My post the other day on nuclear power prompted a number of comments – most of them hostile. Because the comments offered were fairly standard-issue arguments that one often hears in the debate about nuclear energy, it’s worth surveying them seriously.
Markets Schmarkets
One argument often heard is that market actions are not indicative of economic merit. Rod Adams, for instance, writes:
Markets dominated by people whose only motive is making more money are not the best decision makers – the people making the decisions in that situation will often decide to influence the law of supply and demand by keeping their hands on the levers that they can use to keep supply restrained. If their hands are “invisible” it is because they work at keeping them hidden or because observers and academic study producers do not work very hard to find them.
Well, the desire to make money is what makes markets work in the first place. Rather than walk through an Econ 101 text to flesh out that point, let me ask a question: If profit-hungry investors aren’t the best people to make decisions about whether to invest in this or that, then who are – vote-maximizing politicians? Who has the better incentive to make efficient investment decisions?
Rod seems to be suggesting that nuclear power prices are high because plant operators make more money that way. Given that those operators have to compete with coal and gas-fired electricity, how exactly do cost overruns and high construction costs help nuclear power plant operators?
Regardless, if you really believe that market actors maximize revenues by restraining supply to the detriment of consumers, then you should be in favor of a total government take-over of the energy industry. Nothing else will solve that problem were it to exist. But what makes us think that a government-run energy sector will perform any better than a government-run health care sector, a government-run agricultural sector, or what have you? When politicians elbow aside market actors and call the shots, we get decisions that are designed to help politicians, not the economy. See, for instance, the utterly insane ethanol preferences that make absolutely zero sense from an economic or environmental perspective but wonderful sense from a political perspective.
Jon Boone seconds Rod Adams’ contention that markets are worthless in this context:
As Adam Smith himself wrote, his unseen hand works effectively when the field is level and the players share a common sense of the rules, values, and objectives of the game. Such is not the case today in the energy marketplace.
That’s not quite what Adam Smith wrote, but never mind. Jon’s indictment of the market could be made in every sector of the economy because there is no instance that I am aware of when all of these alleged preexisting conditions for effective market operation exist.
But we are not debating about the merits of a theoretically “flawed” market versus a perfect state command-and-control regime. We are debating the merits of a real work economy versus a real-world U.S. Congress making energy decisions in place of investors. That should be an easy debate to adjudicate for readers of this blog. Alas, when the topic turns to nuclear power, it is not an easy debate to resolve because, for many, if the market is rejecting nuclear power, it means there’s something wrong with the market … not that there might be something wrong with nuclear power.
Ed Peschko states the case most bluntly:
You can do some quick, back-of-the-envelope calculations based on power densities and physical trends to get an idea of when the market is giving a false signal or a true one.
Alas, this is the reigning conceit of central planners everywhere: Smart guys with computers and specialized training can outperform markets and market actors and know more than the accumulated wisdom of millions of market actors who’s insights are aggregated in price information. If this were true, then socialism would work grandly. Alas, it does not and there is no BTU exception to the observations found in The Wealth of Nations.
Experience Abroad
Nuclear power advocates frequently point to experience abroad as proof that nuclear energy is economic under something closer to optimal political conditions. Ted Rockwell, for instance, notes that plants in Europe make a profit, so why can’t they make a profit here as well?
Yes, some nuclear power plants in Europe – and rather many in the United States for that matter – make a hell of a profit. That’s the case in the U.S. because third-party investors bought those plants at fire-sale prices from utilities which had been bled dry by those same plants. The new owners turned out to be much better operators than the old owners, and so profits were gained.
So yes – if someone else eats the bulk of the construction costs, you can make money in nuclear. That’s not very relevant going forward, however, for those interested in building new facilities. The construction costs will be their’s to eat.
European nuclear power plant construction costs going forward are not much different than U.S. construction costs as witnessed by the Areva debacle in Finland – the first new power plant to be built in a liberal energy market anywhere in the world over the past several decades. This facility, for those not keeping up with the news, was advertised to be a state-of-the-art, modular facility with a $4.2 billion price tag – about the same as that for a similarly-sized plant that might be built in the U.S. – but it is already several years behind schedule and 50% over budget for reasons that have nothing to do with regulatory delay. The final price tag is expected to double.
