"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. [Friedman, pg. 264.]
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.
The problem then is much less economics than politics. Both Wall Street and the utilities fear that, as soon as the first proposal comes out of the box, environmental and opposition groups will gang-tackle it, exploiting the public's fear about safety and nuclear "waste." Once again completion times will extend 10 years and beyond and costs will rise to $15 billion. In fact opposition groups are already challenging new proposals even before they reach the NRC licensing stage. "We're still in a situation where pretty much everybody wants to be second," notes Roger W. Gale, a former Energy Department official and now a utility consultant.
This is unfortunate because, as far as "nuclear waste" is concerned, the problem could readily be solved by reprocessing. Almost 100 percent of the material in a spent nuclear fuel rod can be recycled for additional fuel or industrial and medical isotopes. The problem is that America banned nuclear reprocessing in the 1970s under the illusion that it would somehow prevent nuclear weapons from proliferating around the world. Several countries have since built nuclear weaponry and it had nothing to do with plutonium from American reactors.
The French now have complete nuclear reprocessing and get one-third of their reactor fuel from spent rods. Other isotopes are extracted for commercial sale. The remaining "waste" is all stored beneath the floor of a single room in La Hague - 25 years worth of producing 75 percent of France's electricity.
The fate of the Yucca Mountain Nuclear Repository - which has been entirely funded by the industry through taxes on every kilo watt of energy generated over the last 20 years - is evidence of the power of opponents to derail nuclear. Thanks to them, the government has been hampered in completing the site on schedule and it will likely never become operational because of environmental opposition. Indeed, Exelon Corporation, which owns the largest fleet of reactors in the country, won a $300 million settlement from the Department of Energy for its failure on Yucca.
Now nuclear utilities have pioneered "dry cask storage," an on-site system that is good for at least 100 years. Because of nuclear's great "energy density" - the energy generated from a given volume, mass or collection area - the waste generated by nuclear is vanishingly small. Three years worth of spent rods from a 1000-MW reactor can be stored in a cask four times the size of a telephone booth. But Greenpeace and the Nader organizations - who remain beguiled by the idea that an industrial economy can be run on so-called "renewable" energy - exploit NIMBY (Not in My Backyard) fears to oppose nuclear plants housing on-site disposal. This has injected uncertainty and made nuclear power too risky to justify the high up-front investment.
Some free market advocates bring up the Price Anderson Act that caps the liability of the industry in case of accidents to question its viability. They maintain that if the industry had to buy full insurance, it would make nuclear power uneconomical compared to other fuels. But the fact of the matter is that caps on liability are in no way unique to nuclear. The coal mining industry also benefited from liability caps against black lung disease. Major hydroelectric dams around the country carry no liability insurance because they are all federally or municipally owned and exempted by sovereign immunity. If anything, the nuclear industry carries far more insurance than any other industry. Under Price-Anderson, every reactor in the country can be assessed $100 million for an accident by another reactor. That puts total coverage for any accident at $10 billion. As the industry says: "We are all hostages to each other." That's despite the fact that coal kills 30,000 people a year according to Environmental Protection Agency estimates, whereas Chernobyl - a bizarre foul-up that will never happen again - claimed only 60 lives directly attributable to the disaster.
The current problem with nuclear is not its underlying economics but the current political climate in the U.S. that is hostile to nuclear and doesn't offer a level playing field. Coal is familiar and politically entrenched and so people don't question the danger it poses. Solar and renewables are showered with subsidies and mandates because they have won popular favor even though they are very low density energy sources.
The real solution then to making nuclear energy economically feasible may lie in changing the popular perception of nuclear as forbidding and dangerous. People should consider nuclear as natural as the ground beneath their feet (hence I have titled my forthcoming book Terrestrial Energy). The slow breakdown of uranium atoms is what heats the core of the earth to temperatures hotter than the surface of the sun. When we build a nuclear reactor, we are only reproducing this process in an isolated environment. Yet it is so powerful that its environmental impact is 2 million times smaller than fossil fuels or the various forms of renewable energy. If powering the world with virtually no environmental impact can't be made economical, what can be?
William Tucker is an award-winning journalist whose book, Terrestrial Energy: How Nuclear Power Will Lead the Green Revolution and End America's Long Energy Odyssey, has just been published by Bartleby Press.