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Home      The Real Costs of the Nuclear Industry
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The Reals Costs of the Nuclear Industry
Brian Guerin
Nuclear Power is unsustainable. There is no realistic case to be made for nuclear power, whether on grounds of safety, economics or even social stability.

The recent changes in climate have focused attention upon renewable and non-renewable sources of energy. The argument is being made by its proponents that nuclear power  is vital for the reduction of carbon emissions, as renewable sources are uncertain and are incapable of fulfilling future energy demands. This article will argue that these arguments are false, and that the economic and ecological costs of nuclear energy effectively preclude it as a viable option for future energy needs.
There are 442 nuclear power plants in the world, operating in some 30 countries, thus has some significance as a provider of electricity.
 The nuclear industry, however, has been in trouble for the past 15 years, with various disasters and financial problems. British Energy, the UKs nuclear-energy operator, required successive government bailouts.

Britain has also recently finalized a £50 billion ($90 billion) scheme to deal with the nuclear-waste liabilities of British Nuclear Fuels (BNFL), a reprocessing company on the verge of bankruptcy.

The British taxpayer, however, will pay the bill, through the device of a new Liabilities Management Authority.

However, in Asia, nuclear power is making some advances. China has 9 nuclear reactors, and is planning to commission a further 30. New capacity is under construction or consideration in India, Japan, Taiwan and South Korea. Russia has several plants under construction. Western governments are looking again at nuclear energy. Recently TVO, a Finnish consortium, began work on the first new nuclear plant to be constructed in the West in a decade. Pertti Simola, TVO’s chief executive, proclaims that, “Finland has opened the door to a new nuclear era! Many western countries will come behind us.” France’s parliament has also recently granted approval for a new nuclear plant. Guillaume Dureau of Areva, the world’s largest nuclear supplier stated: “We are pretty convinced of a nuclear revival and [we] need to prepare for it. We need to hire 1,000 engineers. The industry is still a sizeable business. In 2004 Areva had sales of ¤6.6 billion ($8.2 billion). This includes mining uranium, designing power plants and reprocessing waste fuel. General Electric’s nuclear division, which designs and builds plants but does not handle fuel or waste, turned over $1.1 billion last year. Westinghouse, a US company currently owned by BNFL, and recently put up for sale, had sales of around £1.1 billion ($2 billion). The main reason for this shift is global warming. The nuclear revivalist James Lovelock stated: “Only nuclear power can halt global warming.” (Ibid). David King, Scientist of the UK government, argued that another generation of nuclear stations is needed to buy time, in order to keep down emissions of carbon dioxide, the chief greenhouse gas, while new carbon-free non-nuclear technologies are developed, and because renewable methods are not up to the task: “We need another generation of nuclear-fission stations.”  In Germany, where a decision to close down its nuclear power plants was made by the SDP-Greens coalition, the Christian Democrats stated that they may reverse this if they entered power, as they have; a decision is pending. In America, although the Bush administration is hostile to any mandatory action on global warming, it is strongly supporting nuclear power. Groups such as Environmental Defence and the World Resources Institute have moved to support nuclear power.  (Ibid).
There are direct rivals to nuclear plants, such as fossil-fuel plants with carbon sequestration that can provide baseload power, and much investment and experimentation in this field is under way, from Algeria to China to America. Vattenfall, a Swedish nuclear utility, is investing in technology to remove carbon from its coal plants in Eastern Germany and Poland. Cinergy, a US utility, is examing coal gasification and carbon sequestration in Indiana. A Scottish consortium led by BP announced the first commercial-scale project to produce carbon-free power from natural gas, reinjecting the waste carbon dioxide into fields in the North Sea, thus storing the gas underground and also enhancing hydrocarbon recovery from the field. Above all, combined heat and power, which allows companies and consumers to use the heat created by power generation and the electricity it produces, is booming. Nuclear power has its current momentum due to a comparative increase in economic efficiency. The increased consolidation of nuclear plants has helped spread the cost somewhat in the US. France has lower operating costs due to the standardization of plant design. (Ibid). CERA has calculated that 31 countries have commercial nuclear-power reactors; these produce about 16% of the world’s electricity, which is worth $100-125 billion annually. Expansion in China is likely to involve around $50 billion of capital spending. However, even if China constructs all 30 planned plants, nuclear power will only make up about 5% of its projected energy use in 2030. Meanwhile, natural gas is expected to grow from a 1% share today to over 6%, according to the International Energy Agency (IEA), an offshoot of the OECD.

