Atomic Insights

Atomic energy technology, politics, and perceptions from a nuclear energy insider who served as a US nuclear submarine engineer officer

Amory Lovins-speak: Three misleading statements in a 15 second sound bite

By

I had the opportunity to be in the audience during the above talk. You might notice my impolite interjections; I have often been accused of being very poor at hiding my real reactions and feelings. There is a reason why I stopped playing poker during game nights on the USS Stonewall Jackson. I was losing my shirt.

Once again, I am not going to perform a point by point response to the numerous examples of misinformation provided by a rather typical Lovins talk. Instead, I will focus on one short example early in the presentation that contains at least three individually incorrect assertions in just 15 seconds (7:44-7:58). Here is the quote:

Amory Lovins – Since August ought 5, the US has offered 100 plus percent construction subsidies for new nuclear plants plus operating subsidies slightly bigger than wind power gets without making a single reactor financeable with private risk capital.

Let’s take each one of those individually.

“Since August ought 5, the US has offered 100 plus percent construction subsidies for new nuclear plants…”

Since Lovins specifically mentions August 2005, he is presumably referring to the nuclear incentives offered by the Energy Policy Act of 2005. That act includes provisions for a modest loan guarantee program that has so far resulted in a $6.5 billion dollar loan (not a subsidy, but fully repayable by the borrower) split between the Georgia Power Company (a subsidiary of the Southern Company) and Oglethorpe Power Corporation. Those are two of the three partners in the Vogtle units 3 and 4 nuclear power plant project, which is currently estimated to have a total project cost nearing $15 billion.

Surely, that loan guarantee program cannot be what Lovins was describing as a 100 plus percent construction subsidy. Perhaps he is referring to section 638 of the act, which is titled STANDBY SUPPORT FOR CERTAIN NUCLEAR PLANT DELAYS. That includes the following clause — subject to about half a page worth of conditions.

(2) INITIAL 2 REACTORS.—In the case of the first 2 reactors that receive combined licenses and on which construction is commenced, the Secretary shall pay—
(A) 100 percent of the covered costs of delay; but
(B) not more than $500,000,000 per contract.

That clause includes the 100 percent statement, but it is not exactly a “100 plus percent construction’ subsidy.

Here is the second misleading statement in the 15-second sound bite from Lovins’s Dartmouth presentation:

“..plus operating subsidies slightly bigger than wind power gets..”

This statement compares the clause in the EPA 2005 applicable to wind (Section 1301 – Extension and Modification of Renewable Electricity Production Credit) against the one that is applicable to advanced nuclear (Section 1306 – Credit for Production from Advanced Nuclear Power Facilities). Both sections include numerous terms and conditions; the one applicable to renewable electricity like wind is a modification of an existing law, specifically 26 U.S. Code § 45 – Electricity produced from certain renewable resources, etc. Here is what that section of the US Code says; it has been modified several times since 2005.

(a) General rule
For purposes of section 38, the renewable electricity production credit for any taxable year is an amount equal to the product of—
(1) 1.5 cents, multiplied by
(2) the kilowatt hours of electricity—
(A) produced by the taxpayer—
(i) from qualified energy resources, and
(ii) at a qualified facility during the 10-year period beginning on the date the facility was originally placed in service, and
(B) sold by the taxpayer to an unrelated person during the taxable year.
(b) Limitations and adjustments
(1) Phaseout of credit
The amount of the credit determined under subsection (a) shall be reduced by an amount which bears the same ratio to the amount of the credit (determined without regard to this paragraph) as—
(A) the amount by which the reference price for the calendar year in which the sale occurs exceeds 8 cents, bears to
(B) 3 cents.
(2) Credit and phaseout adjustment based on inflation
The 1.5 cent amount in subsection (a), the 8 cent amount in paragraph (1), the $4.375 amount in subsection (e)(8)(A), the $3 amount in subsection (e)(8)(D)(ii)(I), and in subsection (e)(8)(B)(i) the reference price of fuel used as a feedstock (within the meaning of subsection (c)(7)(A)) in 2002 shall each be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the sale occurs. If any amount as increased under the preceding sentence is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent.

That is a lot of words that will be difficult for most people to decipher; what it means in actual practice is that in March 2014, the date when Lovins made his comment, the wind energy production tax credit was 2.3 cents per kilowatt hour with a preplanned inflation adjustment. That credit also lasts for 10 years after a facility inservice date.

