After years of taking a sensible approach to energy, the Weekly Standard has gone green. Last week the editors kicked off their "Energy Policy in 2011" series with a treatise from none other than the pied piper of solar energy, Amory Lovins.
Needless to say, Lovins informs Standard readers that nuclear is a monstrously unworkable technology and that no reactors would have ever risen out of the ground without lavish subsidies from the government. This should come as no surprise to anyone. Lovins has been campaigning against nuclear for the past 25 years. What's news is that the editors of an esteemed conservative magazine have decided to dance to the tune.
The trouble with Lovins' argument begins right in the second paragraph where he begins outlining the reason why the construction of reactors entails what he defines as "Nuclear Socialism:"
We got a taste three decades ago. Congress grew infatuated with the promises of nuclear promoters. It overrode the risk assessment of private capital markets, and expanded subsidies for nuclear projects to $0.08 per kilowatt-hour -- often more than investors risked or than the power could be sold for. This seduced previously prudent utilities and regulators into a nuclear binge that Forbes in 1985 called "the largest managerial disaster in business history."
The source for this figure is a study called "Nuclear Power as Taxpayer Patronage," by Doug Koplow, of Earth Track, published by the Nonproliferation Policy Education Center. Turn to page 24, where Koplow charts these subsidies, however, and you find the biggest contributor -- 3.7 cents per kWh -- is a loan guarantee program that wasn't passed by Congress until 2005. Unlike other loan guarantees, it also requires the nuclear industry to pay for the program. Southern Electric received the first and only guarantee of $8.3 billion last June for its Vogtle reactors in Georgia, but hasn't begun construction yet.
The second largest "subsidy" in the Koplow paper -- 2.5 cents per kWh -- is the Price-Anderson Bill, long a target of anti-nuclear ire. First adopted in 1956, the bill organized insurance companies to provide $60 million in coverage with the federal government pledged to pick up another $500 million. In 1967, the system was shifted to no-fault basis, with utilities waiving their right to defend on claims in exchange for a cap on liability. Workmen's Compensation works the same way. Today the government is completely off the hook. Private insurance provides $300 million and individual reactors can be assessed $100 million apiece for an accident at another reactor, for a total of $12 billion. The industry insures itself. The only claims ever made were $90 million at Three Mile Island and private insurers paid them. Although the program has lowered costs for utilities, it has never cost the government a dime.
A third "subsidy" listed by Koplow -- a production tax credit of 1.8 cents per kWh of delivered electricity -- was also adopted in 2005 and has not yet been awarded. In any case, it only applies to the first 6000 megawatts built after 2005. This compares to the production tax credit -- now at 2.1 cents per kWh -- that has been paid to wind and solar facilities since 1979 and has cost the government billions. According to a 2007 report by the Energy Information Agency, subsidy and support for wind and solar were $23.37 and $24.34 per megawatt-hour respectively. The subsidies for conventional forms of generation were 25 cents for oil and natural gas, 44 cents for coal, and $1.59 for nuclear. President Obama's stimulus package contained $90 billion in subsidies, loan guarantees, and direct payouts to renewable energy -- the kind that Lovins wants to substitute for nuclear power.
To this must be added the 26 state "renewable portfolio mandates" that require utilities to build wind and solar facilities or buy from those who do. Ninety percent of the generating capacity built to conform to these mandates has been windmills -- which is why there has been such a surge of windmill construction around the country. No one has ever mandated that anyone build a nuclear reactor.
Our entire fleet of 104 reactors was built in the 1970s and 1980s without any subsidies or mandates and paid for in full by the utilities. Most were "turnkey" projects built by Westinghouse, General Electric, or Babcock & Wilcox. All three companies lost huge amounts of money but soldiered on because they thought they were laying claim to the future. Now that their construction costs have been retired, the owners are profiting handsomely. Many reactors make more than $1 million a day. In the midst of the oil price run-up in 2007, Connecticut attorney general Richard Blumenthal proposed a windfall profits tax on the state's two Millstone reactors because they were making so much money. As Jack Bailey, vice president of the Tennessee Valley Authority, says, "No matter how expensive a nuclear plant is at the beginning, twenty years later they all look good."
