Anti-nuclear activists, both the vocal kind and the kind that work the decision making bodies behind the scenes, love to point to initial costs as a way to discourage positive hopes for a fission powered future. They emphasize news stories about cost overruns at projects like the Olkiluoto reactor in Finland, the projected costs of large projects in Florida and Georgia, and the efforts by the nuclear industry to obtain legislation that is favorable to the development of long term projects that rely on stable financing by patient investors.
It never ceases to amaze me how much deference people like Harvey Wasserman and Karl Grossman, who normally bash corporations and investors, give to the “free market” and Wall St. ratings agencies when they talk about nuclear power and its seeming dependence on public policies. They paint France’s successful effort to almost completely eliminate its addiction to burning fossil fuel for electricity production in just 25 years as a completely socialistic endeavor that placed an extraordinary debt burden on French taxpayers. They frequently claim that no nuclear plant has ever been constructed with purely private money and they claim that the cooperative industry insurance pool organized with government blessing represents a subsidy to nuclear technology that is so large its value cannot be reliably computed.
The drumbeat is repetitive, but it like listening to base drum while tuning out the more interesting snare drums. It is missing some key components of an honest discussion about market based investments. Without any mention of long term value, product quality, or the competition’s dependence on subsidies, an isolated focus on first costs is meaningless. Some activists tacitly acknowledge the limitations of their arguments by trying to add increasingly difficult to overcome boundaries to their discussion – they are now claiming that even if nuclear power plants can be built at something close to their projected costs, it is too late to start a program since they cannot be built fast enough to make a difference in the crisis that they have manufactured in the public perception. (BTW – Doubting the existence of a crisis is not the same as denying a problem.)
There are certainly supporters for this view that are not on the far left. Academic institutions, independent non-profit organizations and government agencies produce documents with similar assertions about the high cost of nuclear power plant construction. Blogs from all over the spectrum comment regularly about the high cost of building nuclear power plants. Of course, there are the “smoking gun” type articles that come directly from the competition that favors investing money into their technology instead of nuclear.
Even credible financial publications like The Economist, the Wall Street Journal, BusinessWeek and the Financial Times often publish similar stories. (My cynical side would ask critical thinkers to take some time to peruse some back issues of these publications and count ad pages for companies associated with coal, oil, gas, wind, and solar industries. My gullible side tells me there is no way that the writers at such publications could possibly be influenced by the business side of the companies where they work.)
The impetus for today’s musings came in the form of an email from a friend who let me know that my post about investor interest in nuclear power had been linked to a Financial Times Energy Source blog post titled The revival of nuclear power gathers pace in Europe, but will a free market finance it? Here is a quote from that blog:
The big problem remaining, however, is that the economics of new nuclear are still not clear. Vincent de Rivaz, EDF’s chief executive in the UK, has often protested that nuclear power will not need government support. He likes to ask: “Look at my business plan and tell me, where is the line for government subsidy? It is not there.”
The British government takes the same view: a free electricity market, supported by the support for low-carbon electricity provided by the EU’s emissions trading scheme, will be sufficient to bring forward that huge investment in new reactors.
Yet without support of some kind, it is hard to imagine private sector investors – or indeed the French government, EDF’s 85 per cent shareholder – wanting invest those tens of billions that will be needed.
Evidently, the blog author has not taken a look at EDF’s (mostly owned by the French government) financial history with nuclear power. The company borrowed a great deal of money from the public, built a series of reliable facilities, operated the facilities and sold the power, and has now paid off most of the loan balance. They also now own 58 relatively new nuclear power plants that are providing some of the most competitive, clean and reliable electricity in Europe. The public benefits every month from the investment that they made.
An institution that can do math very well has used its historical knowledge as the basis for large investments into their capability to build and operate new nuclear plants in a number of other countries like the US and the UK. EDF and Areva have apparently been able to present the numbers to the partners that they will need in order to make the necessary investments. Here is the comment that I left on the FT Energy Source blog:
Ed – thanks for the mention of my Atomic Insights article about investor interest in nuclear power. Over the years I have spoken to a lot of private investors about atomic energy in my role as the head of a tiny company that wants to develop and build relatively small atomic power plants.
There is little doubt that investments in long term energy projects require enabling laws – there are enough ways for lawmakers to tilt the energy playing field over time to disadvantage any given technology. It is clear from 50 years of nuclear power plant history – laws can scare any investor away from even the most technically capable energy source. I have also noticed that the market competitors to nuclear power have some powerful friends in lawmaking bodies. I just read that the coal, oil, and gas industry has spent nearly 50 million on lobbying expenses in the US during the last quarter.
However, human laws cannot change certain facts – fission does not release carbon dioxide, the wind is fickle, shale gas requires continued commitment to drilling because of rapid depletion rates, the sun disappears for inconveniently long times, and burning coal releases deadly gases and dangerous particulates in addition to climate changing gases.
Enel’s investment may be a bid for a learning opportunity, but so is Areva’s construction of a first of a kind unit in Finland. People with long term perspectives know that it takes effort to refine knowledge and make it valuable and they know that the first of a kind of any new product will face unpredictable challenges and probably exceed the budget due to the nature of budgeting and optimism.
Publisher, Atomic Insights
Host and producer, The Atomic Show Podcast
From my point of view the claims that nuclear fission needs government support are besides the point. It would be difficult to find any major industry success story that has
not received at least some support from government bodies and it is arguably impossible to find one of those stories associated with energy production.
The real goal needs to be to align the benefits with the people who make the investments; if public support is necessary, then the companies that obtain that support need to cut the public in on the rewards. That has happened in France, and a solid case can be made that it has also happened in Florida, Georgia, South Carolina, Virginia and other states where cost of service regulation remains in effect. Those paid up, low marginal cost nuclear plants are paying dividends every month in the form of lower power bills than would otherwise be the case.
In places like Maryland, Texas and Illinois, where savvy businessmen looked ahead and convinced the public to allow them to “take responsibility” for the “stranded” costs of “expensive nuclear power plants” under a “deregulated” model, the results have not been quite as positive for the ratepayers that enabled the initial investment.