In contrast, the Energy Policy Act of 2005 section 1306 provides a production tax credit for advanced nuclear power facilities — defined in the act to be a nuclear power facility placed into service between August 2005 and January 1, 2021 AND with a reactor design approved by the Nuclear Regulatory Commission after December 31, 1993 — of 1.8 cents per kilowatt hour, with no inflation adjustment, for 8 years after the inservice date, with a 6,000 MWe capacity limit nationwide, and a per facility limitation of $125 million. Does that sound like a production subsidy slightly bigger than wind gets?

The third and final misleading statement in Lovins’s 15-second sound bite is the following:

“…without making a single reactor financeable with private risk capital.”

There is not one, but at least two reactor construction projects underway in the US that are financed by private investors using money borrowed from the traditional banks that have always financed electric utility construction projects. VC Summer units 2 and 3 have received no federal loan support and are 100% financed by the normal capital markets. The democratic process in the state of South Carolina has provided SCANA and its other partners with a guaranteed customer contract, but that is nothing new to the capital intensive electric utility industry.

I’ll leave additional deconstruction of the Amory Lovins March 28, 2014 talk at Dartmouth to the comment section.

PS (Added at 11:16 August 10, 2014) Starting at time mark 51:57, Dan Richter asks a question about natural gas price volatility. Though I disagree strongly with Lovins’s assumptions about unreliable energy supply systems and the potential for energy efficiency growth, I agree with his statements about the high risk of continued natural gas price volatility.

Reader Interactions

Comments

  1. I was there. I remember tweeting something like “pants on fire” as he was speaking.

    I was glad to hang out with you, Howard Shaffer, and Bob Hargraves, at that meeting! In that sense, it was a great meeting. Listening to Lovins, not so much fun as it could be. It’s amazing how Mark Twain was right about “a lie going halfway around the world while the truth is still putting on its shoes.”

  2. The only word I can think of that best describes his role inthe scheme of things is propagandist. It is telling that a very profitable career was made from peddling such gross misinformation against nuclear energy. Someone thought he was providing value for their money.

    It is clear these things are carefully crafted half-truths with outright lies embedded. One of the tenets of propaganda is to use enough correct information to allow the deceptions to pass without critical analysis. Sophistry is strong with him.

  3. I have found more deception at 35:48. The “utility scale PV cost” is supposed to be the total system cost. However, the figure provided in the graphic is actually the O&M cost. His source states that PV has an O&M cost of 10-20 USD/MWh, [1] but says nothing about the system cost. The system cost can be easily found in the EIA estimates, [2] and is about factor of ten more than the O&M costs. Thus even “Hinkley Point C” is well under the correct figure of new solar generation.

    [1]: http://emp.lbl.gov/sites/all/files/lbnl-6408e_0.pdf
    [2]: http://www.eia.gov/forecasts/aeo/electricity_generation.cfm

  4. The nuclear industry was growing at quite a rapid pace from ~2% of US electricity to ~20% between 1971-1991, this at a time when the US economy was half was what it is now and despite cancellations both before and after TMI. Had the pace of reactor starts of the early 1970s persisted thru the early 1990s all coal (then >50%) could have been displaced well before the turn of the century, preventing >100,000 early US mortalities and avoiding ~20 billion tons of CO2 emissions. Even so, the curtailed US fission portfolio supplies ~70% of US Ultra Low Carbon generation (#2 large-scale hydro ~25%). So much for the slow build theory.

    France’s build-out program, which also spanned the 70s & 80s, supplies 70% of their electricity, essentially their entire baseload, plus exports. I strongly suspect Lovins would happily be citing a similar level of success for the German Energiewende experiment, at a cost even higher than the massively over engineered EPRs under construction in France & Finland. Unlike Germany however neither France nor Finland are planning on increased coal & gas imports. Meanwhile Denmark has not managed to average its wind portfolio much above the 20% we’ve been hearing about for 30 years now, but nuked up baseloaded Sweden enjoys Denmark’s desperately dumped subsidized kWs.