If nuclear reactors are difficult to build right now, it has nothing to do with the nature of the technology. The principal reason is that America's nuclear industry has already been socialized --with the utilities still paying the bills. The entire industry is now one huge conglomerate run out of the 18-story building in Rockville, Maryland that houses the Nuclear Regulatory Commission. Any company trying to build or operate a nuclear reactor can barely buy a broom without clearing it with the front office at the NRC. In 2005 I visited the Cooper Nuclear Station in Nebraska. While touring the plant I noticed a tricycle sitting on the sidewalk and asked its purpose. Plant officials said that employees who had to walk long distances between buildings in the winter had complained of the cold. Because no motorized vehicles are allowed within the compound, they asked if they could ride bicycles. The NRC considered the matter for eight months before deciding that bicycles were too dangerous. They would, however, allow employees to ride a tricycle. One employee later asked if the tricycle would have a seat belt, but was informed that would not be necessary.
Asking permission to build a nuclear reactor means applying to the NRC for a combined construction-and-operating license (COL), which could take five-to-ten years except nobody really knows because the NRC has not issued a license since 1976. NRG Energy, the first American company to apply since 1973, filed in 2007. It is still nowhere near the end of the process. When he assumed the chairmanship of the NRC in 2009, Gregory Jaczko -- a former aide to Senator Harry Reid -- said he hoped the NRC could issue a license by the time his term ends in 2014. He may have been optimistic.
The NRC has not even approved the design of the Westinghouse AP1000, a new model that is under construction at four different sites in China. David Blee, executive director of the Nuclear Infrastructure Council, says that industry officials watch the NRC the way foreign policy experts once watched the Kremlin. "If Commissioner [Kristine] Svinicki mentions the AP1000 in a speech, that means something may be happening with regard to the application," he says. Outside the Byzantine Empire, you could hardly find a better historical example of bureaucratic sclerosis.
The rub is that the applying companies pay for all this. Unlike any other federal agency, applicants before the NRC must pay a "service fee" of $260 an hour for having the NRC review its application. The process is open-ended and could easily run to $100 million -- although once again no one knows because no one has ever completed the process. Constellation Energy and its partner, Électricité de France, had spent $500 million in trying to obtain a license to build a third reactor at Calvert Cliffs, Maryland, when Constellation finally gave up on the project two weeks ago.
Nuclear reactors are expensive, make no mistake. They easily cost $6 billion apiece, maybe more. But 75 percent of the cost is in the construction. Once completed, reactors are very cheap to operate -- which is what makes them so attractive to utility long-range planners. What makes reactors prohibitively risky is the chance they may never be built or allowed to operate. The Shoreham Plant on Long Island cost $5 billion and was prohibited from opening because New York Governor Mario Cuomo refused to participate in drawing up an emergency evacuation plan -- a lesson not quickly forgotten by the industry. In order to overcome these misgivings, Congress adopted both the production tax credit and the loan guarantees as part of the Energy Policy Act of 2005. These are the first direct subsidies ever offered to the nuclear industry.
Even now, the prospects for avoiding the construction delays and regulatory revisions of the 1980s do not seem promising. The Vogtle project in Georgia, the only plan to be awarded a loan guarantee, has received permission to begin site clearance. Last July, after inspecting the work, the NRC decided that the dirt Southern Electric was using to fill the site was unsatisfactory. Southern was told to go further afield and spend more money for better dirt. A month later the NRC discovered that Shaw, the major subcontractor, had asked prospective employees about previous drug and alcohol use but had not required them to fill out a written form as prescribed by NRC rules. The Commission closed down the project for six weeks.
No reactor will ever be built under this kind of oversight. I frankly doubt the Vogtle plant will go ahead, even though it may one day receive permission to begin actual construction. The possibilities for endless regulatory delay -- the cause of the 1980s cost overruns -- are just too great.