Nuclear often gets built in non-liberal energy markets in Europe, however, because it is the state – not the market – that decides what gets built in those economies and politicians in France and elsewhere simply love nuclear power for all sorts of (non-economic) reasons. Because these are public-private construction projects, it’s hard to concretely identify total costs. But to the extent we can, they do not appear to be different than those experienced in the United States.
In France, overnight construction costs for an Areva plant being built in Flamanville are estimated at 4 billion Euros, or 2,434 Euros/kW, which is just as high – if not higher! – than many costs estimates floating around for new plants in the United States. That plant, by the way, is also running behind schedule and over budget – and this from one of the most experienced nuclear power companies currently operating anywhere in the world today.
Ed Peschko, on the other hand, finds inspiration in Asia:
In places where nuclear is accepted and where energy projects seem to be planned on technical merits – namely korea, china, taiwan and japan – construction costs are much lower. Large reactors are regularly being built there in a 3 to 5 year timeframe at 1500-2000 $/KW.
That is simply incorrect. For data on construction costs there, see Jim Harding, Economics of Nuclear Power and Proliferation Risks in a Carbon-Constrained World,” The Electricity Journal 20:10, December 2007. Costs there are as high (or higher!) than costs here once relatively low-cost Korean labor is factored into the equation.
Blaming the Regulators
Jim Hopf, like many, believes that nuclear power was cheap before the regulatory onslaught that followed the Three Mile Island incident. This, he says, is strong evidence that regulators are to blame for high construction costs.
But nuclear power plant construction costs were climbing steeply well before Three Mile Island, almost doubling from the period 1972-1973 to the period 1974-1975 and increasing by 50% from the 1974-1975 period to the 1976-1978 period (see Table 12.3 in William Peirce’s excellent Economics of Energy Industries: 2nd Edition, Praeger, 1996). They doubled again after Three Mile Island and regulatory reaction was indeed one reason. But there were other reasons as well; the general inflation of construction costs throughout the economy, high interest rates, and poor utility management.
The latter should not be underestimated. Some utilities were able to hold construction costs down rather impressively even in the wake of Three Mile Island. Of the 24 plants that were ready to begin operations in the period between 1984-1987, costs ranged from $830 per MW of installed capacity (for Duke Power’s Maguire 2 facility) to $4,700 per MW for the infamous Shoreham plant (nominal dollars for both).
Here we find perhaps the best argument for the possibility of economically competitive nuclear power; to wit, that low cost plants have indeed been built in the past. This is true, but it seems to be an exception to the rule. Good utility management can theoretically get low-cost plants into the market. And if any good utility managers have a plan to do so, they have every chance of convincing profit-hungry investors that free money will come to those who provide the loans.
The larger point, however, is that if the industry could not survive the regulatory jihad after Three Mile Island, how do we explain the Maguire 2 plant? Too often, we attribute high costs to regulators rather than poor utility management.
Katana0182 (whoever that may be – I prefer to deal with actual names) may be correct that the Nuclear Energy Institute is not ideally placed to challenge bad regulation. I have heard similar arguments from friends in the nuclear energy industry (yes, believe it or not, I do indeed have friends in the industry!) who are frustrated with that association’s attitude towards Washington. On the other hand, industry executives who testify in front of Congress sing nothing but praise for the existing federal regulatory architecture. Do chief executives of other heavily-regulated industries do the same when they are encumbered by – or threatened to be encumbered by – counter-productive federal policy? Uh … no. Peruse through the testimony of the oil industry over the past decade if you want a dose of industry anger towards government.
That said, Katana’s contention that construction costs would be much lower if the feds didn’t prescribe how plants were to get built is founded upon a misunderstanding of the regulatory status quo. Utilities submit designs and the NRC approves them or not. Perhaps you think that the NRC does too much tinkering with these plans, but if so, we hear little complaint from those who would have every reason to complain – the parties filing the permit requests.
