Divergent views about nuclear power economics

A regular reader sent me a link to the cover article of the May 12, 2008 edition of The Nation titled What Nuclear Renaissance? That article, written by Christian Parenti, begs response, but I do not feel like spending much time writing a letter to the editor that will have a minor probability of being published. By the power vested in me by Blogger.com, I will instead venture to provide a far more detailed response than any “letters” section would ever allow.

Mr. Parenti questions the reality of a shift in nuclear energy’s prospects. For him, the pace of change indicates that nothing is actually happening. He repeats the bottom line critique that many others – including a number of industry players – have also repeated on a number of occasions. “(T)he banks will not put up the cash” for enough plants to make much of a difference in the world’s energy or environmental condition. Though I have personal and repeated experience that could be used to support that assertion; I also have personal knowledge that contradicts that claim. It has been hard to attract cash to nuclear projects – especially in the past six months – but it is not impossible.

Wall Street and investment banking is a complex environment that includes many people with differing views of the world – that is what makes it a marketplace. If everyone had the same opinion about the future value of each potential investment, there would be no trading because everyone would be on the same side – either all wanting to buy or all wanting to sell. Writers that want to make a claim about a technology by citing investor opinions should clearly understand that aspect of their argument. Mr. Parenti’s understanding of financial matters does not impress me at all – the first person that he chose to quote with regards to nuclear power’s investor appeal was Arjun Makhijani, a man who has been a professional anti-nuclear activist for several decades.

Another piece of the financial puzzle that needs understanding is the fact that no development is right for all times and all places. Mr. Parenti makes a big deal about the fact – discussed in previous posts on Atomic Insights – that Warren Buffett made a decision not to proceed with plans to build a new nuclear plant in Idaho. That decision needs to be understood for what it was, a decision about a particular project in a particular location. There are dozens to hundreds of factors that go into the financial model for any large project; there is no way of knowing just which ones were the ones that drove the model built by Mr. Buffett’s people for their Idaho concept. Nothing indicates that the primary decision driver was the plant fuel source – after all, Mid-America did not follow the release announcing the cancellation with one stating that the Idaho location was determined to be better suited for a coal, gas, oil, wind, or solar project.

One big lie

Not only is Mr. Parenti financially illiterate, but he also repeats some claims about nuclear power that are demonstrably false. One primary lie is the following statement – “nuclear power did serve a key role in the cold war: spent nuclear fuel rods are refined for weapons-grade plutonium and enriched uranium.” Poppy cock. Used nuclear fuel rods from commercial reactors are NOT used to produce weapons grade materials. Outside of a couple of openly dual use technologies like RBMK and Magnox, they never have been used for that purpose.

(Correction posted April 27, 2008 at 1600 – I have done some more research; apparently the RBMK was not used to produce weapons materials either. There is some disagreement among credible sources about whether or not that ability was part of the original design or whether it was simply true that the basic design evolved from a material production reactor. What is clear is that the RBMK design has something in common with CANDU reactors – its use of pressure tubes rather than a large pressure vessel evolved as a way to overcome the industrial limitations in its country of origin. At the time that the RMBK reactors were designed and constructed, the Soviets had difficulty making large, high pressure forgings required for high capacity light water reactors of either the BWR or PWR variety.)

In fact, commercial reactors are really good at destroying large quantities of nuclear weapons materials while providing a byproduct with substantial value, something that no other technology can do. Since 1994, 50% of the fuel for US commercial reactors has been supplied by blending Russian weapons material with natural uranium so that it can produce the heat used to create the electricity that powers one out of every ten electricity sockets in America. (Megatons to Megawatts) The commercial value of the electricity produced through the Megatons to Megawatts program is at least $4 billion per year, but could be valued at a far higher number depending on the entering assumptions.

