NUCLEAR POWER: PROMISE & PITFALLS
This memo consolidates a three-blog series posted in August 2008, which concluded that the future of nuclear power was somewhat murky (this assessment would be reinforced in ensuing years by falling natural gas prices due to the fracking boom). The content has been modestly edited, but without change in substance.
A. Pros and cons of nuclear power
B. Start by addressing current problems
C. No special favors for nuclear power
A. Pros and cons of nuclear power
We suggested a clear edge for nuclear power over wind power in the 5/5/08 entry (“The Holy Grail: Energy policy based on evidence vs. propaganda”).
For those concerned that too much fossil fuel is being consumed to produce electricity, there is always nuclear power – which is far more practical than wind power given the current state of technology.
Perhaps the point was too quickly made, for nuclear power is neither cheap nor problem free. This week we will begin a review of the subject.
Case for nuclear: For those who buy into the alleged perils of manmade global warming, it seems obvious that the use of fossil fuels must be curtailed (with more energy obtained from alternative sources) – the sooner the better. Thus, per John Holdrens, a Harvard University and Woods Hole climatologist:
If we continue on business as usual, we are going to see more floods, more droughts, more heat waves, more wildfires, more ice melting, faster sea level rise. * * * We really have less than a decade to start getting this right. If we're still dragging our feet in 2015 I think it really becomes at that point almost impossible for the world to avert a degree of climate change that we simply will not be able to manage without intolerable cost and consequences.
While viewing such claims with skepticism, SAFE supports continued research on the increase of greenhouse gases in the atmosphere to settle the issue based on scientific evidence vs. polemics. It also seems sensible to develop some alternative energy technologies, just in case.
Global warming aside, by the way, producing energy from fossil fuels (coal, oil, and natural gas) may not remain the cheapest way to go indefinitely. Fossil fuels are nonrenewable assets; their cost can be expected to rise as the most readily exploited reserves are exhausted. Meanwhile, technological advances may cut the cost of energy from other sources.
“It doesn't take a soothsayer,” says columnist William Rusher, “to foresee that oil, as our principal energy resource, is a fast-diminishing asset.” He goes on to tick off some replacement candidates and declare nuclear power the clear winner (“substantially infinite, ecologically inoffensive and readily available”).
Some caveats: Senator Tom Carper (D-Delaware), a member of the Senate Committee on Environment and Public Works (and chairman of the Subcommittee on Clean Air and Nuclear Safety), expressed qualified support for nuclear power in a 7/29/08 column for the [Wilmington] News Journal.
Nearly three-fourths of U.S. electricity is produced from fossil fuels (mainly coal and natural gas), albeit “at a cost of dirty air, acid rain and dangerous greenhouse gases.”
Most of the rest of the country’s electricity is produced at nuclear power plants (104 nuclear reactors, none undertaken in the past 30 years), which “helps avoid burning fossil fuels and reduces air pollution and global warming.”
Although various power sources may come into play as a replacement for fossil fuels, the use of nuclear power could potentially grow. Notably, car manufacturers are developing plug-in cars that could be recharged overnight from “clean power like nuclear-derived electricity.”
To achieve the vision of additional nuclear power plants using state of the art technology, safety must be job one.
All it would take to short-circuit America's renaissance of nuclear power is an avoidable accident or serious incident at a nuclear power plant. My admonition to the nuclear industry has become, "If it isn't perfect, make it better."
In addition to underscoring Carper’s call for flawless operations, the News Journal suggested in an accompanying editorial that the private sector would not undertake new nuclear power plants (said to cost $5 to $12 billion each) without “enormous government subsidies” or “a tax on carbon use so heavy that nuclear construction costs [would] look cheap.” Taxpayer acceptance of such measures seems doubtful, said the newspaper, when “so many other energy alternatives show promise.”
No subsidies, please: As has been stated before, SAFE opposes government subsidies or mandates for ethanol, wind power, etc. Let the market decide whether such forms of alternative energy are economic. The same goes for nuclear power. The government should not prop up any candidate, regardless of the “promise” it might show.
