A leading academic has written a report that questions the cost effectiveness of nuclear power one year on from Fukushima. We speak to the academic and industry analysts to get the bigger picture.
Mark Cooper, a senior fellow for economic analysis at the Institute for Energy and the Environment, believes that an escalation of nuclear power plants would not be considered in the US without the support of the federal government. This belief is not radical in the slightest, but what he highlights in his recent piece of research is that Nuclear Regulatory Commission imposed regulations could rapidly pose nuclear energy as uncompetitive compared to other traditional and renewable energy sources.
This is not a new argument, but it is one, if shared by many in decision making positions, that could have a lasting effect on issues that could or could not propel the nuclear energy industry into the next phase of the energy renaissance--where renewables and traditional power sources compliment, rather than compete.
The Insitute that Cooper is affiliated is part of the Vermont Law School. In his paper Nuclear Safety and Nuclear Economics, Fukushima Reignites the Never-Ending Debate, he writes: “The “nuclear renaissance,” which was loudly heralded with extremely optimistic cost projections proved to a re-run of the collapse of the “Great Bandwagon Market” of the 1970s and 1980s. The industry could not live up to the hype and cost projections escalated rapidly. The estimates now used by utilities are three times the initial “renaissance” estimates, while independent analysts on Wall Street, put the cost estimates at five times the original estimates."
Economic Supply Curve
His paper in 2009 The Economics of Nuclear Reactors: Renaissance or Relapse displayed an economic supply curve that has been updated in his current work. He claims that the more efficient future energy path could comprise of variable energy sources such as wind, with gas as a complement to them.
To achieve this, by the end of the next decade, options for development include improved grid management and storage, and more importantly for renewables to reduce their costs, as technology becomes more advanced like with solar modules.
Cooper also argues that due to the NRC imposing more regulations after what happened in the Far East, the cost of nuclear energy will be higher and thus render uncompetitive in the market place when compared to other sources of energy.
In response the NRC says that safety and working in the interests of the public are paramount, as opposed to purely economic concerns, and that a regulatory reaction was necessary to learn the lessons of Fukushima.
A spokesperson said: “On March 12, 2012, the NRC issued the first regulatory requirements for the nation’s 104 operating reactors based on the lessons-learned at Fukushima Daiichi. The NRC issued three orders requiring safety enhancements of operating reactors, construction permit holders, and combined license holders.”
“These orders require nuclear power plants to implement safety enhancements related to firstly mitigation strategies to respond to extreme natural events resulting in the loss of power at plants, secondly ensuring reliable hardened containment vents, and thirdly enhancing spent fuel pool instrumentation. The plants are required to promptly begin implementation of the safety enhancements and complete implementation within two refuelling outages or by December 31, 2016, whichever comes first.”
The paper also takes a critical eye at disaster insurance, that is currently underwritten by the federal government, and Cooper now senses that the support from Capitol Hill is perhaps not what it was.
He told Nuclear Energy Insider: “There is certainly much less talk of increasing the loan guarantee pot of money. The political party platforms may support nuclear, but I will be surprised to see any policies to subsidize nuclear power. A host of factors has drained the steam out of explicit subsidies for energy projects. The budget issue matters, the scoring is fairly small, although these days every penny counts. Loan guarantees are not popular in the wake of Solyndra.”
Industry analysts are anything but the gloomy outlook about nuclear energy’s prospects as the paper would suggest, and see a clear future for nuclear power as part of the US’s energy base in the future.
‘Nuclear plants are good investments’
Chris Gadamski, lead analyst for Bloomberg New Energy Finance, repudiated the paper’s findings: “I find the arguments that the paper is putting forward hard to believe, and I don’t think that government is moving away from supporting nuclear power. It’s very state specific in non-regulated markets, and nuclear power plants are good investments that are cost effective.”
“Gas prices will be volatile in the future, and that will ensure that nuclear energy is competitive, renewable sources such as solar are intermittent ones, and this leaves nuclear power having a foothold in every power generation. Both the Georgia and South Carolina plants are promising, and if they are delivered on budget, then you will see more nuclear power plants being built in the US.”
According to the NRC there are currently 18 COL applications that have been submitted, but this does not mean that this will result in a steady proliferation of nuclear power plants, as Mark Cooper outlines:
“Applying for a license is not a very good indicator of what will be built, as my paper shows. Very few of the proposals appear to be very active. Only four are spending significant sums of money. FPL has said it has not decided to go forward. Progress has negotiated an out, even though it says it is moving forward.
“The Environmental Investigation Agency is only counting on 4 reactors by 2025. Thus, the reality of the “nuclear renaissance” in the U.S. is a lot closer to one than 18.”
Mark Cooper is a Senior Research Fellow for Economic Analysis at the Institute for Energy and the Environment; his current project is Energy Assessment. Dr. Cooper holds a PhD from Yale University and is a former Yale University and Fulbright Fellow. He has provided expert testimony in over 250 cases for public interest clients including Attorneys General, People’s Counsels, and citizen interveners before state and federal agencies, courts, and legislators in almost four dozen jurisdictions in the U.S. and Canada.
Only time will tell if this bleak outlook is shared by the majority of energy decision makers. It will therefore be for the nuclear industry to put its neck out to inform, educate and create new solutions for this industry at both a federal and state level to ensure its business objectives are not sidelined and that its costs are as streamlined as possible.
Academic papers published today can have a lasting and wide reaching impact due to social media on a host of issues for nuclear power plant operators ranging from uprate programmes, safety, technology innovations, new build projects and decommissioning. But one thing is clear, safety measures in this energy industry and any other have relative costs.
But arguing that these regulatory imposed costs are making the nuclear industry uncompetitive is futile. Safety measures, whether carried out by new technology or humans, can be considered a good return on investment, since the measures not only help protect those working and living around nuclear plants, they also create much needed employment, product innovation, and as a consequence, long-term baseload electricity. But like any meaningful investment, the returns will not be placed on a plate for stakeholders to devour overnight.
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