Doubts Cast on Nuclear Renaissance

Quite a number of recent developments in the nuclear industry, most notably big cost overruns and delays on a Finnish reactor being built by France's Areva, have called into question whether a widely anticipated "nuclear renaissance" is really going to happen. As discussed here and elsewhere, rising construction and financing costs have meant that new reactor projects can get underway only with big government subsidies or pre-construction electricity rate increases. Because of uncertainties about when and how such support will actually materialize, Moody's Investor Services has cautioned potential investors in nuclear projects that risks may not be adequately taken into account. Even though Moody's believes that reactors may well be financially viable once operating, observes University of Vermont economist Mark Cooper, problems with permitting and financing may make it difficult or impossible to get nuclear power plants up and running in the first place.

Cooper is the author of a recent report "The Consumer Economics of Nuclear Reactors: Renaissance or Ripoff?", in which he highlights a fourfold increase in reactor construction costs in the last decade, which is uncomfortably reminiscent of the seven-fold increase seen in the first generation of nuclear construction. What's particularly troubling about the development--though this is a point Cooper does not explicitly make--is that the cost runups in the first generation are often attributed to radically tightened safety regulation and retrofit requirements after the 1979 Three Mile Island accident; in the last decade, no such event is available to explain why costs have gone up so much. On the contrary, the industry was supposed to have learned how to build plants in a more standardized manner, at more predictable costs.

Cooper argues that even if, in the future, it's made much more costly to emit carbon, nuclear reactors will not become a significantly greater part of our energy supply if decisions are made on a least-cost basis. Specifically, the nuclear option will remain for decades to come more expensive than efficiency, cogeneration, geothermal, biomass, landfill, onshore wind, and natural gas (though not coal with carbon capture or, possibly, photovoltaics).

There may, in a sense, be less to this argument than meets the eye. All serious students of the subject agree that energy efficiency is the cheapest and fastest way to address energy shortages and cut emissions: the best kind of new watts are what Amory Lovins has dubbed "negawatts." With the proper price incentives and regulatory requirements, greater energy efficiency ought to make it possible for us to keep total energy consumption at current levels. But if we want, beyond that, to reduce reliance on coal and oil, what are we going to use in their place? The only obvious candidates at present are natural gas, nuclear, and thermal solar--regardless of how expensive they may be relative to one another on average. Not any one of them will be best in every situation, but every one will have its niche.

Nonetheless, Cooper provides a compelling and disturbing analysis of the challenges the nuclear industry will have to surmount if nuclear is to become a bigger player or, in the long run, be a player at all. His lucid account of overnight, all-in, and busbar cost accounting is, by itself, worth the time it takes to download his report.

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