Nuclear Power and Energy Independence

A Reason Foundation roundtable

Shikha Dalmia, William Tucker & Jerry Taylor | October 22, 2008

(Page 2 of 3)

Jerry Taylor, a senior fellow at the CATO Institute, however, disagrees. He points out that the high upfront cost of building safe and reliable plants have raised both the opportunity and risk costs of nuclear, making it unattractive for potential investors. Only in countries where government has stepped in has nuclear flourished. "Those who favor nuclear power should adopt a policy of tough love," he counsels. "Getting this industry off the government dole would finally force it to innovate or die—at least in the United States."

Shikha Dalmia is a senior analyst at Reason Foundation. An archive of her work is available here.

William Tucker: Politics—Not Economics—Is Hampering Nuclear Energy

"Nuclear has gone from too cheap to meter to too expensive to matter," exults anti-nuclear guru Amory Lovins. "It is so hopelessly uneconomic that one doesn't need to debate whether it's clean or safe." Given that there hasn't been a new reactor built from the ground up in the United States for 30 years, who would disagree?

In the Energy Policy Act of 2005, Congress offered a 1.8-cent per kilowatt-hour production tax credit to the first 6,000 megawatts of new nuclear construction. Also added was "regulatory insurance" designed to protect new projects if they become ensnared in the licensing morass that stretched construction times out to 15 years in the 1980s. Yet, despite all this government prompting, investors do not seem very confident about undertaking the risks.

The day after presidential candidate John McCain announced his determination to build 45 new reactors by 2030, Admiral Frank "Skip" Bowman, director of the Atomic Energy Institute, wrote an op-ed in the New York Post begging for money:

Our nation will need something similar to the Clean Energy Bank concept being considered by some in Congress. This would be a government corporation providing loan guarantees and other forms of financial support to ensure capital for deploying clean-electricity technology.

All this would suggest that nuclear power is a failed enterprise, surviving off government subsides. There is only one trend that runs counter to this. In 2006, when the Northeast was experiencing a winter run-up in natural gas prices, Connecticut Attorney General Richard Blumenthal wrote the following manifesto for the Hartford Courant:

[W]e need a windfall profits tax aimed at generators who have reaped outlandish and undeserved profits through irrational market rules. In 2006, the nuclear Millstone II and III generators in Waterford will have profits of $274 million and $419 million respectively, while the coal-fired Bridgeport Harbor plant will enjoy profits of $113 million . . . The generators using low-cost coal and nuclear fuel reap these same high prices and enjoy ever-ballooning profit margins.

So how is it that nuclear can be too expensive to matter and at the same time making so such money that it merits a windfall profits tax? To understand this mystery, you have to recognize the hurdles nuclear power faces.

The idea that nuclear is inherently uneconomical is incorrect. Most of the nation's 104 nuclear reactors are now making profits in the range of $1 million a day. One reason is that nuclear plants are immune to the price increases that bedevil fossil fuels. Even when uranium underwent a speculative boom in 2008, with prices rising from $16 to $135 a pound before dropping back to $60, reactors were only marginally affected. "Uranium costs represent only about 10 percent of the costs of nuclear electricity as opposed to 77 percent with coal and 95 percent for natural gas," Jim Slider, director of planning and analysis at the Nuclear Energy Institute, notes.

What's more, operating and safety snags that long dogged the industry have been overcome so that the nation's entire nuclear fleet now operates at a capacity factor of 90 percent—a figure undreamed of a decade ago. Fossil fuel plants, by contrast, operate at a capacity factor of 60 percent and windmills and solar collectors are lucky to produce at 30 percent. The superior efficiencies of nuclear compared to both conventional and alternative fuels are the result of a re-organization within the industry in 1997 when "merchant" companies started buying up reactors from utilities. Entergy, Exelon, Progress Energy, Florida Power and Light, and several others became specialists in operating reactors, raising their performance to unprecedented heights. In the old days, for instance, refueling could take two months and employees often regarded it as a vacation. Now, special teams tour the country performing refueling in three weeks, choreographing them years in advance. These merchant companies are now making so much money that they want to build new nuclear plants—which is why there are nine applications before the Nuclear Regulatory Commission (NRC) with two dozen more waiting in the wings.