And if no type of alternative energy will fly without government support, the logical response is to risk a bit of global warming and keep burning fossil fuels until the alternative energy technologies are improved and/or fossil fuel prices increase to the point that some other form of energy becomes economically attractive.
Are we being irresponsible? Not at all, given the many questions about the global warming (aka climate change) scare. For a helpful summary see “Global warming as mass neurosis,” Brett Stephens, Wall Street Journal, 7/1/08.
But before rejecting nuclear power (beyond keeping the existing plants going), it seems worthwhile to ask a question: Just why should new nuclear power plants be so expensive?
Nuclear power is hardly an unproven technology, after all. Existing plants in the United States are said to provide some of the lowest cost power available. Similar facilities (typically more advanced) are operating in countries around the globe (e.g., France, which gets about 80% of its electricity from nuclear).
Nuclear woes: A bit of history may help. Surprise, surprise, the reasons for high nuclear power costs turn out to be more political than technical.
The first U.S. reactor to produce power for commercial purposes started up in 1958 in Shippingport, PA. One of the supporters for this undertaking was President Eisenhower, who saw the use of atoms for peace as vastly preferable to nuclear war. The Soviet Union and the United Kingdom had been using nuclear power since 1954, and our country did not intend to be left behind.
Fast-forward to the OPEC embargo in the fall of 1973, which caused the price of oil to quadruple and resulted in a supply crisis. President Nixon reacted by calling for U.S. energy independence, to be achieved by accelerating the nuclear power program, relaxing restrictions on domestic oil production (sound familiar?), and clearing the Trans-Alaska pipeline to transport oil from the big find at Prudhoe Bay.
Nixon envisioned 1,000 U.S. nuclear reactors by the year 2000. Here are the actual results, as summarized in “Going Nuclear,” David Whitford, Fortune, 7/31/07. “No more than 250 were ever ordered, only 170 filed for permits, just 130 opened, and 104 remain.”
According to Whitford, the shortfall was due to “construction delays, cost overruns, high interest rates, systemic safety issues, a whole lot of no-nukes protestors, and a surprising dropoff in electricity demand.” The infamous 1979 malfunction at the Three Mile Island plant (Middletown, Pennsylvania) was “just another nail in the coffin.”
Project Independence, as Nixon named the energy plan, was compared to Project Apollo (which had resulted in sending astronauts to the moon). The federal government was to jump start the program financially, as described in the 1974 State of the Union address.
To indicate the size of the Government commitment, to spur energy research and development, we plan to spend $10 billion in Federal funds over the next 5 years. That is an enormous amount. But during the same 5 years, private enterprise will be investing as much as $200 billion--and in 10 years, $500 billion--to develop the new resources, the new technology, the new capacity America will require for its energy needs in the 1980's. That is just a measure of the magnitude of the project we are undertaking.
In relation to the size of the U.S. economy, $10 billion then was equivalent to some $90 billion today. The private investments alluded to would be equivalent to trillions of dollars.
Nixon resigned a few months later due to the Watergate scandal, and the proposed expansion of the U.S. nuclear program did not fare well either. While the sequence of events is fairly clear, there are sharply conflicting interpretations of why things happened and whether or not the outcome was for the best.
#Writing for the 21st Century Science & Technology Magazine in 2001, Marsha Freeman blames the collapse of the nuclear power dream on “a coordinated assault by Wall Street and its foot soldiers in the environmentalist movement.”
A key setback for nuclear power had occurred in 1971, when the new head of the Atomic Energy Commission (AEC), James Schlesinger, overturned an AEC decision and allowed the National Resources Defense Council (backed by “top Wall Street law firms”) to “intervene” via lawsuits to stop construction of the Calvert Cliffs nuclear plant in southern Maryland.
This action laid the basis for two decades of legal maneuvering by environmentalists-in-three-piece-suits to keep utilities tied up in court for years, with bogus environmental and safety concerns, making it impossible for many plants to ever be completed.
At the time, the AEC had oversight responsibility over all nuclear programs, both military and commercial. The agency was later disbanded, with the responsibility to regulate commercial nuclear programs being assumed by the Nuclear Regulatory Commission (NRC) created in 1974.
