Examples of regulatory costs for nuclear energy development

This exchange with Robert Bradley, who is a self-described free market advocate, focuses on my frustration with the inability of his “community” to acknowledge the imposed costs of excessive regulation on nuclear energy projects. Robert blogs at Master Resource, the same place where I have encountered Jerry Taylor, who shares some of the same ideas.


Robert Bradley { 12.06.11 at 11:26 am }

On the smoking gun, good detective work. I am always interested in inter-fuel political fighting, which is my specialty as far as a lot of my writing on political capitalism )vs. free-market capitalism) goes. Keep searching and documenting …

On unnecessary regulation, I would have to let insurance companies (sans Price-Anderson Nuclear Industries Indemnity Act ) try to determine that in a free market.

But nuclear is so far out of the market cost-wise with natural gas prices for the foreseeable future, I do not think overregulation tips the scales. That is what Jerry Taylor and others are trying to argue.

On the question of locking-in gas prices, the plant operators seem to want to ride the spot market to best compete, but if they needed to ‘beat’ a nuclear plant, here is what a trader told me:

“Market is very liquid out five years and somewhat liquid out ten years, although the bid/ask spread widens greatly as you try to do longer term and/or bigger volumes. I assume longer than ten years you would have to search hard for the right counterparty.”

To me, nuclear is a great backstop technology whose time is sometime in the future in a fossil-fuel-rich world given relative economics.


Rod Adams { 12.07.11 at 3:28 am }

@Robert – What does the Price-Anderson insurance pool system have to do with regulation? Throwing that topic out during a discussion about nuclear energy capital costs comes straight out of the antinuclear playbook issued by UCS, NRDC, Greenpeace, RMI, and Sierra Club.

If you are really curious about how the insurance pool system works, how much it has cost taxpayers, and how much it has paid out in its fifty-five years of collecting fees from nuclear plant operators, a good source is the NRC’s fact sheet.

http://www.nrc.gov/reading-rm/doc-collections/fact-sheets/funds-fs.html

With regard to the cost of regulation, here are just a few examples of the multitude of layers that I am talking about.

Applicants for a federal license (design certification, early site permit, construction permit, or combined construction and operating license) pay full cost of the application process. Current fee per regulator hour is $273.00

http://www.nrc.gov/reading-rm/doc-collections/cfr/part170/part170-0020.html

The estimated cost in NRC fees of obtaining a design certification is $50-$100 million IF the application is based on light water technology that has a 55 year history on which to base decisions. All bets and estimates are off if the applicant decides to be innovative and use one of the half dozen or more other technologies that have been proven at demonstration scale through several decades of testing here and abroad.

All operating reactors pay the full federal cost of regulation. The annual fee starts at $4.7 million per reactor, no matter how large or small it is and no matter how exceptional its record is. If an operator somehow upsets its permanently assigned resident inspectors (there are two for every plant), it may end up paying for additional regulatory services to the tune of several million per year in fees – plus about 2-3 times that amount in salaries and lost time in responding to the additional “assistance.” TVA recently got put on the bad boy list merely by having a valve turn out to be not operable in automatic – though it could still be manually repositioned.

One final example from first-hand experience. I have been employed for the past 13 months on a project whose goal is to get a design certification for a refined light water reactor. (You can read all about it by search on B&W mPower reactor). The team is currently estimated to have 250 full time employees. We are currently projecting that we will be ready to turn in our design certification application by the end of 2013 and have estimated that it will take about 42-48 months for the NRC to review that application.

The standard review plan that the NRC has issued to provide guidance to applicants for a design certification is 4,500 pages long. The average application is about 15,000 to 20,000 pages. Producing each page requires several hours worth of engineering and technical labor to ensure technical accuracy of the numbers and words. The government’s review of each page costs $273 per hour at this year’s rates.

After all of those bits are reviewed (we will be submitting PDF’s, not actual pages) plus all additional Requests for Additional Information are answered, we will finally have permission to START building.

Our current timeline shows the first unit in operation by the end of 2020, but the NRC chairman, an Ed Markey and Harry Reid protege, just told the Washington Post that his agency will have to slow down its review of licenses because it does not have enough resources to pay for a sufficient staff for an efficient process. (Today’s Atomic Insights will most likely have some additional information about that.)