Even if regulations are “good” now, isn’t there fear that they will become “bad” in the future? If so, might that – as Ted Rockwell argues – color investor interest in nuclear power? Of course! Regulatory uncertainty is no small thing. But it is not, as Mr. Rockwell argues, a good argument for federal loan guarantees. Those guarantees do not “ameliorate” this risk because the risk of policy change does not go away. The risk is simply transferred from investors to taxpayers. That’s a good deal for the industry, perhaps, but a bad deal for the taxpayers.
Regardless, regulatory uncertainty exists for all sectors of the economy. Ask the coal industry about it with regards to future rules concerning carbon emissions. Should we give them loan guarantees as well?
Quibbles
Several commenters go into great detail about how micro plants and other technological innovations could make nuclear economic. Rod Adams, for instance, asks:
What if some technologists reject that assumption [high construction costs – although the reality of high construction costs is not an “assumption”] and choose a path that aggressively and successfully works to reduce construction costs?
Well then, I would throw a party. Haven’t seen it yet though.
If technological innovations occur, those innovations will attract investor interest and, hence, find their way into the market. That’s what a single-minded pursuit of profit will deliver to us in a free market economy.
Rod Adams also complains about my statement that the argument for nuclear power is little different from the argument for solar power. He’s right to point out that nuclear power has many advantages relative to solar power. But that’s not the point. The reason that solar power and nuclear power is the flip side of the same coin (economically and politically) is that neither would exist without massive amounts of government intervention. The Nuclear Energy Institute admits this frankly when their production tax credits, loan guarantees, and liability protections are up for legislative renewal. They are similar politically because the arguments made for both are in large part identical; they both offer theoretically limitless power, they both have low operating costs, they are both environmentally friendly (relatively speaking), they both capture the popular imagination, and advocates for both turn themselves into pretzels in the course of arguing that the object of their affection is economically competitive were it not for some vague conspiracy of competitors acting to keep those technologies down.
Jim Hopf goes into great detail about how prices are inaccurate because pollution from gas and coal is not reflected in electricity prices. His argument as it pertains to carbon was already dealt with in my initial post, so I will not elaborate on that. All I would add is that if we could quantify the negative externalities at issue and they were found to be significant, then the correct remedy isn’t subsidy to nuclear power (or solar power for that matter) but a Pigovian tax.
Nonetheless, academics who have attempted to quantify these externalities have produced estimates that are all over the map (see Thomas Sundqvist and Patrik Soderholm, “Valuing the Environmental Impacts of Electricity Generation: A Critical Survey,” The Journal of Energy Literature 7:2, December 2002). Hence, it’s unclear to what extent these externalities are worth our time.
The national security externality Jim would like to see addressed was demolished two years ago in an article I wrote on this topic for The Georgetown Journal of Law and Public Policy. See also this study by my colleague Richard Gordon.
Conclusion
I agree completely with Richard Fulmer. The only way to know for certain whether an industry or a technology is economically worthwhile is to subject that industry or technology to a market test. We have done this with nuclear and it has so far failed said test. Excuses are rampant, of course, but if the main excuse has merit – that regulators are unduly burdening the industry – then the proper remedy is to reform said regulations, not to cut a taxpayer-backed check.
If one day the industry could pass that market test – without government assistance – then I would be as happy as any one of the commenters to my original post. But rigging the market to get the passing grade is – and always will be – bad policy no matter what technology we’re talking about.
Jerry – I have published my promised response on Atomic Insights to your initial Atomic Dreams post.
There is another set of assertions and assumptions here that deserve some detailed response, but as time is short, I will focus on your national security paper. As a professional naval officer who has been on active duty off and on since 1981 and who has had friends pull tanker escort duty, I think you are missing some key geographic and political principles.
I completely agree that US expeditionary actions in the Middle East often do more to reduce our security than to enhance it, and statistical analysis of oil prices would indicate that our actions often lead to price spikes due to uncertainty.