Electricity from nuclear power is slightly cheaper: it costs German utilities perhaps 1.5 (US) cents per kW-hour to make nuclear electricity, according to one estimate, while in contrast it costs 3.1-3.8 cents to produce power from natural gas in Germany, and 3.8 - 4.4 cents from coal. This is due to the carbon-tax introduced in Germany. In the US, where there is no mandatory carbon regulation (thus no penalty on fossil fuels), nuclear power has less of an advantage: coal costs about 2 cents on average, gas power costs about 5.7 cents, nuclear costs about 1.7 cents. (Ibid).

However, the economic case is not as clear-cut. The costs of nuclear power produced by existing plants are likely to be far lower than the costs of newly-built plants, because the capital costs of nuclear plants - typically reflecting half to 2/3rds the value of the project in present-value terms - are long forgotten. The majority of nuclear plants were built when nuclear power was massively subsided by the state. Current low interest rates are good for large capital projects like nuclear, but these may change sharply in the future. And the prices of gas and oil, whose current astronomical levels serve to promote nuclear power, could fall. As Ed Cummins of Westinghouse commented: “The biggest motivator for nuclear today is $6 [the price per MBtu] natural gas. If gas goes back to $3.50, then nuclear plants aren’t competitive.” (Ibid).

The other source of uncertainty is the disposal of radioactive waste. Britain decided to reprocess its waste, which proved hugely expensive. In America, the waste was stored in concrete pools of water at the power plants. The current consensus is that the best solution is geological storage - burying the waste very deep. However, nobody has made much progress with this, or has any idea what this storage will cost in the end.
One financial rating agency, Standard & Poor’s, declared: “The industry’s legacy of cost growth, technological problems, cumbersome political and regulatory oversight and the new risks brought about by competition and terrorism may keep credit risk too high for even (federal legislation that provides loan guarantees) to overcome.”  
A 1000 MW nuclear plant costs $2 billion and takes at least 5 years to build, on the most optimistic estimates. A coal plant of that size costs perhaps $1.2 billion and takes 3-4 years, while a combined-cycle gas plant of similar size costs about $500 million and takes less than two years to build and become operational. The bigger the project, the more susceptible to delay: one analyst stated that a 2-year delay in nuclear projects wipes out 20-25% of its value to investors.

Nuclear advocates point to Finland, where a private consortium seems to have managed to finance a new power plant with government subsidy. But was it achieved without state aid or subsidies? The answer is obscure. TVO is a consortium involving six shareholders - but one of them is a state-owned utility, Fortum. TVO’s owners are also its only customers. Some of those customers are large paper and pulp companies, who use a lot of power; others are municipalities, which are state-funded. Indeed, the ¤3 billion deal is not a conventional economic transaction. Mr. Simola explains that there is a lifetime power-purchase contract agreed at zero profit: “We pay dividends in the form of competitive power,” he jokes. The plant is to be built by France’s Areva on a fixed-price bid. If there are delays or massive cost over-runs, Areva must cover them. Areva has denied that the French government ownership means that the country’s taxpayers will be subsidizing Finnish power: they assert that the firm will yield all its assets and go bust before the French taxpayer will pay anything. But if it does go bust, the French taxpayer must write that cheque to TVO.

Most studies reckon that even a moderate carbon tax would not make nuclear power competitive. Europe’s emissions-trading system (ETS) is, in effect, a tax on non-nuclear energy production. According to the consultancy firm Oxera, even with that tax new nuclear plants will not be economic without government help.
Due to political considerations, the European carbon tax will not probably be raised in the foreseeable future. That is why various governments, including the US, are considering directly subsidizing nuclear power. President Bush tried to insert a provision into his energy bill granting the industry about $500m in insurance against the risk of regulatory delays, and a further $6 billion in subsidies is being considered for new plants. US companies want several billion dollars for the engineering and construction costs associated with building the first 3 or 4 such plants, plus over $500m in subsidies to go through the licensing process, plus an extension of the existing US government’s blanket insurance policy against catastrophic accidents. (Ibid).

