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Compete or Suckle: Should Troubled Nuclear Reactors Be Subsidized?

dry casks for storing irrradiated nuclear fuel at Diablo Canyon plant in California (photo US Nuclear Regulatory Commission)

Dry casks for storing irrradiated fuel, Diablo Canyon plant, California. (Photo: US NRC)

Today we offer the second of two expert perspectives on subsidizing nuclear power. Here’s the argument against providing economic support by Peter Bradford, Adjunct Professor Vermont Law School.  Courtesy The Conversation. The previous, opposing view can be found here.

Since the 1950s, U.S. nuclear power has commanded immense taxpayer and customer subsidy based on promises of economic and environmental benefits. Many of these promises are unfulfilled, but new ones take their place. More subsidies follow.

Today the nuclear industry claims that keeping all operating reactors running for many years, no matter how uneconomic they become, is essential in order to reach U.S. climate change targets.

Economics have always challenged U.S. reactors. After more than 100 construction cancellations and cost overruns costing up to US$5 billion apiece, Forbes Magazine in 1985 called nuclear power “the greatest managerial disaster in business history…only the blind, or the biased, can now think that most of the money [$265 billion by 1990] has been well spent.” U.S. Atomic Energy Commission (AEC) Chair Lewis Strauss’ 1954 promise that electric power would be “too cheap to meter” is today used to mock nuclear economics, not commend them.

As late as 1972 the AEC forecast that the United States would have 1,000 power reactors by the year 2000. Today we have 100 operating power reactors, down from a peak of 112 in 1990. Since 2012 U.S. power plant owners have retired five units and announced plans to close nine more. Four new reactors are likely to come on line. Without strenuous government intervention, almost all of the rest will close by midcentury. Because these recent closures have been abrupt and unplanned, the replacement power has come in substantial part from natural gas, causing a dismaying uptick in greenhouse gas emissions.

compete or suckle graph

The nuclear industry, led by the forlornly named lobbying group Nuclear Matters, still obtains large subsidies for new reactor designs that cannot possibly compete at today’s prices. But its main function now is to save operating reactors from closure brought on by their own rising costs, by the absence of a U.S. policy on greenhouse gas emissions and by competition from less expensive natural gas, carbon-free renewables and more efficient energy use.

Only billions more dollars in subsidies and the retarding of rapid deployment of cheaper technologies can save these reactors. Only fresh claims of unique social benefit can justify such steps.

When I served on the U.S. Nuclear Regulatory Commission (NRC) from 1977 through 1982, the NRC issued more licenses than in any comparable period since. Arguments that the U.S. couldn’t avoid dependence on Middle Eastern oil and keep the lights on without a vast increase in nuclear power were standard fare then and throughout my 20 years chairing the New York and Maine utility regulatory commissions. In fact, we attained these goals without the additional reactors, a lesson to remember in the face of claims that all of today’s nuclear plants are needed to ward off climate change.

Nuclear power in competitive electricity markets

During nuclear power’s growth years in the 1960s and 1970s, almost all electric utility rate regulation was based on recovering the money necessary to build and run power plants and the accompanying infrastructure. But in the 1990s many states broke up the electric utility monopoly model.

Now a majority of U.S. power generation is sold in competitive markets. Companies profit by producing the cheapest electricity or providing services that avoid the need for electricity.

To justify their current subsidy demands, nuclear advocates assert three propositions. First, they contend that power markets undervalue nuclear plants because they do not compensate reactors for avoiding carbon emissions, or for other attributes such as diversifying the fuel supply or running more than 90 percent of the time.

Second, they assert that other low-carbon sources cannot fill the gapbecause the wind doesn’t always blow and the sun doesn’t always shine. So power grids will use fossil-fired generators for more hours if nuclear plants close.

Finally, nuclear power supporters argue that these intermittent sources receive substantial subsidies while nuclear energy does not, thereby enabling renewables to underbid nuclear even if their costs are higher.

Nuclear power producers want government-mandated long-term contracts or other mechanisms that require customers to buy power from their troubled units at prices far higher than they would pay otherwise.

Providing such open-ended support will negate several major energy trends that currently benefit customers and the environment. First, power markets have been working reliably and effectively. A large variety of cheaper, more efficient technologies for producing and saving energy, as well as managing the grid more cheaply and cleanly, have been developed. Energy storage, which can enhance the round-the-clock capability of some renewables is progressing faster than had been expected, and is now being bid into several power markets – notably the market serving Pennsylvania, New Jersey and Maryland.

Long-term subsidies for uneconomic nuclear plants also will crowd out penetration of these markets by energy efficiency and renewables. This is the path New York state has taken by committing at least $7.6 billion in above-market payments to three of its six plants to assure that they operate through 2029.

