1
Did It Jump or Was It Pushed: Five Lessons from the Prematurely Named Nuclear
Renaissance
Peter A. BradfordAdjunct Professor, Vermont Law School
Oak Ridge Associated UniversitiesMarch 6, 2014
Source : IAEA-PRIS, BP, MSC, 2013
3
Reactors Under Construction (IAEA, PRIS)
4
Why the U.S. Stopped Building New NPPs in the 1970s I
• An overreaction to the 1979 accident at Three Mile Island– Excessive regulation caused increased costs– Environmental and antinuclear groups exploited
the accident– The public turned against nuclear and politicians
followed• Can be remedied by political leadership,
streamlined licensing, safer reactors.
WHERE?
1. In the White House
2. After Three Mile Island
3. At reactor sites
4. In hearing rooms
5. In 10 CFR
WEAPON?
1. Crafty NRC appointments
2. Their tongues
3. Overregulation
4. Cost overruns
5. Cowardice
WHO?
1. Environmentalists
2. The NRC
3. The public
4. Jimmy Carter
5. The industry
Clueless - The Board Game: Who Killed Nuclear Construction
Why the U.S. Stopped Building New NPPs in the 1970s II
• In 1978 the U.S. Congress passed a law requiring utilities to buy power from anyone who could supply it more cheaply than the utilities could generate it. – This opening of the generation market, not Three Mile Island,
explains the end of new reactor orders in the U.S.• The resulting independent power industry provided far more
generation and innovation than had the utilities, and at lower prices. This had several consequences:– Improved utility operations and therefore lower costs– Electric restructuring and market development in about half of the
U.S.• Shift of economic risk from customers to investors
7
8
U.S. Nuclear Output and Nuclear Capacity, 1973-2013: Productivity Improvement in the Face of Competition
1973
1981
1989
1997
2005
2009
2013
0
200000
400000
600000
800000
020406080100120140160180
Capacity
Energy
c
Gi gawatt -hours
Gig
awatt
s
9
Nuclear Renaissance in Retrospect I
• 2001 – Admnistration embraces new nuclear• 2002 – Bush administration announces
“Nuclear Power 2010”• Two new reactors operational by 2010 to prove the
effectiveness of the new licensing process
• 2003 – The Nuclear Energy Institute sets a target 50,000 new nuclear megawatts from 40-50 new reactors by 2020
10
Overnight Costs ($2009/kw) of Nuclear Construction (Mark Cooper, 2012)
11
Nuclear Renaissance in Retrospect II
• 2003 MIT Study “The Future of Nuclear Power” urges federal incentives for “a few first mover plants”
• 2005 “Nuclear Power 2010” target date for two new reactors becomes 2014;
• 2006 – Global Nuclear Energy Partnership proposes U.S. reprocessing
Nuclear v. Fossil Fuels per MIT 2003 Study
Energy Policy Act of 2005
• Loan guarantees (capped at $18 billion in 2007)
• Production tax credit (1.8¢/kWh for first 6 GW)
• Price-Anderson renewal• Plus delay insurance, licensing cost sharing
and curtailment of public involvement
14
Nuclear Renaissance in Retrospect III
• 2006 – Several Southeastern states pass “early cost recovery” laws.– Once utility commission certifies a need, then cost
recovery begins, with no refunds for canceled plants and dwarf prudence reviews.
• 2008 presidential campaign – Obama supportive, McCain promised 50 new reactors by 2030, Republicans later doubled to 100.
15
Nuclear Renaissance in Retrospect IV
• By the end of 2008, applications for 29 new reactors (of several designs) were on file at the NRC, with four more expected in 2009.
• But only two more arrived;• GNEP essentially dropped in 2009;• Congress did not enact a carbon policy;• The first operating reactors in 15 years closed at
Kewaunee, Crystal River, San Onofre (2) and Vermont Yankee (later in 2014);– Exelon says it may close several more if power markets aren’t
modified
16
A Nuclear Deal That Might Have Made Sense Circa 2009
• Trade financial support for a few reactors of different types for a sensible carbon policy. Nuclear proponents might have bought it expecting success, opponents expecting failure.– “On time and on budget” won’t help if on budget
is twice the market price.
17
The Status of the U.S. Reactor Renaissance in 2013
2009 Propose
d Reacto
rs
Cance
led as of 2
013
Seekin
g Lice
nse O
nly, or U
ncerta
in
Being Built
as of 2
01405
101520253035
18
What Happened?