Other agencies assumed oversight responsibility for military programs and the promotion of nuclear power; they would become part of the Department of Energy created in 1977 under the Carter Administration. Schlesinger became the first secretary of energy and the assault on nuclear power continued.
While Schlesinger was making speeches about how nuclear energy was not “cost effective,” the Department of Energy showed its anti-technology stripes by actively promoting and participating in “Sun Day” festivities.
The first step toward deregulating the electric utilities took place, under the Carter Administration, through a 1978 Act that gave small, “renewable” energy producers access to the electric grid, and forced utility companies to buy their outrageously priced power.
A march on Washington of 65,000 anti-nuclear demonstrators on May 6, 1979, used the March 1979 incident at Three Mile Island to call for the shutdown of the nation’s then-operating 68 nuclear reactors.
Most of the then-operating nuclear reactors survived, and some of the projects under way were eventually completed (as previously stated, 104 reactors are operating today).
However, slowing growth of power demand in the face of rising prices, double-digit interest rates, and the realization that nuclear power projects would be tied up in the courts for years, had done their work. Nuclear reactor orders fell from a peak of 35 in 1973 to zero in 1976, and there would be no further consideration of such projects until the 21st Century.
Was nuclear power simply too costly to compete with fossil fuel plants? No way, says Freeman, noting that (1) “the actual cost of building plants had been declining for years,” and (2) “GE and other U.S. firms currently build 1,000 MW [megawatt] and larger nuclear units in Japan, Korea and Taiwan in 4 to 5 years.”
But the costs of dragging out construction for decades [due to legal obstructionism], and paying a kings’ ransom to borrow money, as well as the fear any utility would have of starting a project that could put it into bankruptcy court, had driven nuclear power out of the energy picture.
#A somewhat similar analysis by Harvey Wasserman, which however blames the private sector for putting profits before safety, was published in 1996 by Mother Jones. While we do not support Wasserman’s conclusions, this article demonstrates that there are two sides to the story.
Certainly, some degree of government oversight over nuclear power is warranted, and the basic issue is whether the government has done things right or gone overboard in the name of safety and environmental concerns.
# Here is another thought to throw into the mix. If the government proposes a crash program with heavy federal funding, which is likened to Project Apollo of the 1960s (which succeeded, but so what), watch out!
Economic development works better if the government sets the ground rules and leaves the rest to the private sector. Government funding and/or tax provisions to encourage one outcome or another are likely to prove counterproductive. And for goodness sakes, there is no need for arbitrary pronouncements as to the results required and when they are supposed to be achieved.
Let the market decide!
B. Start by addressing current problems
It remains to be seen whether there will be a nuclear power renaissance, but of this much we are sure. A crash program to build a new wave of plants, with massive government involvement, is not the way to go. Our advice to nuclear power advocates would be that a methodical, step-by-step approach is more likely to produce constructive results.
The starting point, it seems to us, would be addressing some of the issues that have bedeviled the existing nuclear power industry (which generates about 20% of the nation’s electricity) over the years.
There are no nuclear plants in Delaware (“the First State”), by the way, but five are located in Pennsylvania, three in New Jersey, and one in Maryland.
Thanks to the interstate power grid, 38% (2004 data) of the electricity used by northern Delaware customers of Delmarva Power is generated from nuclear power. Type in the five-digit zip code and check out the situation in your own area.
Regulatory scrutiny: Periodic relicensing by the Nuclear Regulatory Commission (NRC) is required to continue operating. It was a big deal when the Calvert Cliffs plant in Maryland became the first nuclear power plant in the U.S. to have its license renewed (for another 20 years) in 2000.
Many other plants have obtained renewals since then, and the process is apparently working smoothly. Senator Tom Carper (D-Delaware) recently summarized the situation as follows:
Half of the existing 104 nuclear power plants -- many of them 40 years old -- have completed NRC's rigorous, two-year relicensing process. Another 12 nuclear plants are undergoing that process now. Three of the reactors expected to seek relicensing for another 20 years are Salem Units One and Two and Hope Creek, located across the Delaware River in New Jersey. They employ several hundred Delawareans.