Nuclear power vs. other carbon-free fuels

While power markets do indeed undervalue low-carbon fuels, all of the other premises underlying the nuclear industry approach are flawed. In California and in Nebraska, utilities plan to replace nuclear plants that are closing early for economic reasons almost entirely with electricity from carbon-free sources. Such transitions are achievable in most systems as long as the shutdowns are planned in advance to be carbon-free.

In California these replacement resources, which include renewables, storage, transmission enhancements and energy efficiency measures, will for the most part be procured through competitive processes. Indeed, any state where a utility threatens to close a plant can run an auction to ascertain whether there are sufficient low-carbon resources available to replace the unit within a particular time frame. Only then will regulators know whether, how much and for how long they should support the nuclear units.

If New York had taken this approach, each of the struggling nuclear units could have bid to provide power in such an auction. They might well have succeeded for the immediate future, but some or all would probably not have won after that.

Closing the noncompetitive plants would be a clear benefit to the New York economy. This is why a large coalition of big customers, alternative energy providers and environmental groups opposed the long-term subsidy plan.

The industry’s final argument – that renewables are subsidized and nuclear is not – ignores overwhelming history. All carbon-free energy sources together have not received remotely as much government support as has flowed to nuclear power.

Nuclear energy’s essential components – reactors and enriched uranium fuel – were developed at taxpayer expense. Private utilities were paid to build nuclear reactors in the 1950s and early ‘60’s, and received subsidized fuel. According to a study by the Union of Concerned Scientists, total subsidies paid and offered to nuclear plants between 1960 and 2024 generally exceed the value of the power that they produced.

The U.S. government has also pledged to dispose of nuclear power’s most hazardous wastes – a promise that has never been made to any other industry. By 2020 taxpayers will have paid some $21 billion to store those wastes at power plant sites.

Furthermore, under the 1957 Price-Anderson Act, each plant owner’s accident liability is limited to some $300 million per year, even though the Fukushima disaster showed that nuclear accident costs can exceed $100 billion. If private companies that own U.S. nuclear power plants had been responsible for accident liability, they would not have built reactors. The same is almost certainly true of responsibility for spent fuel disposal.

Finally, as part of the transition to competition in the 1990s, state governments were persuaded to make customers pay off some $70 billion in excessive nuclear costs. Today the same nuclear power providers are asking to be rescued from the same market forces for a second time.

Christopher Crane, the president and CEO of Exelon, which owns the nation’s largest nuclear fleet, preaches temperance from a bar stool when he disparages renewable energy subsidies by asserting, “I’ve talked for years about the unintended consequences of policies that incentivize technologies versus outcomes.“ However, he’s right about unintended and unfortunate consequences. We should not rely further on the unfulfilled prophesies that nuclear lobbyists have deployed so expensively for so long. It’s time to take Crane at his word by using our power markets, adjusted to price greenhouse gas emissions, to prioritize our low carbon outcome over his technology.

by

For a contrasting view, see this article by Penn State University nuclear engineering professor Arthur Motta.

Republished with permission from The Conversation, a great source of highly readable viewpoints from academics on a wide range of topics. Recommended.

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Jesper Antonsson's picture
Jesper Antonsson on Sep 13, 2016 9:37 pm GMT

First, let me point out that even if one would accept as a fact (which one shouldn’t) that nuclear has had these huge subsidies historically, that should not influence current decisions. This author argues for competitive electricity markets, but then sunk costs are irrelevant! You don’t get to pick and choose.

Second, of course nuclear can be replaced by renewables, but from an environmental perspective, it’s fossils that needs to go. So instead of letting RE shut down nuclear, we can let it shut down fossils. Seems the author is fine with a natural gas-dominated grid, however.

Third, studies have shown that for a sufficiently high carbon tax, the optimal amount of RE in a grid goes down as it is replaced by nuclear. Google “The Optimal Share of Variable Renewables Hirth”. Key figure:
http://media.nejdetkanviinte.se/2015/04/co2-price.png

Fourth, Price-Anderson is band-aid on a wound that politicians themselves inflict. Fukushima had not cost much if politicians hadn’t mandated unreasonable and unwarranted evacuations and cleanups. Also, the artificially high Fukushima costs does not even amount to a tenth of a cent if distributed over the produced global nuclear electricity.

Fifth, the Union of Concerned Scientists is an anti-nuclear group that should not be relied on for anything, and the author’s involvement in regulatory bodies for nuclear power is indicative of how intentionally adverserial oversight and regulation has put the climate and the nuclear industry in the sorry states they are in now. Many decades have been lost, as have millions of lives around the globe. If those responsible would realise that they’ve put humanity in a deep hole and stop their digging, that’d be great.