However, oil is not as easily transported as you imply, especially since a large potion of the world’s useful supply has to pass through some rather vulnerable international straits. It does not take a blockade of a consuming nation to interrupt reliable supply; that can be done with a small force that focuses on places like the Straits of Hormuz where 50% of the world’s internationally traded oil passes.
The idea of self interest holds true most of the time, but the Iran-Iraq war offers one historical example where two nations attacked international oil shipments as part of their strategy, so our expenditures in escorting those ships was a good investment for both consumers and for the oil companies that did not pay for the cost of that service.
You might not know that US forces have spent a lot of time sitting on off-shore oil wells that could not be protected by the owning country or that Saudi Arabia can afford security but has few citizens who are willing or able to do the hard work required to operate war ships that might be needed to protect their international shipments in places like the Gulf of Aden. (I have participated in several exercises with Saudi naval forces.)
By the way – have you heard of B&W’s mPower, NuScale, or Hyperion? I grant that the evidence is not yet received, but there sure seem to be some market actors who think that fission has a future and are not waiting for the establishment industry to notice.
“but if so, we hear little complaint from those who would have every reason to complain – the parties filing the permit requests.”
You’re right. They don’t complain, because, once again, they’re intimidated. They have a choice: play under the program and get things done very, very slowly, or don’t play by the program, and risk everything. Business favors reliable profits over large profits.
As any businessman knows, time is money, and that the NRC takes 10 years to get anything done makes it very hard for the nuclear industry to act in an agile fashion and respond to emerging market demands and needs. As such, the nuclear industry will fail to thrive until the obstacles that cause it to be regulated within an inch of its life are removed.
As for loan guarantees, and R&D funding, they’re very paltry compensation for the regulatory burden placed on the industry. However, they do make the future possible in this extraordinarily regulated and circumscribed economic sector.
If one is a libertarian, one has the burden of being morally consistent. If you want to rid the industry of loan guarantees and want R&D funding to be taken away, then you need to take away the obscene level of regulation and blatant disrespect for property rights that’s shown to owners of nuclear power facilities. Taking away one without the other shows that perhaps there is some ulterior agenda here besides promoting the increase of “economic freedoms”, such as they are. (Like promoting natural gas, coal, and oil.)
I too find it strange that you promote free markets everywhere but nuclear and seem to have predetermined that absent of both burdensome regulation *and* subsidy nuclear will fail. You sir do not have a crystal ball by which you can examine a complex system and say the exact cause for this or that output.
I’m all for free markets. But make those free markets actually free, or at least with a vaguely level playing field. As it stands the cost/risk spent on nuclear power far exceeds that of any other power generation, which are not without their own risks (as observed with the explosion of the chicago coal plant a few years back).
Indeed your entire argument is a bit odd. “We shouldn’t deregulate nuclear at all because they’d fail even without the regulation”. It reminds me of another current case where people are claiming to understand a vastly complex system and claim they can predict the exact delta resulting from all input changes into said system.
To do what you say is perhaps the worst of government intervention. They will keep complete control, and give absolutely nothing back in exchange. To use an analogy… I accept that in prison certain things will happen, but don’t claim that lube makes it worse.
Despite being a fervent nuclear power advocate, I completely agree with your argument.
Promising new technologies may come about, but they’ll have to endure the test of the market, like everything else should. Subsidizing any form of energy creation is counter productive, there should be myriad methods so that the most efficient system can be installed for each application. Deciding which method should be used by armchair experts from afar has never been as effective as people in the trenches finding the best solution for the problems close at hand. And the best feedback for their success is how much money they make.
I take issue with Taylor for a very different reason.
Markets are good for some things but not for everything. Some public goods will not be provided by any market and society is better off if government (or some other public proxy like a utility regulator) provides these public goods.
We would not expect markets to deliver a national highway system or a high-voltage transmission grid. Instead, we rely on governments and regulators to provide these (and other similar) things.
