telvent to boost its software development capacity, other firms are being seen as potential acquisition targets in the ‘smart grid’ sector. A possible takeover of PSI of Germany was doing the rounds until chief executive officer Harald Schrimpf’s statement that the company would remain independent for a couple of years at least put rumours at rest.

The UK saw a cut in subsidies for solar projects of less than 5MW - to take effect from 1 August. It joined Spain, Germany and Italy in slashing solar feed-in tariffs to reduce costs for consumers that have to pay the higher expense of clean energy.