Is this the true nature of nuclear? Not in the slightest. Lovins drops the statistic that nuclear's contribution to global electrical production fell from 16 percent to 13 percent -- trying to create the impression that the world is giving up on the technology. Nothing could be further from the truth.
Currently there are 61 reactors under construction around the world in 15 countries. Besides building four Westinghouse AP1000s -- the design our NRC has yet to approve -- the Chinese are building reactors sold by the French, Russians, and Japanese, plus 20 of their own design. (The U.S., you will notice, is no longer in the picture.) Russia is building 15 reactors, five at home and ten abroad, and is already volunteering to take other countries' nuclear waste for reprocessing. "The Russians seem to have a peculiarly high comfort level with all things nuclear," wrote New York Times reporter Andrew Kramer the other week in marveling at their progress. Perhaps it would be more correct to say the U.S. has a peculiarly high level of discomfort. Korea has become a nuclear-happy country after winning a $20 billion contract to build four reactors of its own design in the United Arab Emirates. Two weeks ago the Koreans held a "National Nuclear Day" to introduce children to the technology. They are training nuclear engineers faster than anyone else and have set up the world's first nuclear safety academy. France is already 80 percent nuclear and Areva and Électricité de France, both nationally owned companies, are marketing reactors abroad.
All this might be called "nuclear socialism," but it is nothing unique to nuclear. In France, the government has owned television stations, banks, auto manufacturers, and film companies. Russia and China are the same. Nuclear power does not equal "Nuclear Socialism," as Lovins argues. America has a long tradition of private ownership. The only reason nuclear has run aground in this country is that, as Milton Friedman once noted, "When government gets big enough, the only thing that can counteract it is more government."
The reason it is nearly impossible to build nuclear reactors in this country is that people like Amory Lovins have convinced the public that there is something uniquely terrifying about nuclear energy. Reactors are really bombs in disguise. They can explode at any moment or if attacked by a hijacked airplane (a commercial jet would crumble like a beer can against a concrete containment structure – as in this test). Nuclear waste is a hellish material that no one knows how to handle (although the French manage to store all their waste in one room). The lesson is clear -- only fanatical government oversight stands between the public and a "nuclear holocaust." In the early days, Lovins played on all these fears -- and other prominent crusaders like David Lochbaum, of the Union of Concerned Scientists, still do. Now Lovins has gotten smarter. He couches his argument in economic terms in order to seem hardheaded, even "conservative." And some conservative publications are even gullible enough to believe him.
So here's a test. Lovins ends "Nuclear Socialism" by proposing a "principled alternative:" "Reverse the energy arms-race. Don't add subsidies; subtract them. Take markets seriously. Not just for nuclear and fossil fuels but for all so-called 'clean' technologies, head toward zero energy subsidies, free enterprise, risk-based credit pricing, competition on merit, cheaper energy services, greater energy security, and dwindling deficits."
But notice he overlooks one thing. How about canceling all those state mandates that require utilities to get 10-20-25 percent -- pick a number -- from so-called "renewables"? Construction would halt immediately. There has never been a windmill or solar collector built anywhere in this country without the help of some subsidy or mandate.
And here's another test. Back in the 1970s, Lovins argued that central power plants were obsolete and should be replaced by a "distributed" network of backyard windmills, solar collectors, and mid-sized industrial co-generation plants generating both heat and electricity. Things haven't quite worked out as planned. Lovins now talks of covering all of North and South Dakota with windmills and distributing the energy across the country as electricity or hydrogen. Small is no longer beautiful.
But the nuclear industry has come up with a plan that could rescue Lovins' dream. They have invented small modular reactors not much bigger than a gazebo that can be buried underground for safety, operate for five to ten years without refueling, and power a whole town or city as large as 125,000 people. Such mini-reactors could be harnessed to the cogeneration of steam, district heating, or water purification and save enormous amounts of energy. Built in bite-sized units, they would be easily affordable with no help from the government required. All they need is approval from the NRC.
Will Lovins support such an innovative, non-socialistic, "small-is-beautiful" blueprint for distributed energy? Don't bet on it.