The relatively recent experiment to apply market forces in the electricity industry has yet to prove itself. Electricity markets are pretty good at deciding which already built power plant gets run later today or next week, but these markets are not very good at providing incentives for long-term power plant investments. The various fixes (e.g., capacity “markets” and reliability requirements) to address the long-term electricity investment problem in electricity markets are even more recent and are even more problematic.
That major regions in the US and many countries have abandoned the move to electricity markets is strong evidence that these electricity markets may not be the best way to organize the electricity sector.
If nuclear power provides a public good (long-term, low-marginal-cost, carbon-free energy) that makes society better off and that markets will not provide, then there may be a very valid role for government.
Rod Adams – Your angst regarding the vulnerability of shipping lanes in the Straits of Hormuz is unnecessary. Shutting down those straights is virtually impossible as explained by Eugene Gholz in the pages of Foreign Policy: http://www.foreignpolicy.com/articles/2009/08/12/the_strait_dope. There is a longer version of this essay somewhere, but I cannot seem to find the reference at the moment.
Katana & Artemis – I have indeed argued for deregulation of the nuclear power sector. See, for instance, this panel discussion I put together to forward the case for abolition of the Nuclear Regulatory Commission with a regime of strict liability to take its place: http://www.cato.org/event.php?eventid=777. If nuclear power plants could be built sans subsidy and sans federal regulation, then great. I am skeptical about that for reasons already iterated, but I would be happy to live with whatever market verdict were to follow.
Industry Observer – I don’t disagree for the most part. In fact, I have argued that electric utility restructuring (something that is often, although inaccurately, described as “deregulation”) is probably a step backwards and that the “old regime” we grew up with might well look a lot like what a totally laissez faire market would eventually produce: http://www.cato.org/pub_display.php?pub_id=2609. Regardless, the best way to provide for the public goods at issue – environmental quality – is via a Pigouvian tax to internalize the relevant externalities into price signals and then to let markets sort out how best to rearrange affairs … not by having government pick winners. I am not sure that the negative externalities at present are large enough to justify Pigouvian taxes, but for those who believe otherwise, that’s the route to go.
I do not have the reference on hand, but I believe the 2007 update to the MIT study estimated that the levelized cost of nuclear was similar to gas if nuclear did not have to pay a risk premium for financing costs.
If true this would suggest that the “free market” argument depends on the assumption that capital markets are always accurate at appraising risks.
Recent developments in the real-estate markets suggest that this is not always the case.
One fundamental factor underlying the reconsideration of nuclear power that sets the stage for this debate is that some take seriously the warnings coming from climate scientists. Your denial of this entire science, and further, your denial that it means anything that climate scientists have convinced the top leaders of science worldwide, who have called on G8 heads of state and governments worldwide to put plans in place to decarbonize the energy supply to civilization, makes your contribution to the nuclear debate useless.
Perhaps Taylor’s position would be a little more understandable if he would produce a comparison of all the subsidies applied to the major energy technologies. Perhaps then he wouldn’t come across as applying a double-standard in this issue.
@jtaylor – your linked article ignores one of the most effective weapons against shipping. I will give you a hint – they almost won the battle of the Atlantic and they played a major role in the effort to defeat Japan.
Iran has at least three of them.
Jerry – I finally had a chance to look up Pigouvian taxes. I agree with you that they are the way to price in externalities that are not currently being paid by energy sources that use our common atmosphere as a free waste dump.
I have written about the need for waste dumping fees on a number of occasions. Here is one example:
http://atomicinsights.blogspot.com/2009/10/nuclear-energy-plus-tax-and-return.html
@jtaylor – I appreciate the idea of nuclear power being subject to no regulation but that of strict liability, but why should nuclear power qualify for that special treatment (strict liability) when other energy sources don’t? Other energy sources are far more inherently dangerous. I mean, coal kills 25,000 Americans every year through lung disease and causes 40,000 heart attacks per year. Natural gas – if the explosions weren’t enough – well, then, there’s the constant danger of the invisible killer, carbon monoxide, which takes a dreadful toll in American houses every winter. With oil, one only need to look to debacles like the Valdez, not to mention the military force needed to guard the sea lanes, and the terrorist atrocities funded by oil sheiks to get an idea. Wind turbines are well known for catching on fire and throwing large icicles that could easily impale a person – and could you imagine if one of those multi-ton blades whirling at a high rate of speed detached and crashed into a crowded neighborhood? With solar – the factories making solar panels give off poisonous silicon tetrachloride, and some dump it with reckless abandon, while the panels themselves are a “fall from roof” disaster waiting to happen!