Remember, our design is simply a refinement of currently well proven light water reactor technology used to produce steam for a very well proven Rankine cycle heat engine.

Now, Mr. Free Market advocate, do you understand why a nuclear fission heat engine that uses almost exactly the same kind of machinery as a fossil fuel combustion heat engine might cost several times more than it should in initial capital investment largely BECAUSE the fossil fuel-influenced US government has layered so much restraining regulation that I personally feel a little like Gulliver waking up in the land of the Lilliputians.

Note: I speak only for myself and not for my employer.

About Rod Adams

31 Responses to “Examples of regulatory costs for nuclear energy development”

Read below or add a comment...

  1. Daniel says:

    Rod,

    We are starting to understand how things work in the US. How do we compare to France, Canada, China or the Russia for example? How are the federal regulators-watchdogs financed ?

    I think a bit of comparative study would help us ascertain if we lead the pack or simply are totally left behind and that the NRC should be revamped.

    • DV82XL says:

      Please don’t look to Canada as an exemplar of good nuclear regulation. It used to be rather good in the days of the Atomic Energy Control Board of Canada, but since it has become the Canadian Nuclear Safety Commission it has become bureaucratic and officious.

      The only bright light is that the current President Michael Binder holds a Ph.D. in physics (unlike his predecessor who was a Liberal Party hack) and is very proactive in jumping on the media whenever there is a story about nuclear dangers. He is quick to put the record straight, but tends to overemphasize the role of his Agency in keeping the industry safe.

      However the the problems with the NRU and the farce of the MAPLE reactors demonstrates that the regulator here is not exactly an asset to the industry’s development.

  2. Daniel says:

    Maybe the US will get a message here. Here’s to you, the NRC:

    Microsoft co-founder Bill Gates confirmed Wednesday he is in discussions with China to jointly develop a new and safer kind of nuclear reactor.

    “The idea is to be very low cost, very safe and generate very little waste,” said the billionaire during a talk at China’s Ministry of Science and Technology.

    Gates has largely funded a Washington state-based company, TerraPower, that is developing a Generation IV nuclear reactor that can run on depleted uranium.

  3. Leslie Corrice says:

    One year ago, I believed some foreign nuclear regulation programs were superior to our’s. One was Japan. Obviously, I was wrong. Even with all its warts and foibles, the NRC might be the better mousetrap. On the other hand, regulations predicated largely on political expediency ought to be heartily challenged by the regulated entities. Bradley’s statements support my belief that the nuclear energy industry has a meek “yessir, three bags full sir” attitude. Superficial actions and persuasive rhetoric used to make it seem as if the industry resists vacuous change are, not the answer.

    • Wayne SW says:

      The times I have been wrapped up with the nuclear regulation tarbaby, it always seemed to come down to a go-along-to-get-along attitude on the part of management for one basic reason: it was “easier”. You could fight the bureaucracy but that would end up taking longer and costing more and you’d end up in the same place when all was said and done. The industry faces a very politically hostile regulatory environment, and since that’s the only game in town, you either play it or quit. The opposition knows this, and will play it for all its worth. This is where the “free market” arguments break down. It isn’t a free market when it comes to nuclear. It is the most highly regulated industry in the country. You really can’t apply the simple “free market” arguments. It’s amazing when you think about the fact that nuclear is still able to match or in some cases beat the competition even when hamstrung with the regulatory burden it has to manage. If the fossil industries “competed” in the same regulatory environment, it would be no contest, nuclear would run them off the track.

      • Daniel says:

        Hence the need for a carbon tax … Worldwide … I hope this will be a conclusion of the United Nation meeting that is going on in Africa right now on climate change.

        If we get to compete on a ‘clean loop’ approach, we win.

        • donb says:

          Fundamentally, we should be reducing the cost of nuclear energy so that it can displace fossil fuels in the market, rather than seeking to raise the costs for fossil fuels. For the good of society we need to have less expensive energy, not more expensive energy (as a carbon tax would produce). Certainly fossil fuels have external costs to society that are not funded. Unfortunately, things such as a carbon tax tend to feed the black hole of government spending, providing little aid to the work of reducing the cost of energy.

