MISSION: Southwest Research and Information Center is a multi-cultural organization working to promote the health of people and communities, protect natural resources, ensure citizen participation, and secure environmental and social justice now and for future generations

Nuclear Power: Economics and Climate-Protection Potential

Nuclear power is often described as a big, fast, and vital energy option—the only practical and proven source big and fast enough to do much to abate climate change. Yet industry and government data tell the opposite story. Nuclear power worldwide has less installed capacity and generates less electricity than its decentralized no- and low-carbon competitors—one-third renewables (excluding big hydroelectric dams), two-thirds fossil-fueled combined-heat-and power. In 2004, these rivals added nearly three times as much output and six times as much capacity as nuclear power added; by 2010, industry forecasts this sixfold ratio to widen to 177 as nuclear orders fade, then installed capacity to disappear gradually as aging reactors retire. (See Figures 1 and 2.) These comparisons don’t count more efficient use of electricity, which isn’t being tracked, but efficiency gains plus decentralized sources now add at least ten times as much capacity per year as nuclear power.

Figure. 1. Worldwide, low- and no-carbon decentralized sources of electricity surpassed nuclear power in capacity in 2002 and in annual output in 2005. In 2004, they added 5.9x as much capacity and 2.9x as much annual output as nuclear power added. (Output lags 3 y behind capacity because nuclear plants typically run more hours per year than windpower and solar power—though other renewables, like the fossil-fuel cogeneration shown, have high average capacity factors.) The post-2004 forecasts or projections shown are those of the respective industries, and are imprecise but qualitatively clear. Large hydro (over 10MWe) is not shown in these graphs nor included in this paper’s analysis. Two-thirds of the decentralized nonnuclear capacity shown is fossil-fuel co- or trigeneration (making power + heat + cooling); its total appears to be conservatively low (e.g., no steam turbines outside China), and it is ~60-70% gas-fired, so its overall carbon intensity is probably less than half that of the separate power stations and boilers (or furnaces) that it has displaced; the normal range would be ~30-80% less carbon.

All the meager nuclear orders nowadays come from centrally planned electricity systems, because despite strong official support and greatly increased U.S. subsidies, nuclear power’s bad economics make it unfinanceable in the private capital market. Official studies compare new nuclear plants only with coal- or gas-fired central stations. But all three kinds of central stations are uncompetitive with windpower and some other renewables, combined-heat-and power (cogeneration), and efficient use of electricity, all compared on a consistent accounting basis (Figure 3).

Efforts to make nuclear plants appear competitive with central coal or gas plants by enlarging nuclear subsidies or taxing carbon dioxide (CO2) emissions are futile, because windpower and some other renewables, cogeneration, and technologies for wringing more work from each kilowatt-hour, will still win in the marketplace—by margins far too great for new reactor technologies or further-streamlined siting and regulation to overcome, even in principle.

Empirical data also confirm that these competing technologies not only are being deployed an order of magnitude faster than nuclear power, but ultimately can become far bigger. In the U.S., for example, full deployment of these very cost-effective competitors (conservatively excluding all renewables except windpower, and all cogeneration that uses fresh fuel rather than recovered
waste heat) could provide ~13–15 times nuclear power’s current 20 percent share of electric generation—all without significant land-use, reliability, or other constraints. The claim that “we need all energy options” has no analytic basis and is clearly not true; nor can we afford all options. In practice, keeping nuclear power alive means diverting private and public investment from the
cheaper market winners—cogeneration, renewables, and efficiency—to the costlier market loser.

Nuclear power is an inherently limited way to protect the climate, because it makes electricity, whose generation releases only two-fifths of U.S. CO2 emissions; it must run steadily rather than varying widely with loads as many power plants must; and its units are too big for many smaller countries or rural users. But nuclear power is a still less helpful climate solution because it’s
about the slowest option to deploy (in capacity or annual output added per year)—as observed market behavior confirms—and the most costly. Its higher cost than competitors, per unit of net CO2 displaced, means that every dollar invested in nuclear expansion will worsen climate change by buying less solution per dollar. Specifically, every $0.10 spent to buy a single new nuclear kilowatt-hour (roughly its delivered cost, including its 2004 subsidies, according to the authoritative 2003 MIT study’s findings expressed in 2004 dollars) could instead have bought 1.2 to 1.7 kWh of windpower (“firmed” to be available whenever desired), 0.9 to 1.7+ kWh of gas-fired industrial or ~2.2–6.5+ kWh of building-scale cogeneration (adjusted for their CO2 emissions), an infinite number of kWh from waste-heat cogeneration (since its economic cost is typically negative), or at least several, perhaps upwards of ten, kWh of electrical savings from more efficient use. In this sense of “opportunity cost”—any investment foregoes other outcomes that could have been bought with the same money—nuclear power is far more carbon-intensive than a coal plant.

For these reasons, expanding nuclear power would both reduce and retard the desired decrease in CO2 emissions. Claims that more nuclear plants are needed to protect Earth’s climate thus cannot withstand documented analysis or be reconciled with actual market choices. If you are concerned about climate change, it is essential to buy the fastest and most effective climate solutions. Nuclear power is just the opposite. Claimed broad “green” support for nuclear expansion, if real (which it’s not), would therefore be unsound and counterproductive. And efforts to “revive” this moribund technology, already killed by market competition, only waste time and money.