    Lovins makes mention — favorably — of both Hawaii & Cuba which I consider to be exhibit #1 & 2 in a prima fascia case against the Lovins style “soft path” program. Last time I checked ~80% of Hawaiian electricity was generated by burning fuel oil, much the same as it was when Amory Lovins first hit the guru scene in the early 70s. Hawaii is part of a vary wealthy society with no shortage of influential politicians back in DC to draw upon for additional subsidies and the latest technologies yet still, and with all their indigenous sun, wind, waves, OTEC, geothermal (active volcanoes) they have not dented, much less managed to displace, fossil carbon fuels; what hope does VT have I ask? Lovins smugly points out that PV arrays beat HI grid prices, @35¢ per KWh it should.

    Cuba is a total command & control economy, top down centrally planned, so no pesky capitalist ideas or nefarious oil company conspiracies to get in the way of Lovins’ utopian vision of energy that is at once cleaner, cheaper, and more efficient. After terminating their VVER project they have Venezuela’s oil to burn sure but the average Cuban still lacks many of the consumer luxuries most in the US have come to expect like phones, refrigerators, and washer/dryers that don’t involve a bucket and length of string.

    • FYI, I recall that Denmark had 33.8% of its grid power generated from wind in 2013.  However, that is with hydro-heavy Norway and Sweden as export markets (and balancing generators).

      • An interesting metric would be the actual % of that generation that was utilized by the Danes themselves who pay dearly for it. As Rod pointed out in the above Q&A Denmark has the most expensive electricity in Europe; counted as taxes or not the money raised by the gov’t is then (mostly) plowed right back into the same energy subsidies that provide for the wind generation in the first place. As I hinted the Swedes with their BWRs and Norwegians with their hydro (~90%, lucky ones) do not have to pay Danish taxes for THEIR kWhs, so Denmark is essentially subsidizing a sizable chunk of the Scandinavian variable load. And yes Norway can throttle up its hydro fast to compensate for Danish intermittency, nice teamwork with the Danes getting the short end.

  5. In case anyone in this thread is interested in truthful and careful analysis, Rod Adam’s post is another of innumerable instances of his not doing his homework, then supposing I erred.

    – The ~100+% new-build construction subsidies I referred to are of many different types and vintages, not all from 2005: see e.g. http://www.ucsusa.org/assets/documents/nuclear_power/nuclear_subsidies_report.pdf
    and my lay summary at http://www.weeklystandard.com/articles/nuclear-socialism_508830.html.
    – The Production Tax Credit does have a slightly higher levelized value for wind than for the next 6 GW of new-build nuclear, but the difference is more than offset by legacy opex subsidies from the source just cited; I summarize the calculation in http://www.rmi.org/Knowledge-Center%2FLibrary%2F2013-09_BulletinAtomicScientists, note 3.
    – My remark about private risk capital clearly referred to project-specific finance, not to general investment in a utility’s or utility group’s equity. It is true that investors have continued to buy stock in the builders of the Summer and Vogtle plants, but that’s not relevant to my point. Time will tell whether these units are completed, what they cost, how they run, how they compete, and whether they help or hurt their builders’ finances.

    As for a previous thread in which Rod Adams misrepresented and attacked my compensation, the apology/correction he posted, but as far as I can see has not yet taken up my suggestion to repost here to complete the thread he did post here, is at http://blogs.forbes.com/amorylovins/wp-admin/edit-comments.php?p=51&paged=2, submitted 1438 09Sep2014, and reads in full: “Once again, I owe you an apology. I just read the RMI IRS 990 for 2008 more thoroughly. It includes a note indicating that the $780,000 bonus reported in 2008 was reported in both 2007 (as part of the $807,000 compensation for program services) and in 2008 due to a change in reporting rules.” I replied at 1702: “Thank you. FYI, this single but twice-reported payment was the first of two installments of the one-time pension catchup payment, not part of my regular compensation. The second installment (plus its accrued interest) was paid in 2012 as you previously noted. And by the way, your comparison with Flag officers’ salaries is invalid because of the very extensive nonsalary benefits that they receive but I do not. [Mr. Adams later contested this.] May we again return to the subject under discussion?”

    I do not frequent this site and probably will not see replies.

    • @Amory Lovins (Published for the benefit of those who do frequent this site.)

      You cannot seriously believe that anyone in a decision making position would read a statement like “100 plus percent construction subsidies for new nuclear plants” and think that the person uttering that statement was referring a litany of historical appropriations and non-cash liability acceptance for nuclear energy. Their response would be “show me the money.”