          While I might be able to support a carbon tax that would be used to fund the development of advanced nuclear reactors, but even such reactors would not give us the inexpensive energy we need given our current regulatory environment. I suggest basic reform of the NRC before implementing a carbon tax.

        • Brian Mays says:

          So the fix for too much wasteful regulation is … more regulation?

          And a regulatory scheme that is so large as to be impossible to manage effectively?

        • Daniel says:

          When the Republicans first thought of this carbon tax, they had a great market incentives with ‘carbon units’ that you could trade. It was smart. Like a market.

          Imagine, all 1,000 megawatt plants would get carbon credits and sell it to the open market if it did not require it.

          So nuclear plant sells carbon credits to coal, gas, oil plant. Regulatory ? Not bloody likely when you put $$$ on a carbon emission unit. Could it be done quickly? You bet. Money talks.

          Can be done in no time. Do we have the will?

        • Brian Mays says:

          Yes, regulatory. When you have decided to tax something you are regulating it.

          You are also confusing a carbon tax with a scheme for cap and trade, which are not the same thing. (For example, Rod here favors a carbon tax over a cap-and-trade scheme.) Either way, this is regulating carbon, and it involves instituting a new bureaucracy, since somebody will need to count those “carbon units” that get taxed or traded.

          In a world-wide scheme, who is going to do the counting? Do the various countries self-report? Who is going to check that nobody is cheating to gain an unfair economic advantage? These are important questions.

          Are just carbon emissions from electrical power plants taxed (or capped)? Burning stuff for heat or process heat applications generates carbon-dioxide too. Why should someone with an efficient electric heat pump be penalized by having his rates raised, while somebody else heating with gas or oil does not? Or if we impose a tax on the fuel based on its estimated carbon output, why doesn’t the guy with the wood stove have to pay for the carbon emissions (and other air pollution) that he emits?

          While the intended goal might be to drive energy use to more efficient technologies, a poorly implemented tax or cap scheme could very well have the opposite effect of driving companies and individuals to less efficient, more polluting technologies to avoid regulation.

        • Jason Kobos says:

          This is just my opinion.

          Carbon taxes will not help nuclear. There is nothing to stop nuclear from being taxed an “equivalent carbon tax.” (where it is taxed as if it were a natural gas plant of equivalent output) A reason possibly given for this would be that not taxing nuclear would make it unfair for coal(or any other tech) to compete with it. Then nuclear would have “windfall” profits that need to be taxed etc.

          Now, carbon taxes likely would reduce emission to an extent. That extent is limited by how much money other people can make from the carbon users. That is to say, if the money is used to build solar, then solar will not want to see 0 coal plants b/c then who would pay for the solar?

          I just don’t think carbon taxes will work as intended.

        • Wayne SW says:

          OK, well, it seems kind of Bizzaro World to impose a carbon tax on an energy source that doesn’t produce carbon emissions, but, then again, I don’t expect it to make sense, since its politics. But, anyway, if we’re going to tax generators for carbon they don’t produce, would the same tax be levied on solar panels and windmills? If you’re going to do it for nuclear, it would seem fairest to do it for other non-carbon emitting sources as well. But, I have a feeling, just maybe, that they won’t be taxed. The politicians and the special-interest groups would never allow it, because it would require some measure of morality and common sense, as well as guts. All of those are lacking today among the so-called political leaders.

          • Rod Adams says:

            There was an energy tax proposed during the fossil fuel-influenced Clinton administration that was structured to apply to the electrical power output of nuclear fission reactors as if that electricity had been produced by burning coal or natural gas. That tax was actually called a BTU tax. You can read the details here:

            http://www.vjel.org/journal/pdf/VJEL10073.pdf

        • Wayne SW says:

          Yeah, I remember that one. They exempted the windys and sunnies. And when the alchies started squawking, they exempted ethynol as well. Like I said, no morals, no fairness, no guts.

    • Joffan says:

      I wouldn’t be too quick to abandon the Japanese system on the strength of a staggeringly huge natural disaster. If, say, a massive earthquake in California – beyond all expectations – had killed 20000 people, wrecked infrastructure of all sorts and incidentally (by the combination of the natural event itself and all the surrounding chaos caused) put SONGS into the same kind of state as Fukushima, my first thought would not be to blame the NRC.