Energy production is inherently dangerous. Of all energy sources, nuclear is, in fact, probably the safest energy source out of any of them. In a theoretical libertarian free market, therefore, a perfectly level playing field between all energy sources – with strict liability for each of them – is the only fair answer. Putting nuclear in a class by itself is inherently unfair.
[…] Mi post del otro día sobre la energía nuclear llevado a cierto número de comentarios – la mayoría de ellas hostiles. Debido a los comentarios que se ofrecían eran bastante a emitir argumentos estándar que uno oye a menudo en el debate sobre la energía nuclear, vale la pena topografía ellos de gravedad. Schmarkets Mercados Un argumento oído a menudo es que las acciones del mercado no son indicativos de mérito económico. [. . . ] URL del artículo original http://www.masterresource.org/2010/04/nuclear-energy-round-2/ […]
Mr. Taylor,
Thanks for taking the time and effort in making a response to my – and other – criticisms. Unfortunately, a large part of your response seems to be rebutting a caricature of the criticisms, not the criticisms themselves.
It has never been my contention that command economies are better than market economies where the state takes a direct role in production.
What my – and others – contentions are is that markets can be PERVERTED. Like all evolutionary systems they will evolve to fit the environment, and if the environment is bad, the ‘solutions’ will be bad. Hence we can get VERY GOOD AT BAD THINGS, like say leveraging up our banks 100/1 on risky CDRs or creating cigarettes with 160 different toxic chemicals to better enslave their victims and passing off the health costs to taxpayers. In other words, without a good environment, we get very good at evolving parasites and diseases. It is the goal of government to encourage a good environment so that entrepeneurship can be harnessed for the benefit of all citizens.
Now, we could argue endlessly about the bounds of this dictum; but you don’t have to be very liberal to agree that misinformation is one of the main ways that a bad environment appears. You said that nuclear supporters aren’t aware of of the problems with the technology, but that’s patently false – the problem with nuclear is that it is EXCEEDINGLY susceptible to a bad environment – to misinformation, ignorance, corporate malfeasance, bad PR, short term political gain, emotional manipulation and so on. All the ills that the government can and should resist in setting policy, and all the ills that our government has failed to stand up to. Furthermore, all the ills which are tearing our corporate ecosystem apart and making us increasingly at the mercy of foreign powers.
So there you go. Is there a solution to this? I don’t know, but I hope it can be found in a combination of 2 things:
1. small scale nuclear reactors.
2. the initial, military application of them.
In other words, I’m hoping that the military can provide an ecosystem where nuclear expertise and applications can grow, that is relatively safe from the political witch hunts that states and municipalities can give nuclear power, and which provides such a compelling advantage over other sources of power in a military setting that it becomes a mass-produce enterprise and bleeds over into the commercial sector.
In short, I’m hoping that the military does for the power grid what it did for communications and the internet. But I’m not holding my breath.
Ed
ps – with regards to your statement that nuclear power costs are as expensive in asia as in the west. Alas, for our egos, it is blatantly false, and I suggest you update your information.
I looked at the study you mentioned, and as I thought it was an academic study. And, as usually happens with all healthy growing markets, the numbers and objections in that academic study of that market were obsolete once they hit ink. Here are the true, on the ground costs:
http://nextbigfuture.com/2008/12/chinas-cheap-1565-per-kilowatt-nuclear.html
And here’s what is being done to overcome the ‘only one plant capable of large forgings’ problem listed in that paper:
http://nextbigfuture.com/2008/09/soon-ten-or-more-large-forging-makers.html
Of course there could be snags in all this, but China doesn’t seem to be all that disappointed with its nuclear experience. I can’t keep up with their goals. At first it was to be 22 reactors by 2020, then 30, now 70 completed with 100 under construction(!). All indications are that they are going gangbusters on the technology, where we sit with the politically popular wind and solar going absolutely nowhere.