Carper’s column suggests that the situation might become more difficult if there was a serious mishap at one of the U.S. nuclear power plants. And we understand there was a near miss at the Davis-Besse plant (Toledo, Ohio) in 2002, where a “pineapple-sized rust hole” ate through the reactor’s steel lid over a four-year period. “Only a thin, bulging liner,” says the [Cleveland] Plain Dealer, “kept the reactor's high-pressure coolant from spurting out.” Although such a disaster was averted, the reactor was shut down for 14 months and $400 million was spent on repairs and replacement power.
So clearly, as Carper says, safety must be a top priority if the nuclear power industry is to thrive.
At the same time, to paraphrase Chief Justice John Marshall, “the power to regulate is the power to destroy.” The government’s regulatory bar must not be so high and so inflexible as to undermine private sector initiative and drive costs to unsupportable levels.
Nuclear waste: Another key issue, under study since the 1970s, is what to do with high-level nuclear waste (e.g., spent fuel rods).
A possible solution has been identified, namely transporting nuclear waste being held at nuclear plants around the country to Nevada for deep burial at a remote site (Yucca Mountain) that is very dry and not expected to be geologically active. A write-up from ThinkQuest (Oracle Education Foundation) provides additional information.
Tons of money have been spent on the Yucca Mountain plan, reportedly $9 billion to date, and the total system life-cycle cost” is expected to top $60 billion. Even in the “absolute best-case scenario” this facility will not be open to receive nuclear waste until 2017. The estimated storage capacity is 77,000 tons (but a Heritage study cites a higher figure, see below) and some 58,000 tons of spent nuclear fuel has accumulated at sites around the country already, so Yucca Mountain might fill up rather quickly.
An opening date of 2017 assumes no delays due to litigation, which is probably unrealistic. The county (Nye) that encompasses Yucca Mountain has acquiesced in the program, and is happily cashing tax-equivalency checks from the federal treasury ($11 million in 2007). Nine other counties are entitled by statute to weigh in on the project, however, and they are expected to do so.
Per “Going Nuclear,” David Whitford, Fortune, 7/31/07, “the NRC has built a dedicated facility in Las Vegas, out near the airport, just to host the hearings.” Some courtroom action will presumably follow as the counties strive to block the project and/or extract every concession they can.
What if Yucca Mountain never gets final approval to begin receiving nuclear waste? Whitford’s sobering conclusion: “There is no Plan B.”
Given the foregoing, one might wonder whether the U.S. is on the wrong track. What techniques for disposing of nuclear waste are being used by other countries?
Per lecture notes posted on the University of Oregon Website, the predominant technique in use (France, Germany, Sweden) or under study (Belgium, Canada, Finland, Japan, the Netherlands, Switzerland) is underground burial in various media. The UK plans to reprocess spent fuel rods after interim storage.
Although the approaches elsewhere may be less complicated and expensive than the Yucca Mountain plan, they are evidently not trouble-free.
#Most of the nuclear waste in other countries is still being stored on site, per the University of Oregon notes, just as in the U.S.
# In France, there have been reports of alarming contamination from a low and intermediate level nuclear waste disposal facility.
Radioactive tritium from a nuclear waste storage facility in Normandy, France is leaking into groundwater that is being used by local farmers for their dairy cattle, according to a new report published by the French laboratory ACRO. *** In agricultural land close to the dumpsite, ACRO tests found levels in the underground aquifer during 2005 averaged  times above the safety limit.
#In Germany, the transportation of nuclear waste to the underground storage site has triggered massive public protests (the pictures speak for themselves).
A recent Heritage Foundation paper by Jack Spencer provides some perspectives on the Yucca Mountain project that might be helpful in planning the path forward.
First, it would be wrong to view this program as simply a handout from the government. Consumers have to date paid some $27 billion (of which $8 billion has been spent) into a Nuclear Waste Fund via a surcharge on their electricity bills. If Yucca River were stopped, they would wind up receiving nothing for the $27 billion.