      • Wayne SW says:

        Daniel makes a valid point in that being competitive in the “free market” is only fair if all of the players have prices that truly reflect the costs, internal and external. The price for nuclear more accurately reflects internal and external costs, moreso than most fossil fuels. That is why the illogic and hypocrisy of anti-nuclear critics infuriates me when they hammer the nuclear industry for taking care of its waste, yet have no problems breathing in the wastes emitted by natural gas and “clean coal”-burning plants.

        All of this is well-known to those of us who have been fighting these battles for a long time. But it is still astonishing that so-called “free market” advocates who diss nuclear for its costs totally blow these things off.

    • Rod Adams says:

      I think the Japanese did a terrific job of responding to a very challenging natural disaster. The operators might have made a few errors that can be identified by Monday morning quarterbacks, but you are a former plant operator who should be able to put yourself in their shoes.

      Just imagine, your facility has just been swamped by a huge tidal wave, all of your diesels are washed out, your emergency switchgear is fried, the lights are out, your ceiling is falling on your head, and your instruments are showing that water level is dropping and temperatures are rising. Lots of things on your mind, including that family that lives a few miles away and might have been washed away by the wave.

      Under those conditions, a few mistakes might be expected. Bottom line – zero deaths from radiation exposure now and forever more from this accident where the most exposed individual outside the gates might have received a 10-50 mSv (1-5 Rem).

  4. Cal Abel says:

    I love efficiency. No there way to say it. After learning some microeconomics, I found that the optimal market general equilibrium point comes from a set of Pareto optimal points. Setting aside the mathematics, cost externalities can come from two sources. Either unaccounted burdens which create deadweight loss or through overregulation that creates deadweight loss.

    In the case of fossil fuels. Specifically coal used to produce electricity, the costs of the damages from emissions are not fully included in the cost of the electricity. Likewise with fracking the cost of the production are not fully included in price of the liquid being sold. I have no problems with either of those technologies, just that the entire costs need to be included in the price of the product. I look at an externality as theft. The producers are taking a portion of the consumer welfare for increasing their profits (producer welfare). This does not include GHG emissions. I’m just keeping this on the straight stick already known externalities.

    Along a similar vein, the regulations that nuclear power faces do not accurately represent the risks that nuclear power can induce. The act of over regulation follows a quadratic function of costs growth. It represents a cost or tax that the government imposes on the welfare of the society both consumer and producer. I think of this too as stealing because it is the government taking the money from the entire population and using it to fund itself in activities that do not increase the welfare of the citizens.

    With nuclear power it all comes back down to the LNT model is the fundamental constraint that is hampering the benefit that nuclear power can create for our society. It is the tool of guilt that is being held over our heads. The lie that we are told we must believe because of our “responsibility” is that because what we work with is dangerous to even the smallest level it must be regulated to the point of where it is “safe”. I reject that admonition as being a false trade off. It is a lie created to exert control.

    On a different note, Natural gas is predicted to overtake coal in 2025 in electricity production. Nuclear and coal go hand in hand. The link below is a presentation that I gave at Tech on what I think nuclear power and coal can do for our economy:
    http://smartech.gatech.edu/bitstream/handle/1853/42061/tedder_abel_cahill_streaming.html?sequence=2

    Also, check out the impact of shifting to natural gas in the MIT report “The Future of Natural Gas”, Specifically Figure 3.7. Natural Gas is not some energy savior, it is merely an energy source just like everything else.
    http://web.mit.edu/mitei/research/studies/naturalgas.html

    • Joel Riddle says:

      On a slightly related note:

      Rod, any update on the MIT debate proposed by fast reactor advocates who challenged the conclusions of the MIT Nuclear Fuel Cycle study? I think July 29th may have been the last time you provided an update here on that.
      http://atomicinsights.com/2011/07/update-on-fast-reactor-group-challenge-to-mit.html

      I think I saw something earlier this week about GE-Hitachi making a proposal to the UK government regarding utilizing the S-Prism to get some useful benefit from dispositioning Britain’s surplus of excess plutonium.

      • Rod Adams says:

        I have been in touch with Professor Lester. He told me they are going to try to set up something during the spring semester. I will keep pushing; it is an important topic.

