One of the memes continually repeated by the forces of opposition to nuclear power is that “Wall Street does not like nuclear power.” The most recent time I have run across that quote was in an article titled Out of the Shadows: Can Japan’s Nuclear Power Renaissance Reduce Global Emissions? on a blog named Japan Focus. Here is the context of the quote:
The prize is a share in the contracts for 150 nuclear plants mooted for construction worldwide over the next 20 years, adding to the roughly 435 commercial reactors already in operation. Many analysts wonder if these plants will ever be built – nuclear power is still considered too risky and expensive for most commercial investors. “Wall Street doesn’t like nuclear power,” said the US-based Institute of Energy and Environmental Research recently, summing up a widespread belief that the industry will never be profitable, let alone safe.
I have been mulling over a way to respond to this for many months, not only here in thought, but also out in the real world of action. I am still working on the action part, but here are some of my thoughts.
The lack of a ringing endorsement of investment support from “Wall Street” during the past thirty years is an established fact that has halted an industry (in the US) that was one of the fastest growing industrial enterprises ever during the 1960s and 1970s. Starting from a dead stop in 1953, when there was not a single commercial nuclear power plant operating or even under construction in the United States, by 1993, the operating reactors were producing more electricity than all generators on the grid did in 1960. Certainly, there were bumps and learning experiences along the way, and some investors got burned, but that is the normal way of industrial development.
I can guarantee you that some railroad investors of the 1840s got burned, some skyscraper investors of the early 1900s got burned, and plenty of computer investors got burned in the 1950s, again in the 1970s, and again in the 1990s. When there are new ideas of great value, the normal course is to attract a lot of resources, try out a lot of new ideas, fail at a few and proceed with the ones that prove themselves useful.
Unfortunately, many Wall St. investors have lost their taste for technological developments, especially those that take more than 4-6 years to mature. They have also lost their taste for truly revolutionary investments that have the potential for serious disruption to the established businesses. As most active investors have begun to learn, many Wall St. firms have spent the past 10-15 years focusing more and more of their activity on pure speculation and arbitrage – borrowing money cheaply and lending out far more than they borrowed to other speculators in order to collect quick fees that pump up their own income statements.
When current income looks high, it makes the companies think that they are populated by “the best and the brightest” who somehow deserve outsized rewards. Of course, since these companies were really populated by greedy, immoral people who have difficulty thinking for themselves; what they really developed was a house of cards built on taking enormous, systemic risks that only worked while no one doubted. As soon as people started questioning the soundness of the paper on which the enterprises were built, the real sources of the remaining capital started fleeing for the doors, causing the entire edifice to collapse.
It is actually a very good thing for the world that Wall Street investors have not been attracted to nuclear power. It is an unforgiving business that requires steady hands, long term commitment to excellence, and a recognition that nothing worthwhile gets built quickly and provides instant gratification.
What the nuclear industry really needs behind it is patient capital that can be satisfied with investing in productive, industrial plant capacity for a product – electricity – that never goes out of style and that enables so many other innovations to be achieved. It is not at all surprising that the places in the world where nuclear power is being well supported by responsible government leaders (rather than popularity contest winners) tend to be Asian countries full of people with generational awareness.
In China, Japan and South Korea, there is no worship of “the invisible hand” of free enterprise, even though those countries have plenty of enterprising entrepreneurs who work very hard to compete in business. Instead, there is a respect for each other and a recognition that some decisions need to be made for the common good with a long view of the consequences. The “visible hand” of central guidance by people who are carefully educated in the arts and useful sciences plays a much larger role in figuring out what kind of energy systems need to be developed and deployed.
Of course, there is also a contributing factor that none of those countries have an investment establishment that is dominated by money traceable to traditional energy sources like coal, oil and gas, but that is a topic for other posts.
The next time you hear someone like Jim Riccio of Greenpeace, Tom Cochrane of the NRDC, Paul Gunter of Beyond Nuclear, Amory Lovins of the Rocky Mountain Institute, Michael Mariotte of NIRS, or Arjun Makhijani of the Institute for Energy and Environmental Research claim that nuclear power is destined to fail because “Wall Street does not like nuclear power”, take that as a ringing endorsement for the technology.
Perhaps someday, they will figure out that recent history has clearly exposed the systemic weakness of “Wall Street” decision making capabilities. I am not terribly optimistic about the learning ability of any of those gentlemen or their supporting organizations, but they represent a tiny slice of America and an even smaller slice of the people that matter.