Josh Nilsen's picture
Josh Nilsen on Sep 14, 2016 12:18 am GMT

Nuclear will continue to get federal money I assure you.

Coal is the one getting absolutely wrecked.

The fracking ponzi schemes are coming to a close as they run into fresh water issues.

You still need either coal or nukes for 10-15 more years. And it ain’t gonna be coal.

If the nuclear guys were smart, they would invest money into distribution infrastructure to carry renewable energy AWAY from the nuclear plants and into coal regions.

Coal could very well go to <5% in the US in as little as 6 years. It's moving that fast.

Helmut Frik's picture
Helmut Frik on Sep 14, 2016 6:44 am GMT

You forgot to mention that the graph is only valid if
– very low cost nuclear is in the model
– demand reactions on price are excluded
– power trade to areas outside the small moddeled area are excluded
– large hydro storage is excluded (although existing)
– other storages are excluded
– grid extensions intead of more capacity is excluded
etc…
Which means the percentage value in the graph has no practical meaning.

Jesper Antonsson's picture
Jesper Antonsson on Sep 14, 2016 8:51 am GMT

No, the model is using a historically very high nuclear cost (€4/W), which is appropriate given the current uncertainty on nuclear costs in countries with adverserial regulatory bodies, but might also prove to be substantial overestimates once economies of scale set in again.
http://media.nejdetkanviinte.se/2016/02/nuclear-costs.png

Also, the modeled area is rather large, covering the interconnected Germany, Belgium, Poland, Netherlands and France. Large hydro storage is excluded, since it is actually _not_ existing. Demand reactions are excluded, but for a good reason, as the price inelasticity is very high.

My intention with supplying the graph was not to establish exact levels, but the basic concept. Since wind and solar should be seen as a package deal with natural gas, higher aversion to CO2 emissions will make nuclear more valuable and wind and solar less valuable. The author from the Union of Concerned Scientists’ position on nuclear’s value thus seems to reveal a very low aversion to CO2 emissions.

Darius Bentvels's picture
Darius Bentvels on Sep 14, 2016 11:54 am GMT

Nuclear emits ~10 times more CO2eq/KWh than wind & solar as shown by independent studies referred in the Conservation. It may even be >50% of that of natural gas. So it’s not a real low carbon source.

Following similar course as the tobacco industry, nuclear facilitated many studies to show that nuclear is low carbon (‘forgetting’ the full uranium cycle, etc).
So, as with health harm through smoking, study results differ up to a factor 10.
Hence it’s time to use sound reasoning.

Per dollar, costs are near always associated with about the same amount of carbon emission as costs are in the end always labor. And av. workers spend their money more or less the same.
So wind, solar, nuclear electricity all emit X grCO2eq/cent KWh*).

The operating / marginal costs of nuclear are more than $50/MWh as shown by the new NY-state subsidies (ZECs).
The operating / marginal costs of wind and solar are smaller than $5/MWh.

So sound reasoning implies that existing, depreciated NPP’s emit at least 10 times more GHG (CO2eq/KWh produced) than comparable solar and wind!

Hence the claims for even more subsidies because nuclear would emit not much more CO2eq/KWh than wind+solar are a lie.
____
*) Doesn’t apply for fossil, as fossil itself produce additional CO2 when burned.

Jesper Antonsson's picture
Jesper Antonsson on Sep 14, 2016 1:23 pm GMT

According to OpenEIs comprehensive harmonized survey of life cycle analyses, nuclear and wind has 11-12 g CO2/kWh, whereas solar pv has 44 g CO2/kWh. If you add solar’s and wind’s need for backup and transmission upgrades, there is no contest and nuclear is clearly superior. The article you reference includes, once again, anti-nuclear scientific fraud, this time in the form of the infamous Storm-Smith studies. I assume you know that science overwhelmingly disfavour your position, and that’s why you add a conspiracy theory to the effect that the median of academic LCAs has been skewed by the nuclear industry.

Of course, if you compare existing nuclear with new RE, nuclear is even more superior as most life cycle emissions comes from building the plant. You apparently confuse life cycle emissions of power sources with their workers’ consumption, which is irrelevant. But what the workers does in their line of work clearly matters. Workers in the solar and wind supply chain are almost all working to create, transport and install materials and equipment. This is very CO2-intense work. However, much of nuclear costs is safety related paper pushing, licensing and so on. This is far less CO2-intense.