Indeed, no one disputes that nuclear offers big cost advantages and returns over conventional fuels in the long run due to their low operation and maintenance costs. The problem is getting over the initial investment hump, given Wall Street's reluctance to invest in nuclear. A new reactor costs between $5 and $7 billion, probably the biggest private undertaking in the world. As Thomas Friedman puts it in his new book, Hot, Flat and Crowded:

To build a new nuclear plant costs a minimum of $7 billion today, and would take probably eight years from conception to completion. Most CEOs have about eight years in office, and there are not a lot of utility CEOs who would bet $7 billion—which might be more than half the company's market cap—on one nuclear project.

Nevertheless, a 2003 MIT study, "The Future of Nuclear Power," found that while nuclear electricity sold for 6.7 cents per kilowatt-hour (kWe-hr) compared to 4.2 cents for coal and 3.8 cents for natural gas, a $50-per-ton tax on carbon emissions would push coal and gas prices to 5.4 cents and 6.1 cents respectively while leaving nuclear unaffected. Both coal and gas prices have since increased by 25 percent. A 2006 study by the French government found that nuclear and gas now cost exactly the same—4.6 cents (Euro) per kWe-hr—without a carbon tax.

Comments

DannyK|10.22.08 @ 3:19PM|#

Nice! I should print out and laminate Jerry Tucker's post for future reference.

BakedPenguin|10.22.08 @ 3:52PM|#

Yes, and now nuclear energy is funky!

|10.22.08 @ 3:57PM|#

I find myself agreeing with both. Nuclear is great, and subsidies should be removed. I think we will end up with nuclear power - but we should be in no rush to do so immediately. Technology will make this power source viable, and rushing in with early generation tech will only lock us in to expensive energy. Let the Frogs and the Finns subsidize nuclear. When we need it, we can liscense the best solution that emerges.

Darrel|10.22.08 @ 4:13PM|#

Frogs with Fins? This nucular thing can't be good.

Kaiser|10.22.08 @ 4:15PM|#

Slightly OT:


I am a firm disbeliever of man made global climate change. I am not however against alternative energies. I just don't think tax payers dollars should be going anywhere near funding alternative energies. I am a big fan of nuclear energy and have been or a long time, but I do realize the down sides to it as well. It seems to me though that people want a "cure all" when it comes to alternative energies. Something that will just replace fossil fuels but in reality we need a combination of all of them to sustain what fuel has done for us.

Let us not forget too that IF we could completely replace all of our energy usage with alternative methods, we would still need crude oil and lots of it. Many people forget or don't realize that (I don't want to quote percentages here because I don't know for sure) a lot of our crude oil goes to things that have nothing to do with energy. Rubber, nylon, vinyl, plastics, many synthetics, ASPIRIN ffs, etc the list goes on.

|10.22.08 @ 4:17PM|#

As a nuclear design engineer, I'm ever so pissed off at Jane Fonda and Barack Obama.

Nuclear is anathema only to those who have no fucking clue how it works. The average person is completely clueless when it comes to energy generation and words like nuclear just sound scary.

If I see another anti-air pollution advertisement depicting a power plant's cooling towers releasing clean water vapor I'm going to choke a vegan.

Brandybuck|10.22.08 @ 4:18PM|#

Considering that it's gum'mit that's dragging down nuclear power, I'm quite sure it would be quite sustainable without their intervention.

Kolohe|10.22.08 @ 4:28PM|#

Excellent articles. Two small things:

1) Is it just me, or did Ms Dalmia assiduously avoid taking a stand? Or was she the 'moderator'? (no pun intended. ok yes it was.)

2) Mr Taylor's assement that a carbon tax would be $2 per ton seems a little lowball to me. I recall seeing figures of around $10 per ton (which itself seemed a little low end) when Lieberman/Warner was being debated.

Kaiser|10.22.08 @ 4:33PM|#

Phalkor:


That is another thing about nuclear energy that pisses me off. So many people view it as an evil entity, associate it with things like bombs and chernobyl. Keep in mind I am just a laymen here but as I understand it it is merely steam. The reaction from the plutonium or whatever is used basically just super heats water and the steam created powers turbines etc etc. Maybe we should re-name it, sort of like how they re-named the bailout to rescue.

nonPaulogist|10.22.08 @ 4:33PM|#

Nobody knows whether or not it would be a good idea to expand nuclear power because the price information that should be provided by the free market is absent.

As a former Navy Nuke, I know that Nuclear regulation is excessive and misguided.

