Bill Totten's Weblog

Saturday, July 14, 2007

The Joys of Going Nuclear?

by Jessica Holzer (May 25 2006)

Is nuclear energy enjoying a renaissance?

Electrical utilities certainly think so.

No new nuclear plant has been proposed since the 1970s. But now, three companies, Exelon, Dominion Resources and Entergy, have filed applications for site permits with the government, and sixteen companies have said they're planning to apply for licenses to build and operate up to 25 new plants.

On Wednesday, at Excelon's Limerick nuclear plant outside Philadelphia, President George W Bush gushed about the joys of nuclear power and trumpeted Nuclear Power 2010, his initiative to get more plants built. That was his second appearance at a nuclear reactor since last June, when he visited a reactor in Maryland. And it was the second time a sitting president has visited a nuclear reactor site since Jimmy Carter's appearance at Three Mile Island.

Utilities famously backed away from nuclear power in the decades after that 1979 accident. But their cold feet weren't caused so much by environmental concerns as financial ones: Once the massive construction costs are factored in, nuclear plants simply aren't as profitable as their competitors, coal and gas-fired plants.

"It's not as if Greenpeace killed the industry. Guys in pinstripe suits on Wall Street killed the industry", said Jerry Taylor, a senior fellow at the Cato Institute in Washington.

The specter of caps on carbon emissions - which many in the power industry believe are inevitable - certainly increases the appeal of nuclear power, which is emissions-free. But even with the run-up in natural gas and coal prices, nuclear is not profitable without a raft of government subsidies. Still, with the largess it extracted from the government last year, the nuclear industry may have put even the ethanol lobby to shame.

The Energy Policy Act of 2005 extended insurance coverage to the public in case of a reactor accident at any new plant for twenty years. It provided for a generous production tax credit and federal loan guarantees for up to eighty percent of the project's cost. The government even agreed to step in and eat the cost of any delay in plant construction related to litigation or government red-tape - a huge prize for plant sponsors and investors given the massive capital costs associated with building a nuclear plant.

These new subsidies were lavished on top of old ones, including the biggest one of all: the government's shouldering the problem of nuclear waste. It is little wonder that nuclear is getting a second look.

But even with all this corporate welfare, those generating electric power are timid about diving in. "We've not made a decision to build, but we are very interested", said Sandy Robinson, a spokesperson for Southern Co.

A huge hurdle is the licensing process, which was streamlined more than ten years ago but still remains untested. Like in the refining industry, getting the license to build and operate nuclear reactors is so costly and arduous - it can run several years and cost millions - that power companies have formed consortia to pool legal expenses in order to test it.

And there are other uncertainties. Once nuclear plants are up and running, they are far more profitable than gas or coal-fired plants. But the construction costs can boggle the mind. There were huge cost overruns in the construction of the last generation of nuclear plants, and many of them did not get to full capacity for years after they were built. In an environment of rising interest rates, the power industry and Wall Street might shy away from such unpredictable and capital-intensive projects, says Taylor of the Cato Institute.

Given the costs, it isn't obvious to many environmentalists that nuclear power is going to help solve the problem of climate change. To have an impact, the country would have to triple the amount of nuclear power produced today, which would require making it more affordable and solving the thorny issue of what to do with spent fuel, says Lee Lane of the Climate Policy Center in Washington.

And building more nuclear power plants won't do much to improve our energy independence either, since they compete with coal- and gas-fired plants. The US imports just a small portion of the natural gas it uses and is blessed with a more than 150-year supply of coal. All this makes one wonder why the Bush administration is plugging so hard for nuclear.

Bill Totten


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