So I’d do a bit of reassessment of your thinking. We may end up with a nuclear infrastructure, but like everything else in this country, we may end up importing it from China.
Ed
To add to what katana said, getting rid of NRC but having nuclear subject to liability (w/o Price Anderson) is not enough to level the playing field. Coal plants cause 25,000 deaths per year (EPA) w/o paying a dime in compensation, whereas if we had one severe meltdown, which would cause, at most, on the order of 1000 eventual deaths, the nuclear industry would be sued for hundreds of billions in damages.
No, we would have to add a large (Pigouvian?) tax on fossil plants (especially coal) in addition to eliminating NRC and subjecting nuclear to liability, in order to get close to being level. According to most external cost studies (including the European Commission’s ExternE project, http://www.externe.info/), this tax would have to be large. Coal’s external costs are estimated to be several cents/kW-hr (4-8), even w/o global warming considerations.
If we had the terms desribed above, I would be willing to leave it all to the market. However, since I believe in GW, I would also insist on hard, declining caps on CO2 emissions, resulting in fossil plants eventually having to pay for containing all their CO2.
By the way, not only would the number of deaths be small, but the financial liability for nuclear related to death and disease would likely also be small (see my Price Anderson post below). However, most of the liability would come from property damage, due to areas (farms, houses, etc..) having to be taken out of commission because of lack of compliance with ridiculously strict limits on radiation exposures (which ONLY apply to exposures related to the nuclear industry!!).
Thus, to level the playing field, one more change is necessary. In the event of a significant radiation release, the regulations on allowable concentrations in food, and allowable exposures for residing in a given area need to be made sane. A good suggestion would be to simply require that nobody would get a dose rate outside the range of natural background (i.e., no more than 1,000 mrem/yr), under realistic assumptions. This, instead of no more than a few percent of background (current policy). Not only have no health effects have ever been established for exposures within this range, but for for all non-nuclear-power/weapons-related radiation exposures, we’ve always completely ignored exposures within this range. Such sane regulation would dratically reduce the “costs” that would result from a meltdown.
Some background/perspective on Price Anderson:
A very strong legal precedent has been set, based on a large body of (tort) case law regarding radiation exposures, as well as exposures to other toxic hazards. The precedent/principle is that compensation is not owed unless the plaintiff can show that it is at least 50% likely that his cancer (or other harm) was due to the agent in question. Given that the general cancer rate is ~25%, I suppose the calculated cancer risk from the radiation exposure would have to be ~25% to meet this criterion.
In the case of a severe meltdown of a Western nuclear plant, all of the (hypothetical) deaths projected to occur are the result of a tiny increase in cancer risk occurring over a very large population. In fact, the radiation dose required to produce a 25% chance of getting cancer is so high it would also cause acute radiation exposure effects. It is known (from the Chernobyl experience and other data) that no members of the public would recieve and exposure anywhere near that large, in even a worst-case meltdown.
Thus, if such a meltdown were to occur, all indications are that the industry would fight (in court) any health effect claims, and it would win. It would actually pay out little to nothing for health/injury/death claims. Property claims are another matter (see above).
A main pupose of Price Anderson was to ensure/allow compensation to be paid to a large population of “affected” individuals in the case of a severe accident. As discussed above, such payments are not ensured, and are indeed not likely, if the indsutry were “left to fend for itself” in the court system.
Thus, it can be argued that Price Anderson is there primarily to protect the people, not the industry. If nothing else, claims are likely to be held up in the legal process for an indefinite time period, if not outright rejected (which has often happened with such claims).