If you add the fact that nuclear is about as cheap per average watt (adjusted for capacity factor) and has 3 times the lifetime of solar and wind, it is clear also from that perspective that nuclear requires less effort and thus creates less CO2 emissions. And finally, it’s not that difficult to find out the mass of an average installed watt for the different technologies, preferably split into steel, concrete and copper. Nuclear has a large advantage there too. PV is incredibly heavy.

OpenEI has surveyed costs too, and nuclear comes out ahead. For instance, PV is listed at a median of $30/KW and year ($22/MWh at 15% CF). The claim that nuclear would have a marginal cost of $50/MWh is ridiculous to anyone with some knowledge of the nuclear industry. OpenEI has the median at $0.6/MWh variable and $91/KW fixed ($12/MWh at 90% CF).

Bob Meinetz's picture
Bob Meinetz on Sep 14, 2016 2:21 pm GMT

Bas Gresnigt, as usual your sources are hovels of antinuclear activists who bestow upon themselves the title of “scientist” (why? because they can), and then proceed to sermonize in a most laughably un-scientific manner.

But their first document listed in The Conversation is “404 – Not Found”. I’m somewhat familiar with Mr./Ms. 404, he/she’s someone who contributes to pro-renewables propaganda, but having a shred of self-respect realizes the 404 family name might be sullied by being associated with the movement, and withdraws his/her contribution.

Next – a paper advocating 100% renewable energy in New Zealand, which claims to be “peer-reviewed” just because it was er, written. There are two problems with that assumption: 1) No publisher has deemed it worthy of publication, and 2) the only “peers” who have “reviewed” it are fellow activists who read only the Conclusion, saw that it promoted renewable energy, then bestowed their approval. I doubt you got that far.

I’m hoping Mr./Ms. 404 was in the room and deletes it from their server, but I’m not holding my breath.

Bob Meinetz's picture
Bob Meinetz on Sep 14, 2016 2:42 pm GMT

Peter, the anti-nuclear movement would make itself appear a bit less ridiculous by choosing articles written in the last three decades as references.

Seems there have been some changes since 1985. Here is what Forbes is saying as of July 28, 2016:

“During peak-hours in California, gas supplied over 60% of California’s electric load while solar and wind supplied less than 15%. The largest solar plant in the United States, California’s Ivanpah, recovering from a solar fire in May and struggling with bad performance overall, isn’t helping much in this heat. After receiving $1.6 billion in loan guarantees from the Department of Energy and $535 million from the U.S. Treasury, Ivanpah is still unable to meet its promised 940,000 MWhs per year and is failing to even meet it’s power purchase agreement.

‘We got lucky in that there was some monsoon cloud cover from the desert southwest that came into California and kept temperatures lower, but it also added to the variability of solar resources that we had to contend with,’said Greenlee.

Luck and more gas pipelines…if we close anymore nuclear plants, that’s what we’ll be depending on in the future.”

Wow – saved by monsoon cloud cover. Sounds like in Califonia, utility solar can’t compete – just suck.

Darius Bentvels's picture
Darius Bentvels on Sep 14, 2016 5:45 pm GMT

The Hirth studies are not taken serious by Energiewende’s Agora think-tank while Hirth is also situated in Berlin.
Stronger, Hirth cooperated with Agora studies which deliver quite different results!

The Hirth studies resemble the simple scenario studies in the nineties. Based on those entrepreneurs and cooperation’s built 35 pumped storage facilities which are making big losses since their start. No need for those.
May be with >45% renewable in 2025 though other more competitive solutions may then take the market. Cheaper (flow)batteries, P2G, TOU metering (Germany has a smart metering program allowing that in ~2020), etc.

Jesper Antonsson's picture
Jesper Antonsson on Sep 14, 2016 8:02 pm GMT

Bentvels, I’m sure Hirth’s models can be improved at the margin, as can any model, but at least he is honest, unlike the infamous junk scientists you regularly link to. You’d have a stronger position when arguing about which research is reliable if you didn’t do that.

Also, I’d like to point out that Hirth’s models does help to explain the apparent inability of the RE pioneer countries to move on and reach really high RE penetrations. Every “fast” solar buildout has proven to be a bubble once it reaches medium to high single digit percentage points and wind pioneers has also leveled out at 20% or so with the exception of Denmark that’s acting as a small part of a larger grid.

You regularly claim that RE is so cheap, that nuclear five times more expensive, that pumped storage isn’t even needed, that there are no limits. But then why doesn’t high RE penetration just happen? At least we should see steady and appreciable progress with some pioneer countries, but we don’t. Hirths findings helps explain why, and also why countries that relies more on real expertise than on green think tanks are still planning for more nuclear power.

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