      If you could prove that such a program was available somewhere, there would be an enormous rush to gain access to those subsidies and start construction right away. (I’ve seen — up close and personal — the amount of effort that SMR start-up operations have invested just to have a chance at a cost sharing program that might pick up about 20-30% of the cost of obtaining a design certification.)

      Here is a copy of note iii from your BAS article:

      “Koplow (2011) estimated these at $3 to $8 per megawatt-hour in 2009, and they’re rolled into the reported operating costs in Figure 1. In addition, likewise with no expiration date, but not included in Figure 1, the next 6 gigawatts of nuclear plants built get an 8-year (versus 10 for wind), $22 per megawatt-hour (same as wind) Production Tax Credit woth $11 per megawatt-hour from a societal or $25 from an investor perspective (as in note 2). Thus the total new-nuclear operating subsidy exceeds new wind power’s production tax credit and it’s inconsistent to analyze removing one without also removing the other.”

      Even that note includes two easily proven incorrect statements – 1. As shown in my quote from EPA 2005, the nuclear PTC is $18 per MW-hr, not $22, and it is NOT indexed for inflation. 2. There is a definitive expiration date; the definition of “advanced nuclear power facility” states that the plant must be in operation by January 1, 2021.

      If you wanted to limit your statement about private capital to “project-specific finance” why didn’t you simply state it that way? There are a wealth of different models available for financing electricity generating factories; the decision to finance construction by borrowing at the corporate level is certainly a “private risk capital” decision by the people who are most responsible for ensuring reliable, affordable electric power delivery to customers.

      With regard to your accusation that I have not followed through on your suggestion to continue posting updates to our conversation on your original Forbes article, please see the section on http://atomicinsights.com/amory-lovins-continues-sowing-confusion-renewable-nuclear-energy/ that starts with

      Update added 11:37 8/10/2014 (continuation of discussion on Forbes)

      and ends with

      End 8/10/2014 Update.

      For those who do not have the time to read that entire section, it concludes by providing a direct comparison of compensation using a standard calculator provided by one of the many organizations that help military personnel transition to civilian life.

      The civilian equivalent to the complete compensation package of a 4-star Admiral with 2 dependents living in the Washington, DC metropolitan area is $311,000 in 2014. In contrast, Amory Lovins’s reported W-2/1099 total for 2012 as the Chief Scientist at RMI, excluding the one time payment for pension catchup, was $346,000. That 990 statement also reported retirement, deferred income, and non-taxable benefits of $23,000.

      In my world, $369,000 “substantially exceeds” the $311,000 total compensation received by a four-star Admiral receiving one of the highest housing allowance payments in the country.

  6. There is not one, but at least two reactor construction projects underway in the US that are financed by private investors using money borrowed from the traditional banks that have always financed electric utility construction projects. VC Summer units 2 and 3 have received no federal loan support and are 100% financed by the normal capital markets.

    @Rod Adams

    Not even close. If your tirade against a single individual doesn’t include better facts … you’re not winning the argument.

    Forgetting about CWIP?

    “To pay for the new reactors at V.C. Summer, the General Assembly went all-in by passing a unique financing scheme in 2007 called the Base Load Review Act, which allowed utility companies to jack up power bills on its customers to finance new power plants. The law shifted the risk and costs of building the new nuclear power plants into the wallets of ratepayers and off the backs of the company shareholders” (here).

    Capital recovery on these plants will be facilitated by a PTC (worth $2 billion spread over 8 years), which is not normal business for utility investors or shareholders. VC Summer is also eligible for Standby Support if there is a construction delay (a new federal subsidy for nuclear) worth $500 million to SCANA help finance their debt service (downgraded as it turns out). Lots of props (added to all the normal ones of course) for an industry working as you have suggested with traditional banks and financing construction projections as they have “always [been] financed.”

    Might I recommend you both stay away from 100% type arguments (since neither of you seems to do hyperbole very well). It’s not too convincing, and it’s not bringing any new acolytes to your side.

    • @EL

      You are correct. I should have avoided the 100% statement and should not have said that it was the normal market.