I would argue that Price-Anderson is not a subsidy at all, rather it is an insurance scheme, and that the Federal government is its primary beneficiary. The 10 billion dollar insurance pool established by Price Anderson would come directly from the nuclear power industry, and would more than cover liabilities for any plausible accident. Market worries about higher accident liabilities, are exceedingly irrational and demonstrate that markets have been swayed by the anti-nuclear phobia promoted the Sierra Club, Greenpeace, and other anti-free market extreemists, as well as by the oil, coal and gas lobby.
The NRC’s ability to hold the industry hostage is not mere rhetoric. I have personally observed some of the reactions within the agency when licensees have questioned the process too vigorously.
Because the NRC regulations are preemptive in nature, they can effectively tie a licensee up in knots when nothing has actually happened yet. The costs associated with such issues are born entirely by the licensee (and eventually, the ratepayers). It is with great reluctance and only through third party negotiations that the utilities will tell the NRC that something is too onerous and requires modification.
Bearing in mind that, in addition, there is a McCarthy-esque tone to the whole issue. If one objects to significant increased costs that have only nominal improvement in safety, it is immediately ASSUMED that you are not interested in safety and are putting the public at risk. In other words, guilty until proven innocent.
Let us put coal, natural gas, solar, and wind into the same extreme regulatory environment and see if anyone wants to lend the utilities money to build those plants.
As I pointed out in my comment on Jerry Taylor’s previous critique of nuclear economics, fair & intelligent comparisons are just not possible given the absurd safety regime to which fission energy is held.
Just this year the National Academies released a study (here)indicating that on the order of 10,000 people suffer premature death every year mostly from the SO2 emissions of old coal power plants. Does anyone think that if the National Academies released a study suggesting that nuclear power plants were killing 10,000 people every year the ever sensationalistic news media would have managed to not report on it? But with coal? Yawn.
It would not go too far I think to assert that the radiological aspect of nuclear energy is a million times safer than the routine operation of a pulverized coal boiler that has been grandfathered in under the 1970 Clean Air Act. Just one profound subsidy Mr. Taylor manages to miss. What do you think the value has been to allow utilities to operate a significant fraction of this nation’s electric energy generation outside the Clean Air Act?
In his previous critique Mr. Taylor linked to the 2007 response of (then) five major U.S. banking institutions (Citigroup, Credit Suisse, Goldman Sachs, Lehman Brothers, and Morgan Stanley) to a Notice of Proposed Rulemaking on Loan Guarantees from the DOE in an attempt to obtain financing for next gen nuclear. Their objection was not with any practical aspect of the technology but rather that they were “acutely concerned about a number of political, regulatory and litigation-related risks that are unique to nuclear power, including the possibility of delays in commercial operation of a completed plant or ‘another Shoreham’ — reference to the Long Island NPP than was completely finished but was never allowed to operate because the state of NY did not see fit to grant it permission.
What if those coal plants had to wait around for 5-10 years while the EPA ruminated on the latest mountaintop removal and valley fill proposal? In the 1980’s Seabrook was held up for years while the EPA & Army Corps of Engineers fought over who had regulatory authority over that reactor’s proposed use of the Atlantic Ocean as its ultimate heat sink (ultimately requiring a Channel Tunnel size outlet miles offshore. BTW, manatees seem to love the warm water outlet at Crystal River NPP). What if the hydraulic fracturing of shale gas deposits required strict compliance with the clean water act and toxics release inventory? Maybe a good half decade should be required to review each well project? How much would natural gas electricity cost then?
The ExternE analysis of European nations found external costs averaged a factor of 2-10 more for natural gas vs nuclear and externalities of coal and oil were as much as a factor of >30 more. According the the National Academies study I linked to above, the external cost of a coal generated kWh is 3.2 cents or $62 billion sector-wide per annum.
A Pigovian tax that used CO2 as an expedient or politically correct “proxy pollutant” at the rate of 30/ton would approximately capture that 3.2 cents of unaccounted for coal pollution of the atmospheric commons; and returning that tax as a Pigovian subsidy to those same companies from which it was taken to finance new low and no emission IGCC and NPPs would be a neat solution (essentially advanced rate recovery) for such capital intensive projects to get underway.