• Too much economic risk for power markets or private investors, manifested in a cascade of events, any one of them arguably fatal:– Nuclear construction cost estimates up by 2-300%– Electricity demand declining due to recession and low cost
energy efficiency;– Natural gas prices below MIT 2003 low end estimates;– No carbon pricing;– Discrediting of federal subsidies especially among pro-
nuclear Republicans– Fukushima
Same Story, Told Elegantly
Operating Reactors
• Most probably still competitive, but– Some will eventually close early for economic reasons
• None in the U.S. has ever closed because its license expired
– Margins are narrower;– Output may decline with age;– Major capital investments will be harder to justify;– Much depends on who takes the risk under the
regulatory arrangements in different states.• When investors must take risks of poor performance or
cheaper alternatives, nuclear is less attractive to owners (same issues now confront Japan if it restructures)
Holding the 20% Share of U.S. Electricity? (Paul Joskow, MIT, 2006)
21
Fukushima and Changed Perceptions of Nuclear Risk
• Permanent destruction of +/-one percent of the world’s nuclear capacity live on worldwide television
• Destruction of TEPCO – World’s 4th largest utility• Evacuation of +/-100,000 people• The accident goes on and on• Liability issues of more than $100 billion unresolved• Failure of a once respected regulatory regime • Major political impact in Japan • Undetermined health effects, mitigated by wind• Land contamination, some probably for many years• Substantial resurgence of nuclear skepticism in many countries, with
slowing and cancellation of construction programs
Lesson 1: New Nuclear in Competitive Markets Will Take $Billions in Support Per Reactor
• The reality is that none will be built without extensive government support:
• Loan guarantees and customer supplied capital can reduce price but not cost (because they merely transfer risk).
• Current DOE gas forecasts indicate gas-fueled electricity not rising above 8 cents/kwh for more than 20 years.
• And large amounts of efficiency remain available at less than 4 cents/kwh.
• Alternatives getting cheaper, new nuclear apparently not.• North Florida follies are costing customers more than a billion
dollars for nothing;• Hinckley Point
23
24
Lesson 2
• Don’t buy insurance that costs more than the event you’re insuring against.
25
Gas Volatility v. New Nuclear Power at 12 Cents/kWh
27
Lesson 3
• It is possible to explain the downfall of the nuclear renaissance without mentioning waste or proliferation,
• Or Jimmy Carter, or– Overregulation, or– Citizen and environmental intervenors, or– Three Mile Island, or even– Harry Reid.
Lesson 4: Silver Bullsh*t
• Substitute for serious thought: – “There are no silver bullets. We need silver
birdshot. Therefore, we have to do all of the above.”
• What we really need is what we have always needed – market-harmonized ways to a nuclear policy that serves wise public policy, not the other way around.
Today’s Alternatives, As Seen by the Largest U.S. Nuclear Operator John Rowe, AEL, March 8, 2011
30
Nuclear Power and Climate Change
• To accomplish 10% of the needed greenhouse gas reduction by 2050, we’d have to triple the number of reactors worldwide– Plus enrichment and waste repositories
• But nuclear output has declined since 2002
Do Everything or Prioritize Wisely? The Pacala/Socolow Wedges (Scientific American, 9/06)
A Wedge
• Prevent 1 billion tons carbon per year by 2054;• Scaling up only of technologies already
deployed on an industrial scale;• Seven needed to stabilize CO2 at 500ppm;– More will be needed to get to 350ppm
Other Wedges
• Energy efficiency (3)• Alternative transportation approaches (4)• Enhancing natural carbon sinks (2)• Decarbonizing electricity generation (4)– Of which nuclear is one
The Nuclear Wedge
• Doubling of nuclear power really requires tripling the existing capacity (372GW/438plants) because today’s plants must be replaced.– Probably 700-900 new plants needed to get 1100GW
• Assumes nuclear replaces all coal. In fact, nuclear will replace some gas and large hydro, requiring more new nuclear capacity to make a wedge.
• Prodigiously difficult and expensive, but so are many of the wedges.
• Little impact before 2030.
How to Choose
• Without a price on carbon we are left with various forms of governmental picking of “winners”
• Carbon markets have not to date produced prices remotely high enough to support new nuclear,– But a price on carbon might save existing reactors.
Lesson 5: Don’t Call It a Renaissance Until You’ve Seen a Masterpiece