Everybody is just guessing. McCain's central planning is almost certainly calling for a less than optimal solution. We might need more Nuke plants and we might need less, but McCain's call for 45 is just pulling a number out of a hat.

|10.22.08 @ 4:34PM|#

When I was in colorado they started dismantling rocky flats. Needless to say, the press coverage was less than nook-u-lar friendly. I guess people equate power plants using uranium with spilling tanks full of Plutonium solution into the groundwater.

TallDave|10.22.08 @ 5:06PM|#

Yet, despite all this government prompting, investors do not seem very confident about undertaking the risks.

Well, given that all their work will probably be wasted if Obama is elected, you can't really blame them for ebing cautious.

The latest generation of nuke plant designs can compete, if the government will get out of their way.

What's scary is that the global warming people and the anti-nuke may be in charge. This is a recipe for nationwide blackouts starting in a few years -- and it will take a long time to fix.

nonPaulogist,

Did you know there's a Navy fusion project that might give us cheap fusion power? Another libertarian Navy nuke has been writing about it quite a bit.


http://www.classicalvalues.com/archives/2008/10/fusion_report_2_1.html

Alice Bowie|10.22.08 @ 5:07PM|#

Nuclear energy SHOULD BE AVOIDED !!!

Keep Dope Alive !!!

John McCains plan to build 45 Nuclear Plants right here in America would HELP our enemys

There will be no need for Iran, Russia, and our next enemy to invest a penny in nuclear technology...The BOMBs would be right here waiting for our enemys to blow them up and make several miles around the plants uninhabitable for 100s of years.

What do we do with the waste
Yea Yea Yea ... it's safe ... i'm just a wimp and a tree hugger. I think it sounds stupid.

Where would they put these SAFE Nuclear Bombs (i mean plants) ???

You can be sure that it would be near the POOR minority areas....no where near McCain, Bush, Cheney, etc.

Alice Bowie|10.22.08 @ 5:12PM|#

I know you Macho Men see me as a little wimp. I should be strong...Like Macho Man Adolph Guiliani...

He wasn't afraid of Terrorist. In fact, to prove to the world how he wasn't going to let terrorist get in his way...He setup NYC Emergency Command Center in the World Trade Center....STUPID IDEA.

I saw Guiliani on 9/11, running for his life right next to me...He wasn't TOO MACHO THEN.

|10.22.08 @ 5:42PM|#

"Yet it is so powerful that its environmental impact is 2 million times smaller than fossil fuels or the various forms of renewable energy."

William Tucker with a gigantic math FAIL. That sentence makes no sense.

Neu Mejican|10.22.08 @ 5:47PM|#

I am a firm disbeliever of man made global climate change.

What an odd thing to have a "firm" disbelief in.
I can understand a skeptical stance, but a firm disbelief?

Nuclear is unlikely to become the power source of choice without active subsidies.
http://www.rmi.org/sitepages/pid467.php

Isn't it time we forgot about nuclear power? Informed capitalists have. Politicians and pundits should too. After more than half a century of devoted effort and a half-trillion dollars of public subsidies, nuclear power still can't make its way in the market. If we accept that unequivocal verdict, we can at last get on with the best buys first: proven and ample ways to save more carbon per dollar, faster, more surely, more securely, and with wider consensus. As often before, the biggest key to a sound climate and security strategy is to take market economics seriously.

nonPaulogist|10.22.08 @ 8:06PM|#

Thanks for the heads up, Tall Dave. I'll check it out.

ARM Legal|10.22.08 @ 11:04PM|#

Uranium is down to $44/lb - also the nuclear fuel cycle includes serious costs in the mining of uranium especial In Situ Leach mining in the aquifers because release of contaminants gets to drinking water and harms the people and environment. So, the economics need to include some measure for the damage caused by uranium mining especially when fuel is not recycled.

These are excellent discussions - I can say first hand that the NRC has a giant rubber stamp and they approve most things with no real questions asked unless there has been a spill, leak, or citizen action.

Today, in fact, the Vermont Yankee nuclear plant had to be evacuated due to radioactive leaks when a cover was being changed.

The only reason these nuclear power merchants have made so much loot is that the construction costs were off-loaded to electricity rate payers as so-called "stranded-costs" when the companies went bankrupt after Three Mile Island and Chernobyl and the actual plants could then be bought for about 1x annual revenues.

It should also be stated that most uranium companies and nuclear companies are foreign owned and/or foreign controlled.