This widening gap between market reality and nuclear theology raises some pointed policy questions. Why divert further public resources from market winners to the market loser? Why pay a premium to incur nuclear power’s uniquely disagreeable problems? (No other energy technology spreads do-it-yourself-kits and innocent disguises for making weapons of mass destruction, nor creates terrorist targets or potential for mishaps that can devastate a region, nor creates wastes so hazardous, nor is unable to restart for days after an unexpected shutdown. Why incur the opportunity cost of buying a costlier option that both saves less carbon per dollar and is slower per megawatt to deploy? And if, unsupported by analysis, you think “we need everything,” how will you avoid acting like a Chinese-restaurant diner who orders one item from each section of the menu because it all sounds tasty, spends his money on a small bowl of shark’s-fin soup and other delicacies, can’t afford rice, and goes away hungry?

A popular euphemism holds that we must “keep nuclear energy on the table.” What exactly does this mean? Continued massive R&D investments for a “mature” technology that has taken the lion’s share of energy R&D for decades (39 percent in OECD during 1991–2001, and 59 percent in the United States during 1948–98)? Ever bigger taxpayer subsidies to divert investment away from the successful competitors? Heroic life-support measures? Where will such efforts stop? We’ve been trying to make nuclear power cost-effective for a half-century. Are we there yet? When will we be? How will we know? And would nuclear advocates simply agree to de-subsidize the entire energy sector, so all options can compete on a level playing field?

The Energy Policy Act of 2005 is festooned with lavish subsidies and regulatory shortcuts for favored technologies that can’t compete unaided. Nuclear expansion, for example, gets ~$13 billion in new gifts from the taxpayer; 80 percent loan guarantees (if appropriated), ~$3 billion in dubious “R&D,” 50 percent licensing-cost subsidies, $2 billion of public insurance against any legal or regulatory delays, a 1.8¢/kWh increase in operating subsidies for the first 8 years and 6 GW (equivalent to a capital subsidy of ~$842/kW—roughly two-fifths of likely capital cost), a new $1.3-billion tax break for decommissioning funds, and liability for mishaps capped at $10.9 billion (and largely evadable through shell companies). The industry already enjoyed Treasury payments to operators as a penalty for late acceptance of nuclear waste (which there’s no place to put nor obvious prospect of one), free offsite security, and almost no substantive public participation in or judicial review of licensing. The total new subsidies approximate the entire capital cost of six big new nuclear plants. Taxpayers have assumed nearly all the costs and risks they didn’t already bear; the promoters, who aren’t willing to risk any material amount of their own capital (despite ~$447 billion of 2003 revenues), will pocket any upside. Yes, this boost may yield slight twitches from the moribund nuclear industry—but no authentic revival.

Lord Keynes said, “If a thing is not worth doing, it is not worth doing well.” Nuclear power has already died of an incurable attack of market forces, with no credible prospect of revival. Current efforts to deny this reality will only waste money, further distort markets, and reduce and retard carbon dioxide displacement. The cheaper, faster, abundant alternatives are now empirically at
least twice as big, are being bought an order of magnitude faster in GW/y, and offer far greater ultimate potential. Since nuclear power is therefore unnecessary and uneconomic, we needn’t debate whether it’s safe. And the more concerned you are about climate change, the more vital it is to invest judiciously, not indiscriminately—best buys first, not the more the merrier.

A state government committed to market-based, least-cost energy policies could do much to correct the distortions introduced by misguided federal policies. State energy taxes might even be designed to offset federal energy subsidies, technology-by-technology, to create a “subsidy-free zone.” This should have a salutary effect on energy cost, security, environmental impacts, and broad economic benefits. Just talking seriously about it and analyzing its consequences could help to focus attention on the differences between current federal energy policy and sound freemarket principles. Such a state could become the first jurisdiction in the world to allow all ways to save or produce energy to compete fairly and at honest prices, regardless of which kind they are, what technology they use, how big they are, or who owns them. Who could be against that?

Amory Lovins is Chief Executive Officer of the Rocky Mountain Institute (www.rmi.org). This article is an excerpt from the more detailed and footnoted September 11, 2005 paper, which is Copyright © Rocky Mountain Institute 2005. All rights reserved. Posted at: http://www.rmi.org/images/PDFs/Energy/E05-08_NukePwrEcon.pdf

Figure. 2. Nuclear power’s allegedly “small, slow” decentralized low- and no-carbon supply-side competitors are growing far faster, and are taking off rapidly while nuclear additions fade. Note also the light dotted line of nuclear construction starts, a leading indicator. (It stops in 2004 because future plans are uncertain; due to lead times, this won’t affect 2010 completions.)

Figure. 3. The canonical 2003 MIT study, whose results continue to look conservative, says a new nuclear plant would produce electricity for about 7.0¢/kWh (2004 $). Adding the cost of delivery to the customers (at least 2.75¢/kWh) raises this busbar cost to 9.8¢ per delivered kWh. The decentralized competitors’ delivered costs shown are those typically observed for well-executed projects in the U.S. marketplace, using assumptions that systematically favor nuclear power."