        • Daniel says:

          Rod,

          It seems you may have closure on this other issue (NYAS) according to Monbiot:

          Caldicott cites as her source a discredited study published by the New York Academy of Sciences (NYAS). The Academy, when advised of the lack of scientific rigor in the materials it published, was so embarrassed it returned the copyright to the authors and removed the work from its website. Nuclear blogger Rod Adams has the devastating details of how the study came to public attention and its rapid fall from grace.

          Are you satisfied ?

        • Rod Adams says:

          @Daniel – I would be satisfied only if Dr. Caldicott herself was to apologize for quoting the bad science book and if the NYAS would publicly denounce the people who abused their good name by publishing it in the first place.

          Where did you see the paragraph that you seemed to quote? It sounds vaguely like the blog post that Dan Yurman, my fellow pronuclear blogger at Idaho Samizdat, posted a few days ago.

          “Caldicott cites as her source a discredited study published by the New York Academy of Sciences (NYAS). The Academy, when advised of the lack of scientific rigor in the materials it published, was so embarrassed it returned the copyright to the authors and removed the work from its website.

          Nuclear blogger Rod Adams has the devastating details of how the study came to public attention and its rapid fall from grace. ”

          http://djysrv.blogspot.com/2011/12/not-enough-buckets-for-helen-caldicott.html

        • Joel Riddle says:

          Rod, I think he’s referring to this article, which I think you tweeted a link to earlier this week.

          http://www.guardian.co.uk/commentisfree/2011/dec/05/sellafield-nuclear-energy-solution

        • Joel Riddle says:

          That link is also where I had seen that GE-Hitachi had made a proposal for the Sellafield site’s plutonium.

        • Daniel says:

          Joe has it right and so do you. I thought it was Monbiot but it is by Idaho Samizdat on Dec 3.

          The NYAS did ‘repair’ the damage but not in an honest and forthcoming manner.

        • Daniel says:

          Here is the link:

          http://djysrv.blogspot.com/2011/12/not-enough-buckets-for-helen-caldicott.html

          I think Joe is pointing to something else.

  5. Cal Abel says:

    As an engineer, I love efficiency. I wanted to learn more about the economics of different power sources, and realized I didn’t know much about economics. In learning economics, I found that the market will seek to identify the most efficient allocation of resources. It follows the same reasoning as the Law of Least Action in physics and the exact same mathematics. Just in economics they call it general equilibrium theory. So this is how I learned to love the market, through physics.

    The market can have failures or cost externalities as a result of policy. The first and perhaps most common is the cost externality. The combustion of coal to produce electricity is a good example of this. The externality represents the reallocation of consumer surplus to the producer with an accompanied loss of efficiency in the market. I look at this as stealing, taking something from somebody else that wasn’t agreed to through a contractual obligation with appropriate remuneration. I don’t like thieves. This is where the responsibility of the government comes in to regulate cost externalities to the exact representation of the burden that it induces on citizens.

    The other form of a market externality is that of overregulation. This is the case that we see with nuclear power. It is when there is a risk that is internalized but the government imposes additional regulations, costs, on the good being sold beyond the damages that they induce to the broader economy. This creates a significant loss in efficiency that is quadratic in its growth. It also represents revenue that the government is taking from the consumers, citizens, and the producers, citizens, that provides no benefit to either. I look at this as stealing too.

    We are told as an industry that there are no safe levels of the consequences of the radiation that is fundamental to our job. We are told that we “deserve” the restrictions that our industry faces, and that it is a moral obligation for us to accept these as our duty to society.

    I reject these admonitions as being a false choice. It is a lie that we are told so that we can be controlled for the good of society because what we choose to dedicate our lives to is so dangerous. I choose to learn more about nuclear power because I was afraid of it. If we let our lives be governed by irrational fear it will kill us.

    There is no “faustian bargain” as Ted Rockwell so eloquently said in ASME a few years ago. Nuclear power is not a deal with the devil. It only becomes one if we accept the devils morality. I reject this morality out of form because of my love of life. Killing someone because the air they breathe is polluted because I failed to fight for what I know is right and accepted what I know as a lie, damns me for their deaths. It would be the same if I were to put a gun to their head and pull the trigger. I am the only person responsible for my actions. “I am the captain of my soul.”