Second, the concept of filling Yucca Mountain with spent fuel and then sealing the repository may have made sense in 1982 when the assumption was that the U.S. would be moving away from nuclear power.
Given physical capacity of 120,000 tons (vs. the 77,000 ton figure cited in the Fortune article, which was apparently based on statutory provisions), there would have been a good chance of using Yucca River to “store America’s current 56,000 tons of spent fuel as well as all future waste from the current fleet of plants.”
Now, however, with serious consideration being given to expanding the use of nuclear power, a more flexible approach seems in order.
The basic concept – embodied in a bill sponsored by Senator James Inhofe (R-OK) – would be to keep the spent fuel at Yucca River available for retrieval and reprocessing.
Why would anyone want to do this? Well, in addition to prolonging the useful life of the repository, spent fuel rods generally contain about 95% of their fissionable uranium content (a subsequently cited write-up differs on the details, but reaches a similar conclusion). Therefore, in Spencer’s words, the policy of permanently disposing of all spent fuel represents “a monumental waste of resources.”
Stated otherwise, the 56,000 tons of spent fuel at U.S. plants contain “roughly enough energy to power every U.S. household for 12 years.” Should this value simply be thrown away?
“Many technologies exist,” per Spencer, to recover and recycle different parts of the spent fuel. One method for so doing is already in use in France, and other technologies show even more promise.
[Most of these technologies], including the process used in France, were developed in the United States. Some recycling technologies would leave almost no high-level waste at all and lead to the recovery of an almost endless source of fuel. However, none of these processes has been successfully commercialized in the United States, and they will take time to develop. Until the future of nuclear power in the U.S. becomes clearer, it will be impossible to know which technologies will be most appropriate to pursue in this market.
Spencer’s analysis was extended in a second paper that advocated making nuclear power plants responsible for the recycling or disposition of their own nuclear waste. Storage capacity at Yucca Mountain would still be available on a fee basis, under this approach, but the government would be relieved of responsibility for managing the waste disposal program.
Assuming such an approach could make it through Congress, it sounds good to us. After all, if reprocessing of spent fuel became an integral step in the nuclear power business, what sense would it make to haul all the nuclear waste in the country to Yucca Mountain and have the government perform this operation there?
Another point to bear in mind is that fossil fuel power plants have waste disposal problems too, especially the coal-burning plants that generate about 50% of the nation’s electricity. While the waste involved is not highly radioactive, there is much more of it, which is unsurprising considering that a ton of nuclear fuel produces energy equivalent to over a million tons of fossil fuel.
Bill Walker, who works in HIV/gene therapy research and resides in Rochester, Minnesota, comments as follows on the routine emissions from nuclear vs. coal-burning power plants.
There is radium and polonium in coal. The routine radioactive emissions from coal plants are between 100 times (for anthracite) and 400 times (for bituminous) more intense than the permitted releases from US nuclear plants. If the Nuclear Regulatory Commission regulated coal plants, every single one would have to shut down immediately. And of course coal plants release millions of tons of dangerous chemical pollutants, the effects of which are not even well quantified.
Like Jack Spencer of Heritage, Walker believes that nuclear power plants should reprocess “spent” nuclear fuel. However, he describes the percentage of nuclear fuel consumed and identity of the fissionable material left over rather differently. Given that fissionable plutonium should result from the bombardment of uranium-238 by neutrons in reactors, we are inclined to think Walker’s description may be more accurate.
Nuclear fuel rods are about 3% uranium-235 when they go into a reactor. They quit sustaining fission when they are roughly 1% uranium, 1% plutonium [also fissionable], and 1% radioactive elements like strontium-90 and cobalt-60. Then in environmentally responsible countries [excluding the U.S., which legally prohibits reprocessing] the rods are removed from the reactor, the uranium and plutonium are recycled into new fuel rods, and the other radioactive elements are used by industry for various purposes.
