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Tickers in this Article: FSLR, KYO, STP, AMSC, SI, GE, CCJ
With news out of Switzerland and Germany last week, it looks as though the long-term energy picture in Europe is changing in a hurry. Germany and Switzerland, two of the world's largest economies, have both announced plans to completely phase out nuclear power as an electricity source, leaving the question of how these countries will fill the power gap without choking off their economies.

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Not surprisingly, solar and wind power stocks rose on the news, but only time will tell if the companies in these markets can increase their efficiency fast enough to become viable cornerstone sources of power. In the meantime, the decisions in Germany and Switzerland are likely to ripple through the power generation market for years to come.

The Scale of the Decision
In relatively short order, both Switzerland and Germany have decided to abandon nuclear power as an ongoing source of electricity. While nuclear power has been a touchy subject throughout most of Europe for some time (especially after the Chernobyl disaster), protests accelerated in the wake of Japan's combined natural disasters and TEPCO's inability to avert serious problems at the Fukushima facility.

The scale of these changes is not insignificant. Switzerland gets 40% of its power from nuclear plants, while Germany gets one-quarter of its electricity this way. Said differently, that is equivalent to almost 175 terawatt hours of electricity a year.

Is Solar Ready for Primetime?
Europe has already shown itself to be a willing market for solar power, even if much of the installation has been underpinned by extensive government subsidies. Consequently, it was not a big surprise to see solar stocks jump on the news. The question, though, is whether or not companies like First Solar (Nasdaq:FSLR), Kyocera (NYSE:KYO), SunTech Power (NYSE:STP) or Sharp (Nasdaq:SHCAY.PK) are ready to fill the gap. At current efficiency rates, it would take tens of millions of square feet of open space to generate a replacement level of power, and that is not even including the extensive battery installations that would be needed to store and redistribute power when the sun is not out.

Blowing in the Wind?
Wind power is the other popular and supposedly environmentally-friendly power alternative often cited as better than nuclear power. Clearly companies like Vestas (Nasdaq:VWDRY.PK) or American Superconducor (Nasdaq:AMSC) would dearly love this to be true, as wind power companies have been under pressure lately. Unfortunately, wind power has its major drawbacks as well - wind turbines kill birds and large wind farms need a lot of concrete and the manufacture of cement for that concrete is a major source of carbon dioxide. Moreover, wind power is not very reliable and many utilities have found that they need other types of more reliable power generation (like coal or gas) as a back-up.

Winners and Losers
Most of the large power generation companies have diversified themselves to a point where national choices about power sources are not critically important. Siemens (NYSE:SI) and General Electric (NYSE:GE), for instance, are both involved in nuclear power, but also have extensive interests in hydroelectric, wind, coal and gas-based generation systems. That leaves Areva (Nasdaq:ARVCY.PK) and Westinghouse (owned by Toshiba and Shaw Group (Nasdaq:SHAW) more exposed, though, as both are heavily dependent on nuclear power.

It also likely sounds obvious that major uranium companies like Cameco (NYSE:CCJ) and USEC (NYSE:USU) have a lot on the line here. The thesis behind uranium stocks has been that demand and prices will head higher as more countries adopt nuclear power as a no-carbon fuel source. Clearly, that would be threatened if other countries decide to go nuclear power-free.

Power companies are also on the hook here, as Germany's large utility E.ON (Nasdaq:EONGY.PK) will have to find a way to find new and equally reliable sources of power while also adhering the environmental mandates regarding pollution and carbon emission. Ultimately, it may be this struggle that unwinds the whole decision to shut down nuclear power. While hydroelectric power is a viable option in some cases (including very mountainous Switzerland), eventually politicians are going to have to face some harsh realities - "alternative power" is not at a place where it can take up a big chunk of baseload demand, there is only so far that hydroelectric can go, importing power is a strategic risk, and coal/gas plants have their own environmental baggage.

The Bottom Line
It is surprising that Germany would take such a bold move as looking to replace one-quarter of its power generation in just over a decade. If the stereotypically pragmatic and cautious Germans think it can be done, perhaps it can. That said, investors should be cautious about rushing to anoint winners and losers today. Alternative sources of power need to get significantly better to become viable and the high costs of turning away from nuclear energy may ultimately force these government to reconsider their positions in a few years. (For related reading, also check out 4 Clean-Energy Alternatives To Uranium.)

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