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May 22, 2005

The other nuclear option

Somewhat to the surprise of the nuclear-energy industry, support for the technology that brought you Three Mile Island and Chernobyl continues to grow.

Three of America’s leading environmental experts—Fred Krupp, executive director of Environmental Defense, Jonathan Lash, president of the World Resources Institute, and James Gustave Speth, dean of Yale’s School of Forestry and Environmental Studies—have each stressed the need to find solutions to nuclear power’s economic, safety, waste-storage and proliferation issues rather than simply abandoning it. Several leading environmentalists—including Gaia guru James Lovelock, Greenpeace cofounder Patrick Moore, and Friend of the Earth Hugh Montefiore—have spoken out in nuclear’s favor, and found themselves spurned by greener greens. The February issue of Wired published a glowing article on nuclear power by Peter Schwartz and Spencer Reiss (shortly followed by a reader meltdown in its letters pages). And in the May issue of Technology Review, former Merry Prankster and all-round uber-hippie Stewart Brand asked:

Can climate change be slowed and catastrophe avoided? They can to the degree that humanity influences climate dynamics. The primary cause of global climate change is our burning of fossil fuels for energy.
So everything must be done to increase energy efficiency and decarbonize energy production. Kyoto accords, radical conservation in energy transmission and use, wind energy, solar energy, passive solar, hydroelectric energy, biomass, the whole gamut. But add them all up and it’s still only a fraction of enough. Massive carbon “sequestration” (extraction) from the atmosphere, perhaps via biotech, is a widely held hope, but it’s just a hope. The only technology ready to fill the gap and stop the carbon dioxide loading of the atmosphere is nuclear power.

Writing in (subscriber-only) Fortune, Geoffrey Colvin assesses where things stand:

It took a month for the Three Mile Island nuclear reactor to cool off in 1979 after it partially melted in America’s most famous nuclear accident. The emotional heat was a lot more intense; it took 25 years to fade. But at long last it has mostly dissipated, and now, very quietly, nuclear power is on its way back in the U.S. and around the world. And—it must be said—that’s a good thing.
More than 30 years after the last U.S. reactor was built, three major U.S. utilities have applied for early site permits for new reactors—Dominion in Virginia, Entergy in Mississippi, and Exelon in Illinois. Two large consortiums of major players in the field, including utilities, reactor makers, and construction companies, have started down another avenue of the complex licensing process, applying for construction and operating licenses. These licenses and other regulatory requirements take years, so the first watt of new nuclear energy won’t be coursing through any wires before 2015. But the process has begun, which not so long ago would have seemed unthinkable.
Even more remarkable is the attitude reversal in Europe, where antinuke fever has generally burned far hotter than in the U.S. A new nuke is under construction in pristine Finland, and interest in new reactors is growing in Britain, Switzerland, Hungary, Slovakia, the Czech Republic, and Bulgaria, reports Steven Taub of Cambridge Energy Research Associates. Germany and Sweden were long committed to shutting down their plants, but those policies are now being ignored and may be formally rescinded. Italy still bans nuclear power, but Prime Minister Silvio Berlusconi has proposed lifting the ban.

But while panic about global warming has made nuclear power more appealing in the abstract, its biggest challenge is that nobody—including the industry itself—knows how much it really costs.

On paper, the numbers can look appealing. For example, drawing on new estimates from the Nuclear Energy Agency and International Energy Agency, the NEI Nuclear Notes blog recently reported that the levelized lifetime costs for nuclear are 2.1 to 3.1 cents per kilowatt hour (kWh)—slightly below coal’s 2.5 to 5.0 cents per kWh.

But this comparison has two big holes. First, the numbers ignore the costs of processing nuclear waste and higher post-9/11 security. Second, because of nuclear’s higher capital costs, its advantage swiftly evaporates when interest rates rise. That’s why the nuclear-energy industry likes to talk about “Nth-of-a-kind” capital costs—i.e., those achieved after first-time design, engineering, construction-management and SNAFU costs have been sunk and “recovered”—industry-speak for the loan guarantees and tax credits it wants for “first-of-a-kind” engineering costs.

First of a kind? Globally, some 440 civil reactors have already been built, and in fact now produce one-sixth of the world’s electricity. But as I’ve noted before, while coal-fired plants have reaped the benefits of standardization over the past half-century, the global nuclear industry has continued to flail over basic design issues. Which is why it remains clueless about its own costs.

All of which leaves me agreeing with John Tierney (and the eclectic John Palmer):

[E]ven if environmentalists and politicians are right this time about [global warming], there’s little reason to trust them to figure out which form of energy will be the solution.
Starting with nuclear power, they’ve backed one loser after another for the past half-century. They promised that their subsidies would move us beyond fossil fuels and produce electricity from vast solar arrays, solar towers, geothermal heat, ocean waves, sugar beets, corn, manure and something called biogas (you don’t want to know). But when the subsidies ran out, the electricity stopped.
If politicians are determined to combat global warming, their best bet is to try something they understand: imposing taxes. A tax on carbon emissions would make investors take into account the risks of global warming. I don’t know if it would make them want to build new nuclear power plants, but I trust them to figure it out better than anyone in Washington who claims to see the energy future.

And as Tierney points out, at least they don’t dress up as mushrooms.

Posted by Stephen at 6:32 PM in Energy + environment | Permalink | Comments (2) | TrackBack (0)

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Hello David,

Your points aren't entirely accurate. Sure, the levelized investment costs include construction -- but at a 5% discount rate. Because capital investment makes up much more (50%) of the total levelized costs of nuclear-power plants than of coal-fired (from memory about 35% -- the report is at home and I'm not) and gas-fired (about 20%), nuclear is MUCH more sensitive to rising interest rates than its rivals. In fact the study notes that at a 10% discount rate capital investment costs soar to 70% of the (increased) total.

Second, it's never been clear from any of the OECD studies whether "decommissioning" or "fuel-cycle" costs actually do include realistic cost projections for processing spent reactor fuel. Looking at the numbers over the years, and having talked to many folks at the various agencies (although not, in fairness, recently), my understanding is that there is only a token, low estimate in there.

Finally, I totally disagree that post-9/11 security costs are included in O&M. Where did you find that data? As far as I know, all the OECD numbers include are locks on doors and the odd security guard :) -- in other words, their methodology hasn't changed on this since pre-9/11.

But all this notwithstanding: I'm on your side!! We absolutely should head down the nuclear route. My beef is that, since I first started writing about this in the mid-80s, the industry has always blurred its costs. You shouldn't. You should be very clear that there are additional costs involved in nuclear, but point people towards all the other benefits.

Best, Stephen

Posted by: Stephen Ayer at May 23, 2005 8:42 PM

When looking at the study NEI references in its post, http://www.iea.org/bookshop/add.aspx?id=196, I found that the levelized lifetime costs include your "two big holes". On page 13 of the study it states:

"The total levelised investment costs calculated in the study include refurbishment and decommissioning costs and interest during construction...At a 5% discount rate, the levelised costs of nuclear electricity generation ranges between 21 and 31 USD/MWh except in two cases. Investment costs represent the largest share of total levelised costs, around 50% on average, while O&M costs represent around 30% and fuel cycle costs around 20%."

According to the study, the first hole you hit on, "processing nuclear waste and higher post-9/11 security", is included. Processing nuclear waste is included in the decommissioning costs and security is included in the O&M costs. The second hole "higher capital costs" is part of the levelised investment costs which make up about 50% of the total levelised lifetime costs.

Posted by: David Bradish at May 23, 2005 11:34 AM