Fission is quite simple

In Mr. Parenti’s opinion, fission is a terribly complex process; in his words “Atom-smashing is to coal power, or a windmill, as a Formula One race-car engine is to the mechanics of a bicycle.” I beg to differ – fission power plants do not engage in atom smashing – that is a better description for what happens in an accelerator where high speed protons are flung at positively charged nuclei. What happens inside a conventional fission reactor is a natural process, neutrons that are meandering at velocities in equilibrium with their environment (thermal energy) are welcomed into the nuclei of certain atoms of uranium. Those uranium nuclei then fracture in a process that releases heat plus enough neutrons to keep the reaction going. If you put the right kinds of material in the right kinds of configuration, fission will happen and generally be as easily controlled as combustion.

Because fission produces some gamma and neutron radiation along with useful heat, it is best to keep that heat shielded from direct use by people. The heat, however, can be put to use in the same way as the heat from large furnaces that are also producing byproducts that must be shielded from people. I always get frustrated when dealing with the old critique that fission is just a fancy way to boil water. The source of my frustration is that human beings spend a GREAT deal of effort and money finding, refining, transporting, and distributing fuel to boil water to create steam for process heat and electricity production. It is wonderful that we have found a new, fancy, less resource intensive way to do it! Besides, if you really dislike steam, I have a product for you that uses the heat from a reactor without producing any steam at all. (Shameless plug – if you want to learn more about a steam-free reactor visit Adams Atomic Engines, Inc.)

Money is not flowing to the industry

Mr. Parenti also buys into the notion that numerous announced programs equals lots of government money for nuclear fission power, but the fact is that very little actual money has flowed from the government to the industry in the past 2, 4, 6 or even 15 years. The minor amounts that have made it in that direction for R&D are overwhelmed by the massive flows in the opposite direction in the form of taxes and fees.

Most of the programs listed by Parenti as Bush Administration support for the industry have been rebranding efforts for the same total quantity of funds – the churn has actually caused quite a few inefficiencies and frustrations for researchers. Of course, the industry has not received any money at all from the often cited loan guarantee programs since the rules are still being written and since the government only will step in if, sometime in the distant future, a project goes sour enough for a default.

Independent voices

Another facet of Parenti’s argument that I find rather amusing is the notion that the only reason that there is a change in perception about nuclear power is that the Nuclear Energy Institute has engaged in a slick marketing campaign. Now, I am not saying that the NEI is not doing a good job, but there are a lot of independent people contributing to the effort who have nothing to do with NEI’s marketing plans. In fact, there are quite a number of us who have been around and active longer than the NEI has even been in existence and certainly longer than the NEI has been actively working to promote a new generation of nuclear power plants. We even throw some criticism at NEI for being too timid.

I can list the names of dozens of people that spend a good deal of time engaging in conversations and sharing their nuclear knowledge. You can find links to many of their works on my blogroll but you can also find them entering into hundreds of different debates and conversations happening all over the web, at Rotary Club gatherings, at water coolers and at conferences. We are independent thinkers, not shills and certainly not much influenced by slick marketing.

Evidence of coming atomic prosperity

Soon after reading the piece in The Nation, I came across the a Forbes article titled Nuclear Plants Power Strong Entergy Results. That article talks about how much money Entergy’s nuclear plants are making in markets where the company is allowed to charge a market rate for electricity. If that was true for all nuclear plants, there would be a lot more capital available for investing in the next generation. The numbers achieved by Entergy and others who recognized the value of existing nuclear plants at another time when Wall Street was wrong about the technology provides some indication of the value that one might assign to a plant that can be completed today with the prospects for 60+ years of reliable operation in a future world with ever falling fossil fuel inventories.

As Parenti accurately points out, Forbes once accused the nuclear industry of being “the largest managerial disaster in history.” That opinion may actually have been true, but one thing that Parenti and other people opposed to nuclear industry do not seem to understand is that nukes are pretty good students who learn from their mistakes. That is part of our culture and our training – we constantly seek to improve our performance.