      However, if solar energy projects in Germany, supported by the democratically passed law that provides generous Feed In Tariffs for 20 years, qualify as “privately financed” in Lovins view, then the special customer arrangements for VC Summer also qualify. Granted, there are promises for special income flows after the plant begins operating, but those are just promises and do not actually result in any money from the government during the risky phase of building two of the FOAK units.

    • @EL

      If your tirade against a single individual

      I would have thought that you would recognize that Lovins is not a “single individual.” He is the guru of a movement who has been preaching a similar message for 40 years. He has received numerous accolades and lucrative appointments because his message is one that the established energy industry actually loves to hear. It distracts far too many people from energy sources that are legitimate competitors that can expand our energy supply instead of requiring a “3 x increase in efficiency” in order to work. (I didn’t write down the time mark for that gem, but it was part of his pitch.)

  7. Concerning relative subsidies and opportunity costs touched upon by Amory Lovins here and at Dartmouth earlier this year (see above), it should be noted that to date the German Energiewende — the most ambitious “alternative energy” program in human history — has cost more than $400 billion, if it continues to run thru 2020 it is estimated that it will cost ~$800 billion. For that colossal sum the Germans have bought themselves, to date, the equivalent of ~15GW(e) of “renewable” Ultra-Low Carbon generation capacity with 90% availability or ~120,000GWh/yr (not including pre-existing hydro). Of course, as Mr. Lovins himself concedes no form of solar or wind power is capable of 90% availability.

    The only form of non-carbon combustion energy capable of 90% availability is fission. At the outrageous cost of 20 European Pressurized Reactors, derivative of the German Konvoi class reactor (~$10,000 per kWe — assuming absolutely no economies of scale or learning from FOAKE to NOAK), they could have doubled their carbon abatement and combined with their legacy reactors they’d have decarbonized >60% of their electricity generation, almost as good as France for half what they are on track to spend now.

    As things stand now in Germany they are moving backwards; the alternatives PV, wind, off shore wind, etc are not even yet capable of filling the projected gap of the NPP currently set for decommissioning, hence their need for more coal and gas imports, and emissions are up since 2009.

  8. It’s important to understand that improvements in energy efficiency is an historical process that has been going on for a long time and not just something that Lovins or the greens dreamed up. One of the more interesting metrics is GDP/Energy Use

    The improvement is actually quite impressive and no doubt various policy measures could somewhat improve on it. However despite that, world energy use and carbon emissions just keep on going up. In any realistic assessment, in a world where energy poverty (including extreme energy poverty) is still widespread and population is very likely to increase by another three billion or more before stabilizing, betting that extraordinarily optimistic projections of improvements in efficiency will deal with the emissions problem looks more than a little reckless.

    Short version: We already have an ongoing drive to better energy efficiency that has been going on for decades. It is undoubtedly very useful, but it has not and cannot solve our big global energy issues.

    • Yes great. No one opposes energy efficiency as a matter of principle; US energy efficiency doubled from the late 1970s thru the early 1990s and doubled again from 1990 to now as the Google Data chart you linked to indicates (as measured in PPP per kg of oil equiv). Notably, China (PRC) is far less efficient as well as far more carbon intensive per unit GDP, and also is below the worldwide average in efficiency gains.

      Another noteworthy trend is increasing electrification and electricity use per capita (one of the options on the Google Data chart). So at the same time as we become more efficient in terms of total energy expenditure we are using MORE electricity. Worldwide electricity production has quadrupled since 1970. Note Sweden’s huge spike in per capita energy consumption in the early 80s.

      Back in the late 40s or 50s only ~20% of US primary energy was devoted to electricity generation, now it may be over 40%. So two trends are at work here: 1.) worldwide increased total energy efficiency and 2.) increased electrification.

      Lovins used to delight in illustrating spaghetti graphs of US total primary energy usage with a huge chunk of that devoted to electrification (2/3) labeled as “Waste Heat”. Aside from the fact that waste heat, especially from NPP, could be used for district heating, as is done already in Switzerland to a limited degree, not all BTUs or Calories are created equal. The US is generating ~100 exajoules or 100 quadrillion BTUs or 25 quadrillion Calories. The Carbon Calories are a limited resource and are linked to pollution. Uranium and Thorium Calories are not in any short supply and my back-of-the-envelope calculation (contra Charles Hall of Syracuse University’s 40 years of research into the subject) indicates fission has an EROEI of perhaps 250:1.