Walker notes an advantage of nuclear power plants that could easily be overlooked, namely they do not take up much space. Thus, while 20% of U.S. electricity is produced by 104 nuclear reactors, it takes over 1,000 coal-burning plants to produce 50% of U.S. electricity. One might infer from this that one nuclear plant is equivalent to about four coal-burning plants.
Nuclear power likewise takes up less space than solar power, wind farms, and the cultivation & production of biofuels.
New nuclear plants: Imagine that the nuclear power industry continues to operate safely, that it is empowered to reprocess spent nuclear fuel, and that a modus operandi is worked out to complete and open the Yucca Mountain facility by 2017 (at the latest, not the earliest).
These things need to be done, and frankly they do not strike us as all that difficult. If our political leaders are not up to the task, perhaps it is time they were replaced.
Then would be the time, it seems to us, to start thinking seriously about a new wave of U.S. nuclear power plants – without federal subsidies.
C. No special favors for nuclear power
The nuclear power industry has flourished in recent years, sparking talk of a renaissance. The existing plants (104 reactors on 65 sites), which produce about 20% of this country’s electricity, will continue to operate successfully. Some 30 new nuclear plants have been proposed and several applications have been submitted to the Nuclear Regulatory Commission (NRC) for review.
But will any of the new plants actually be built? Let’s begin this week’s discussion with factors that augur well for nuclear power; then some obstacles will be covered.
#Current profits: Nuclear power is very capital intensive, meaning it is expensive to build power plants initially (and probably to decommission them if and when they are shut down). Period costs for fuel, plant payrolls, etc., on the other hand, are relatively low, and the industry is now (in marked contrast to prior years) operating at over 90% of capacity.
Meanwhile, with surging demand for electric power (to run air conditioners, plasma televisions, etc., and before long recharge automobiles over night) and sharply higher fossil fuel costs, power prices are on the rise.
The combination of relatively low operating costs and buoyant power prices has made nuclear power plants very profitable. “Nuclear Revival, the Sequel,” Stephen Maloney, Electric Light & Power, January 2008.
Current operating costs are under 2 cents per kWh [kilowatt hour]. A typical nuclear operator sells forward to investment-grade counterparties some 90 percent of its capacity at more than $50/MWh [or 5¢ per kWh]. Anyway you do the math, that’s a money machine. There aren’t too many other generating options looking as good as that.
Never mind the years in which the nuclear power industry struggled to survive, demands to cap its profits now (thereby blunting the incentive to build more nuclear plants) are predictable. “Power surge: As electricity cost spike and demand taxes the grid, some states are eyeing ways to insulate consumers,” Christopher Palmeri & Adam Aston, Business Week, 7/24/08.
While consumers may be feeling pain, utilities that operate plants in states with minimal regulation are making handsome profits. Chicago-based Exelon (EXC) and Baltimore's Constellation Energy Group (CEG), among others, have tripled their profits over the past five years. One reason: They're running nuclear plants that cost much less to run than natural-gas-fired facilities. Yet they can charge the same prices as rivals with higher operating costs.
#Global warming: For those who buy into the theory of manmade climate change, nuclear power offers a huge advantage over fossil fuel plants. The point was highlighted in an MIT study on nuclear power released in 2003.
In the U.S. 90% of the carbon emissions from electricity generation come from coal-fired generation, even though this accounts for only 52% of the electricity produced. Taking nuclear power off the table as a viable alternative will prevent the global community from achieving long-term gains in the control of carbon dioxide emissions.
Here could be some “icing on the cake,” it seems, which could fuel a consensus to go ahead and build more nuclear power plants – but now for the obstacles.
#Old business: See our Section B discussion of issues that have plagued the nuclear power industry and need to be cleared up, i.e., (1) set attainable safety standards for the nuclear power industry, (2) empower the private sector to reprocess spent nuclear fuel, and (3) work out a modus operandi to complete and open the Yucca Mountain waste repository by 2017 (at the latest, not the earliest).
Achieving these goals should not be overly difficult, in our view, if the government provides the appropriate leadership vs. attempting to please everyone and getting nothing done. It remains to be seen, however, whether such leadership will be forthcoming.