Daniel Reeves|10.22.08 @ 11:52PM|#

If Tucker's point is that nuclear energy costs a lot... that's true. But as of now it's the most efficient enviro-friendly energy source in terms of capital.

Alice Brown, I'd rather have a nuclear power plant by my house than a coal power plant. Only in Russia has a nuclear power plant ever killed anyone, and even that was less than 100 people. Never in the U.S. Never. This is in contrast to the thousands that die from coal emissions every year in the U.S.

|10.23.08 @ 2:58AM|#

The thing that pisses me off is that the environmentalists talk out of both sides of their mouths on Yucca Mountain. They make this intellectually dishonest argument that goes something like this:
1. Say that it's unsafe because of the radioactive waste.
2. Say you'll support it when there's a long term solution for storing waste.
2. Oppose any and all efforts to construct a long-term waste storage facility.

That allows them to continue to pretend to be reasonable by claiming they just want nuclear power to be "safer", while simultaneously being totally fucking dishonest shits who are simply out to make sure that no nuclear plants ever get built because of some kind of insane attachment to the belief that radiation is evil.

Not only that, but by diverting us into arguing over long-term storage facilities, it detracts from the much more important point that radiation isn't NEARLY as dangerous as they have painted it as.

The next time some anti-nuck wack job comes out arguing against Yucca Mountain, we should say okay, we're fine with that cause radiation isn't that big a deal.

After all, even if it did excape after 10,000 years, all it would do is cause a marginal increase in lifetime cancer rates.
BIG DEAL!

|10.23.08 @ 9:48AM|#

Why isn't anyone talking about uranium, where it comes from and how much of it is still left to pillage?

Both experts fail to mention that uranium mining does not have a great track record at being "clean". In countries such as Niger, where international environmental and health standards are not imposed, uranium mining has been devastating to local populations and the environment.

And given that uranium is mostly imported, I'm not sure how anyone can talk about nuclear contributing to "energy independence".

Lastly, experts estimate that at the current level of nuclear production, there are about 80 years worth of uranium reserves left in the world. So if this nuclear renaissance were really to take place, I guess it would be short lived.

|10.23.08 @ 10:53AM|#

My concerns about nuclear energy (apart from the usual wepaons and waste stuff):
Convnetional nuke power uses 20% more water than conventional coal energy. Where are we going to get the additional water?

Conventional nuke power requires tremendous amounts of skilled labor to design, construct, manage, and maintain. Where will tha t labor come from?

As mentioned above, the international market for uranium sets the base price. How would we become 'independent' based on an international commodity?

90% of NEW energy plants today in the US are Natual Gas based. How does the nuclear industry plan to compete against that without subsidies?

~A|10.23.08 @ 12:42PM|#

Sam-Hec,
Natural gas is only really used for peak power needs, not baseload production. The options for baseload production are pretty much nuclear and coal. Take your pick on whether the downsides of one are worse than the others.

|10.23.08 @ 1:15PM|#

That's true. It is also true that NatGas plants start/stop quicker, and can respond to demand quicker either than nuclear or coal...thus there is less waste as compared with leaving the latter two on standby all the time. And NatGas can be made smaller and more distributed. Conventional nuke power needs to get Unconventional before it can compete imo.

For alternative renewable baseload I would fight for advanced Geothermal and wave/tide power...maybe unconventional (high altitude) wind energy

|10.23.08 @ 1:35PM|#

Sam-Hec:
Could points.
First, I'm not sure that 20% figure reflects the total water usage or just per plant. If it is per plant, then it is an advantage, since nuclear plants produce many times more electricitry than a typical coal plant. Besides, a 20% increase in water consumption is realtively benign compared with all the pollution produced by coal. Moreover, the water is just heated and discharged, so it's going back into the environment pretty clean anyway.


Second, labor isn't really an issue. Most of the jobs would in in construction. There's a shortage of skilled engineers in the US, but that's been that way for decades. Hire Indians. They are familiar with nuclear technology, and don't pose a threat to the US.

Thirdly, natural gas is only clean when compared to coal. It eliminates some of the more hazardous emissions leading to acid-rain, and produces a bit less CO2, but you're still basically burning fossil fuels.

|10.23.08 @ 5:14PM|#

Hazel Meade,
That figure is per Therm or KW/hr.

Warmer water can actually be very bad for any thing otherwise alive down stream.

Which brings up another point. Droughts lower river water levels which warms up river et al temperatures. Nuke plants have been shut down because of this, until river temps lowered.