20 years ago, the cost of building a nuclear plant in the US averaged almost $3 billion (in 2002 dollars). Years of technological refinements and potential cost-saving measures have not succeeded in significantly lowering the price tag.

When measured on present values, the cost of a nuclear plant means that two-thirds or more of its costs may be incurred at once, before opening. This is without factoring in interesting payments accrued during the long construction phase. In contrast, only a quarter of the costs of a typical gas-powered electric plant accrue up-front costs, and therefore gas plants have supplied nearly all the total new capacity added in recent years. Many of these carry peak or intermediate loads, not baseloads. In most of the US baseloads are handled primarily by coal-fired generators, which are not cheap. Their capital costs per kilowatt-hour are more than twice those of combined-cycle gas turbines. But coal is a strong rival to nuclear power. Even with the latest clean-air equipment, coal plants are not as expensive as nuclear, and once built are relatively economical to operate as the price of coal has dropped steadily over the past 20 years. Coal’s share of US electric domination has, if anything, increased over the last several decades, reaching 50% in 2002. Of course the US has extensive reserves of this particular fuel. (Ibid).

Nuclear power proponents have long complained about excessive US government regulation, but these “hurdles” have long been removed. Following a 1992 Act, a utility, if granted a building permit, knows that an operating licence is assured. Moreover, the regulatory commission has pre-certified 3 technologies for application anywhere in the US. A builder opting for any one of them is practically guaranteed that safety measures will not be open to legal challenges during licensing proceedings. That no new plants have been ordered since these changes in the law in 1992 is proof that finance, rather than government regulation, continues to be the primary barrier. (Ibid).

It is untrue that the US has been less supportive of nuclear power than other OECD members. Only Japan has spent more money than the United States on nuclear research and development. It is true that several other important industrial countries – including France, Japan, Germany, Italy and Britain – have maintained (until recently) fuel-reprocessing facilities for spent fuel, whereas reprocessing ceased in the US in the 1970s. On the other hand, few other nations have advanced with plans for the alternative to reprocessing – namely, the long-term burial of high-level radioactive waste. The Nevada Yucca Mountain depository took years of deliberation and will take many more before it might receive shipments, but plans for waste disposal in other countries have proved just as problematic. Studies of possible disposal sites began in the 1960s in Germany. The geological salt caverns at Gorleben were selected a decade later. Sustained opposition has prevented its use ever since. (Ibid).
Again, only taxes that cover the main competitors to nuclear-generated electricity - coal, and to a lesser extant, natural gas - can make nuclear power feasible to any degree.  
To do so decisively, a broad-based carbon tax would have to be steep indeed, much more than any OECD member has come close to levying. The desire to assist the nuclear power industry is the main stimulus behind the demand for a carbon tax, not global warming.  
In the US, four factors serve to hinder the rebirth of nuclear power:         

1. Annual growth in demand for power has never returned to pre-1974 heights.
2. Gas-fired technology is comparatively fast and inexpensive to install.
3. There is little economic incentive to close down the vast number of coal-burning plants.
4. More than a hundred old atomic reactors are still on-line.  (Ibid).

“If a thing is not worth doing, according to economist John Maynard Keynes, “it is not worth doing well.”

 Aside from bomb-proliferation, waste, sabotage and uninsurable accidents, nuclear power is uncompetitive and unnecessary. In the US, after a trillion-dollar taxpayer investment, it delivers little more energy than wood. Globally, it produces
less energy than renewable sources. In the 1990s, global nuclear capacity rose by 1% a year, compared with 17% for solar cells (24% last year) and 24% for wind power – which has lately added about 5,000 megawatts a year worldwide, as compared with the 3,100 new megawatts nuclear power averaged annually in the 1990s. The decentralized generators California added in the 1990s have more capacity than its two giant nuclear plants, whose debts triggered the restructuring that caused its current energy crisis. Cogeneration plants are especially cheap because they occur at the site where the energy is consumed and therefore transmission costs are largely eliminated. (Ibid).

© The Tara Foundation, 2006