#Capital costs: Historically, nuclear power plant costs far exceeded the initial estimates. A key factor was regulatory delays (8/4/08 entry). The use of “cost plus” contracts did not help either.
This time, it is said, there would be one or two nuclear plant designs – already perfected – versus every plant being a one-of-a-kind installation.
[According to vendors], it won’t take a decade or more to design and build a nuke. Buyers get a standardized design, pre-approved by the NRC, and can count on construction techniques proven offshore to deliver in a few years rather than a decade or more.
Moreover, the NRC will combine the construction permit and operating license process, reducing the potential for unexpected delays once a project has been started.
In the old system [U.S. officials point out], intervenors would get “two bites” in their efforts to use the regulatory process to make a plant too expensive to complete. Today, it’s one-stop shopping with a combined construction and operating license (COL) before construction gets a green light.
Tower Perrins consultant Jerry Maloney cautions against excessive optimism, however, that things will go more smoothly than in the 1970s.
Problems can be expected even with certified reactor designs, says Maloney, just as they do with aircraft that have been in service for years. Also, the “not in my back yard” prejudice is alive and well.
Not everyone wants a nuke (or a wind turbine for that matter) down the road. And “down the road” can mean 30 miles or more away.
A pattern of rapidly escalating cost estimates for new plant seems to be developing already – and it is only partially due to inflationary pressures. Our take is that nuclear power firms are “low balling” project costs and then expecting investors, government agencies, and ratepayers to accept big upward adjustments as implementation proceeds.
Thus, Progress Electric (St. Petersburg, Florida) recently tripled its estimate for a new nuclear power plant (two reactors) to an eye-popping $17 billion. One reason cited was surging prices for steel, concrete, etc., but the recognition of costs that had not previously been factored in, e.g., land acquisition, financing costs during construction, and a $2-3 billion transmission system, was probably more important.
The first reactor would not go on line until 2016, the St. Petersburg Times reported, with the second to follow a year later, but ratepayers would begin paying for the power much sooner. A $9 per month surcharge was foreseen starting in 2009.
No matter, Governor Charlie Crist expressed continued support for nuclear power. The next step was to be a detailed review with the state regulatory authorities.
What about the private sector? Wall Street investors would need to be persuaded to put up the money for new nuclear power plants, said John Schoen in a January 2007 article, necessitating some degree of assurance that state utility regulators will “bless the higher rates needed to pay for these multi-billion-dollar projects.”
The federal role in the process, besides having the NRC ensure the safety of proposed projects, seems to be perceived as providing financial support – and this is hardly something new.
In 2003, the Cato Institute decried the “handouts” embedded in that year’s energy bill. “No Corporate Welfare for Nuclear Power, Navin Nayak and Jerry Taylor.
The energy bill has evolved into the mother of all pork barrels, an indefensible package of handouts regardless of one's political persuasion. It's time for Congress to pull the plug on this legislative abomination once and for all.
The Energy Policy Act of 2005 contained more perks for the nuclear power industry, as summarized by John Schoen in his aforementioned article.
$3 billion in research subsidies; more than $3 billion in construction subsidies for new nuclear power plants; nearly $6 billion in operating tax credits; more than $1 billion in subsidies to decommission old plants; a 20-year extension of liability caps for accidents at nuclear plants; federal loan guarantees for the construction of new power plants.
Lots more help is contemplated, notably a carbon tax or “cap-and-trade” system that would increase the cost of power produced from fossil fuel. There would also be “several important sweeteners” for “the first few companies [n.b. subsidies are easier to create than to kill] that come forward with plans” for nuclear power plants.
Small wonder that companies are floating proposals for nuclear power plants, even though they do not have a clear handle on the costs and are far from decided to make a major investment. Their objective is an option to proceed if conditions appear favorable, e.g., enough money is put on the table. Stephen Maloney, “Nuclear Power, the Sequel.”
As matters currently stand, operators like keeping their options open about adding to their nuclear fleets. The COL provides a licensee the option to build a nuclear plant. Exercising that option is another matter. The application will cost some $40-$80 million, which can be viewed as an option premium.