    On a related but separate note, The Wall Street Journal reported that by 2025 natural gas will surpass coal in electricity generation. This is not good news for our country. It means that not only will our transportation fuel will be dependent on imported energy, but so will our electricity generation. MIT’s report on the future of natural gas:
    http://web.mit.edu/mitei/research/studies/naturalgas.html
    shows in figure 3.7 the trend in domestic production vs consumption. Even with shale gas we will be a net importer of natural gas by 2050. I fail to see how this is good policy. Coal is not the enemy of nuclear, neither is natural gas. Below is a link to a presentation that I gave at tech on the impact that coal and nuclear power can have on our economy, first file is 263MB, second link is streaming.
    http://smartech.gatech.edu/bitstream/handle/1853/42061/tedder_abel_cahill.mp4?sequence=1
    http://smartech.gatech.edu/bitstream/handle/1853/42061/tedder_abel_cahill_streaming.html?sequence=2
    Here is the link the presentation that I gave in pdf
    https://files.me.com/crabel/ta02rc

    We need all the energy we can get from the ground and from splitting either Thorium or Uranium. The presentation is simplified I really do like all high temperature reactors and thorium as a fuel because it allows thermal breeding. I chose IFR because of its maturity and because the fissile material production and fuel fabrication infrastructure is scaled as capacity is built allowing a faster implementation of the technology. Also as a note for you technical bubbas the 1 for 1 repowering may not be warranted because of the age of the coal steam plant or other technical difficulties, in that case put in a S-CO2 brayton cycle in lieu of the steam plant.

    • Joel Riddle says:

      Cal, once you get finished with exams for the semester, you might want to check out this lengthy post expounding on Weinberg’s intended meaning when he called nuclear power a “Faustian bargain”.
      http://nucleargreen.blogspot.com/2011/09/faustian-bargains-and-80-year-slow.html

      And I know you know that thorium isn’t actually split, but rather is first bred into U-233 which is split (fissioned), but I thought I would go ahead and add that clarification.

      • Cal Abel says:

        Joel,
        Thank you for the link. It is either economics or writing a report on the poop problem of Concentrated Animal Feeding Operations. I needed a break.

        I wish I had found Ted Rockwell’s article. It was very influential in my thinking. He described an encounter with Weinberg just before Weinberg died. Weinberg was soliciting validation of the justification of the “Faustian Bargain” that what he did was right. Mr. Rockwell said that no, Weinberg was not right. That the bargain as Weinberg described did harm without providing any benefit.

        I “knew” Ted Rockwell was right, but I did not understand why. It took a couple of years, I have a better handle on the issue and understand more of the “why”.

        The concept of utility maximization, what the devil sold Faust as being something that Faust did not poses or have a right to poses, is simply Pareto optimality. When a system seeks to be able to explore the most degrees of freedom it can, it acts to conserve internal energy, or in the case of economics utility. It is natural, it is the “invisible hand”, it is what drives human action and it is what drives action in the world around us.

        The lie the devil sold was that this “law of nature” was in his possession and Faust had no right to it other than to give up his immortal soul. In the end of Gothe’s Faust, Faust is redeemed from going to hell. I think the redemption is because Faust’s actions were keeping within the natural order and were not amoral. Thus the axiom that the right action for the wrong reasons is still the right action and that we are judged by and for our actions.

        From reading Ted Rockwell’s work over the years, his effort is in keeping and is consistent with the natural world view. Having never spoken to him about this subject that is just an observation.

  6. Jason Kobos says:

    Countries that are pro-nuke will be able to build nuclear at competitive costs to coal and gas thus don’t need carbon tax.

    Countries that are anti-nuke will need carbon tax to force solar to be better than coal and gas. Being anti-nuke to start with any carbon tax legislation will treat nuclear unfairly, thus some silly exclusions will be included to force nuclear down. If it isn’t already outright banned.

    Not only that once governments get used to the tax income they(and the people cashing the checks) won’t let that income go away once all the coal plants are closed.

    This is why I don’t see carbon taxes as a boon to nuclear.

Leave A Comment...

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>





Notify me of followup comments via e-mail. You can also subscribe without commenting.