To be fair this is a very awkward detail for any energy source which requires a water medium.

Unconventional nuke power may devise a work around. But we can hardly get new nuke plants up within a decade; unconventional nuke plants will take longer. Wishing won't make it so.

Labor is an actual issue. While laergely unskilled construction labor is abundant, critical skilled labor in nuclear engineering and administration for existing plants aren't being fulfilled. Few new graduates want to work in Nuclear Energy.

Any conventional power plant is cleaner than coal. And we are discussing 'energy independence' in this thread more than emissions controls.

Douglas Gray|10.23.08 @ 10:42PM|#

A breast cancer map from Centers for Disease Control showsthat within a 100-mile radius of nuclear reactors, two-thirds of all U.S. breast cancer deaths occurred between 1985 and 1989. This map of nuclear power plants in the U.S. identifies them as the major cause of breast cancer in the U.S., as well as nuclear weapons labs in New Mexico, Idaho, Washington and California.

Cancer clustering is nothing new. At one plant back East, after five years of operation, the cancer death rate was nearly 60% higher.

Even low level radiation in the water near Navajo reservations has caused a spike in cancer.

So, if you don't mind a little more cancer, nuclear plants are OK.

|10.24.08 @ 4:05PM|#

Most of Mr. Taylor's arguments about nuclear being uncompetitive do not hold water. He lists all the ways nuclear may be subsidized, but then deliberately ignores much larger subsidies that are recieved by other sources. Fossil fuels recieve more subsidies than nuclear, and renewables recieve vastly larger subsidies per kW-hr of generation (along with outright mandates for their use).

And that's just the direct monetary subsidies. The largest subsidy of all is fossil fuels' priveledge of just dumping all their wastes/toxins directly into the environment, for free. Nuclear has to spend massive sums to prevent even a tiny chance of this happening. Western nuclear plants have never killed a member of the public, or had any measurable public health impact, over their entire ~40-year history. Fossil plants (mainly coal) cause ~25,000 deaths every single year in the US alone (hundreds of thousands worldwide) and they are the leading cause of global warming. And yet, they don't have to pay a dime in compensation (let alone prevention). The ANNUAL environmental, health and monetary impacts of fossil fuel plants vastly exceed the total impact of a severe meltdown event (the thing that Price Anderson insures against).

Whereas nuclear's total external (environmental and health) costs (including mining, accident risk and waste management, etc..) are estimated to amount to only a fraction of a cent/kW-hr. Meanwhile the external (pollution) costs of fossil fuels are enormous (~6 cents/kW-hr, enough to double coal's price). If you add this "free pollution" subsidy to the direct economic subsidies they recieve, one finds that fossil fuels are much more expensive than nuclear. The only sources nuclear has not been able to "compete" with are dirty conventional fossil fuels, and this is only because their massive external costs are not counted.

The fact that external costs (mainly those of fossil fuels) are not included in the market price is the biggest problem (failure) of current energy markets. The best thing to do would be to tax or limit CO2 emissions, air pollution, and foreign energy imports (mainly oil and gas), and see what happens. Let the market then decide what to build.

Nuclear would do just fine in such a scenario. Coal would be rendered uncompetitive. As people try to replace coal with gas, the price of gas (which is already starting to run out in North America) will increase dramaticallly. As a result, nuclear will easily be able to compete with gas for baseload generation. As for renewables, not only are they not any cheaper than nuclear, their intermittentcy will limit their practical use to ~25% of total generation, at most. We still will need traditional plants for the remaining 75%.

The bottom line, if we ever put hard limits on CO2 emissions, nuclear's future is very bright, even with no subsidies. To anyone who would disagree I say, "let's find out".

|10.26.08 @ 9:23AM|#

I was with you until this:
"As for renewables, not only are they not any cheaper than nuclear, their intermittentcy will limit their practical use to ~25% of total generation, at most. We still will need traditional plants for the remaining 75%."

Intermittence can be resolved at low cost through smart grid, and by battery (of some type) backup. ('battery backup' includes, pumped water reservoirs, compressed air, etc, not just chemical batteries.)

Not all renewable energies are intermittent. Solar Thermal, GeoThermal, Wave/tide, and high altitude Wind are all 24/7/365 energy sources. If we try, the development and broad installation of these will take less than the 15 years it takes from initial investment of a Nuke plant to it's first sale of energy.