Brookings Institution Policy Brief #138 – The Political Economy of Nuclear Energy in the United States

I stumbled across a Brookings Institution Policy Brief titled The Political Economy of Nuclear Energy in the United States that is dated September 2004. Oh what a difference a year can make.

After reading the briefing closely, I took the advice offered at the bottom of the last page of the brief and composed a feedback letter. In the interest of time, I will simply share that letter with you. Please excuse the displayed vanity in the sign-off, I am trying to see if the letter can generate just a little response, and sometimes it helps to be somewhat obnoxious if you want a reaction. Anyway, here is my message to feedback@brookings.edu in its entirety.

Dear Brookings Institution:

I read with interest your September 2004 Policy Brief #138 – The Political Economy of Nuclear Energy in the United States. A number of trends and events have occurred in the intervening 14 months that make the brief seem to be quite out of date, so I hope that you are considering issuing a revision.

Here are some specific areas that need updates:

On page 2, your brief states that “On average today, the electricity produced by operational nuclear plants in the United States tends to be cost competitive with gas or coal-generated power after the plants have been paid for.” With the massive increases in prices for all fossil fuels, including both gas and coal, that have occurred since 2001, this statement no longer reflects reality. Leaving out capital costs, average nuclear electricity cost is at least 20% less than average coal electricity cost and about 1/5th the cost of electricity from the average gas fired plant.

The MIT study that you quoted on page 3 assumes that gas at $6.72 per thousand cubic feet is a “high price” assumption for gas. According to daily reports from Bloomberg, natural gas has been selling for $9-14.00 per MMBTU (a measure that is essentially the same as a thousand cubic feet) for the past six months or more, even during the fall, which is typically a low point in the annual price cycle.

On page 4, you mention that only 1/4th of a typical gas plant’s costs are front loaded. Due to the very high gas prices that seem on their way to becoming entrenched, many of the combined cycle plants that were built in the 1990s and early 2000s are rarely operating. Their capital cost per kilowatt-hour increases rather sharply as their production falls well below the level that was projected. These idle gas plants have helped put a number of power producers into bankruptcy, with others not far behind.

On that same page, you make a couple of statements about coal fired power that are difficult to support. No one really knows how much it will cost to build a coal fired plant that is compliant with current emissions control regimes, very few coal plants have been built in the past 20 years and none have been fitted with all of the chemical processing equipment that is currently required for new generating units. Though there is now talk of implementing ways to capture CO2 from the plants, the costs of doing so are enormous. Not only is the equipment expensive, but it robs about 30% of the plant’s power output.

Even existing plants have become much less economic in recent years. Coal prices in the eastern US, for example have more than doubled for most grades, the declining trend that you mentioned stopped in about 2001.

The Energy Policy Act of 2005 did, indeed, include many of the incentives that were proposed in 2003, with rather predictable results. According to a speech given last week by the new generation project leader of the Nuclear Energy Institute, the industry now expects that a dozen new nuclear plants will be under construction in the US by 2012, with the first one starting in 2010.

Unfortunately, the delay is being caused by NRC estimates of 4-5 years worth of reviews for combined construction and operating license applications, even when those applications include a system that has already obtained a design license. Part of the excuse given by the Chairman of the NRC for this incredibly long review period is that his bureaucrats (my word, not his) have little experience with the process. That may be true, but that fact helps to explain why the industry felt that it needed help. Waiting 4-5 years for permission to start is an expensive way to begin a major construction and manufacturing effort.

I have other quibbles with some of the statements made in the policy brief, but they are based on my interpretation of the available data and not based on changes in those data items. For example, on page 7 you state that petroleum is no longer used to propel electrical generators in the industrial world, but you neglect to review the graphs of electricity supply fuels to see that petroleum was pushed out of the market by uranium.

Many of the localities in the world that now receive a large portion of their power from nuclear fission were powered by burning petroleum before 1970. In France, Japan, Florida, New England, California, Texas, South Carolina, Taiwan, South Korea, and probably several others shifted steadily away from petroleum as they completed nuclear facilities.

Since there are still a number of countries – especially island nations, Middle Eastern countries, and Italy – that depend on petroleum there is still an opportunity for uranium to reduce the stress on oil supplies. In addition, 50 years worth of safe operations at sea in 5 different navies points to the fact that nuclear power can propel commercial shipping, as long as costs are kept under control. In this application, uranium competes directly with oil, and often expensive, refined oil, instead of against cheap coal or natural gas.

If you need any other suggestions or assistance in updating your policy brief, please do not hesitate to contact me.

Best regards,

Rod Adams
Editor, Atomic Insights
www.atomicinsights.com
rod_adams@atomicinsights.com