Presently, it’s not obvious the option is in the money. To actually build a plant will cost more than $5 billion. Investments of this scale are in the “bet the farm” category and exceed the market capitalization of most companies.
Now suppose the federal government made clear (to SAFE’s delight) that it welcomes new nuclear power plants, but will not support them either (a) directly (subsidies, loan guarantees, etc.) or (b) indirectly (carbon tax or the like to discourage use of fossil fuel).
There would be a shocked reaction from the nuclear power industry, no doubt, with many currently proposed nuclear projects being dropped like hot potatoes. Longer term, however, we suspect some nuclear power plants would get built anyway. Here is why:
#The economics of nuclear power will continue to improve if fossil fuel prices keep climbing – as they should due to demand growth and progressive depletion of the most accessible reserves.
#Spent fuel reprocessing could contribute to the economics of nuclear power; so could building more reactors at existing nuclear complexes versus creating “green field” sites. (Many existing sites were designed to house up to four reactors; on average, there are only 1.6 reactors per site.)
#The capital costs for new coal-burning plants might be lower than for nuclear power plants – certainly this is so on a per plant basis (one nuclear plant produces as much power as several coal plants) – but they would be considerable.
#Global warming aside (we are not about to rely on this argument), nuclear power offers clear-cut environmental advantages (e.g., no appreciable discharge of demonstrably harmful pollutants into the atmosphere) over coal plants.
Lest our suggestions be dismissed as extreme, note that the UK government has announced a policy of welcoming new nuclear power plants without propping them up.
[Business Secretary John] Hutton conceded that no nuclear plant had been built anywhere in the world without public money - but he insisted there would be no subsidies from the UK government.
"It is a matter for the power companies to bring forward proposals on the basis that there will be no public subsidies," he told BBC Radio 4's The World at One.
This “no subsidy” policy is hardly air tight (the UK is a party to the European Union emissions trading scheme, which is intended to discourage the use of fossil fuels), but it represents a step in the right direction.
What about subsidizing other forms of alternative energy, e.g., windmills, solar power, biofuels, etc.? The main argument for government support of these technologies, so far as we can tell, is that they cannot be expected to catch on without it.
Take the Boone Pickens plan for “energy independence,” which is being promoted aggressively via television advertisements, etc. Build windmills instead of generating power with natural gas, use compressed natural gas to power motor vehicles, and tell OPEC et al. to take a hike because this country is not going to keep paying them $700 billion a year for oil.
Surprise, surprise – the government would be expected to pony up $1 trillion to help make the vision a reality. This would presumably be raised from a carbon tax or a cap-and-spend regime, as though the funds from this source represented “free money.”
Look a bit closer, and it becomes apparent that the Pickens Plan is ill conceived and shamelessly self-serving. True “energy independence” would raise energy costs rather than lowering them. There is no sound reason to invest huge sums in wind power while ignoring the demonstrated potential of nuclear energy. If compressed natural gas (CNG) vehicles were an economically sensible alternative to conventional gasoline powered vehicles, then no government "master plan" would be necessary to deliver them to market.
Even if reducing mankind’s carbon footprint were viewed as a matter of the utmost urgency, the most effective way to get there would be to impose a carbon tax and let the market decide what alternative energy options should be implemented. “T. Boone Hard-Wired for Subsidies,” Jerry Taylor, Cato Institute, 7/24/08.
Maybe it will mean windmills and CNG, but maybe not. Perhaps it will mean more nuclear power, new hydrogen-powered fuel cells, "clean" coal, the emergence of cellulosic ethanol, battery-powered cars or hybrids—or a continuation of the existing energy base but less consumption as a consequence.
Everyone seems to subscribe to “a level playing field” in the sporting world. When Michael Phelps swam for a 7th gold medal at the 2008 Olympics, the issue was who touched the wall of the pool first (thank goodness for the electronic sensors, which showed Phelps had won the 100 meter butterfly by one hundredth of a second), not who “deserved” to win.
So why all the demands for special treatment when it comes to economic transactions? Let’s have a level playing field in the business world too; it will work out better for everyone in the long run.