Babcock and Wilcox (B&W) have announced plans to sell a scalable modular reactor called mPower(TM) that would come in sizes as small as 125 MegaWatt (electrical) [MW(e)]. (See:  www.babcock.com/products/modular_nuclear/) This is not the first we have heard of small nuclear power plants with long (5 year) fueling cycles. For well over a decade it has been argued that economies of scale for nuclear power plants are a myth, and that there are benefits to be had by building smaller plants. To clarify, the argument is that, while multiple units per site may be beneficial, the monstrous 1000+MW(e) plants do not result in lower average costs of construction than do smaller plants. While many studies seem to bear this out, it seems clear that utilities globally have not bought into the argument. One need only look at the plants being constructed to see that, except for Pakistan, these units tend to be on the order of 1000MW(e). B&W seem to be banking that they can gain purchase with an idea that has not proved immensely popular in the past, but their approach of combining the strengths of existing approaches to nuclear power with the small modular design may, in deed, give them an edge over some past plant ideas.

The arguments in favor of such small reactors are several. Smaller reactors mean that a utility will be taking a smaller amount of its base-load power off-line each time refueling takes place.  The modular design is anticipated to allow one to cut delays and the capital costs incurred in building power plants, though the fact of this will remain to be seen. Furthermore, such reactors could be used on smaller grids. There are safety gains resulting from having the containment area underground, and from passive safety systems that are also seen on other commercial designs of this generation. (Passive safety uses things like gravity-fed and convection-operated systems to achieve emergency cooling- rather than pumps and other mechanical devices. This reduces the amount that can go wrong and the amount of complexity in the system.) If these advantages prove to be true to a sufficient degree, they might change the fate of nuclear power.

The term “nuclear renaissance” has been bandied about a lot in recent years. The presumption is that we are on the leading edge of a massive world-wide expansion of nuclear power. As the argument goes, as costs and /or regulatory constraints are put on carbon emissions (e.g. the cap and trade system being worked on in the US), nuclear power, whose operation does not result in greenhouse gas production, will be a big winner. However, it remains unclear to what degree an expansion of nuclear power will include either nascent nuclear power generating countries, or, for that matter, the US. 

A review of the list of states currently constructing nuclear power shows that, except for Iran, all of the countries with plants under construction have a history with nuclear power plants. The bulk of construction is being carried out in large emerging market economies. 26 of the 45 plants being built are in the BRIC (Brazil, Russia, India, and China) countries, and other large emerging markets including Taiwan, Argentina, and the Republic of Korea account for eight more of the new plants. Of those building plants, many (e.g. Finland and Iran, though for very different reasons)  are experiencing major problems with delays and cost-overruns.  

Delays and cost-overruns are at the heart of the apparent death and only slow recovery (if it proves to be the case) of nuclear power. The appeal of nuclear power goes like this: While the cost of building nuclear power plants is enormous, the cost of running it afterwords (fuel and operations costs) compared to fossil fuel plants are quite low. Therefore, you can put some of that high revenue relative to cost into paying back your loans, and eventually, once the debt has been paid off, nuclear becomes the utility’s cheapest (and, therefore, most profitable) energy source.

There are several potential flies in the ointment with respect to the dream of nuclear power. First, delays translate into postponement of the date at which you are beginning earn a return on your investment with which to pay back loans. Readers from Georgia will be familiar with the controversial end run around this problem that utilities have made by successfully lobbying to get rate hikes in place that allow them to build a pool of funds with which to pay off debt before the plant begins to operate. Such schemes are hugely controversial for many reasons, including that they reduce the incentive to stay on schedule, current power customers subsidize future customers, and they raise a lot of questions about what happens if the plants don’t come on line. Second, cost-overruns also have the effect of increasing the capital costs. Finally, there is always risk that due to regulatory, legal, or political reasons, there will never be a return on investment. The ill-fated Long Island Lighting Company experienced this first-hand when they fully-constructed the Shoreham Nuclear Power Plant, but it never earned revenues.  Not only were massive construction costs incurred in building Shoreham, but there were also not-inconsequential costs of decommissioning, all of which had to be paid for from sources other than earned plant revenue.

Suffice it to say, a lot of nuclear energy’s woes revolve around the shear scale both with respect to finance as well as plant size. There are several nuclear aspirant countries that could not go nuclear even if they could manage to secure a few billion dollars in loans because their electrical grid or grids are not large enough to support even the smallest of the commercially available reactor designs now sold. Typical nuclear power plants are in the area of 1000+ MW(e) per unit. If that one unit makes up more than ten percent of the installed capacity on a grid, it is not likely to be feasible.

The B&W claims indicate that it would mitigate both the cost / finance difficulties and the grid size limitation issues. How the problem of grid size limitations are affected is elementary, but the mechanism by which the financial challenges are reduced is less intuitive. The idea is that the modular design would mean that the reactors could be factory-constructed and rail-shipped to  the plant location. Of course, the reactors themselves are only a portion of the infrastructure that must be build, so I’m not certain of the degree of savings to be had. That is, the cooling system, turbine housing, and systems maintain the pressure in the system are all built on site. (Of course, many of these systems are very similar to fossil fuel plants.) If it is true that you can bring the units on-line more quickly, and that they can be operated while construction is being done on the others, this could be a significant benefit. It would speed the time to receipt of revenues and the capacity to pay back loans, and would reduce the value of interest to be paid. Of course, if more utilities are successful in achieving Georgia Power’s sweet-heart deal (and it is not certain that many US utilities will build nuclear power plants if they have to shoulder a bigger portion of the risk) then there may be little incentive to reduce delays or cost-overruns.

There have been a number of newspaper articles recently signalling a change in perspective by the government of Singapore regarding nuclear power, and indicating that they are studying the options. Singapore would be an interesting case for installation of nuclear power. According to the CIA Factbook, Singapore’s land area is 682 km sq (263 sq mi) – which is about 140 km sq less than the land area of New York City- making for an average population density of about 6,745 people per square kilometer (17,490 people per square mile). 

One must assume that the Singaporean government will take into consideration not just the average operating history of nuclear power plants, which conveys a high degree of safety. Instead, they will also likely give some degree of thought to the worst case scenarios, and the worst-case scenarios (be they accidental or man-induced) are quite dire in such a densely packed area. The Singaporeans cannot simply put the plant out in a remote area and run power lines into the city. The whole country is a city – a city-state in the ancient sense – and, with a 100% urbanization rate, buffer-space does not exist.

Singapore’s adoption of nuclear power may have to take the form of small autonomous reactors that can be buried underground and uprooted whole to be refueled. Such reactors, however, may not be deemed feasible for meeting the capacity requirements of this populous and energy-intensive country. Another option is using off-shore floating power plants, but this creates its own challenges, not the least of which are that the waters around Singapore are narrow straits that are heavily-trafficked. Yet another option is to await next generation reactors that might pose substantially less risk than current power plant designs.  Whatever the Singaporean decision, it may require creative thinking to balance their energy needs with their safety and security concerns.

The confluence of $4.00+/gallon gasoline and a political season of intense clashes has ensured that we have seen, and will continue to see, a wide range of proposed fixes. Oftentimes these proposals are economically unsound, but any action that promises to lower prices at the pumps is potentially politically popular (alliteration unintended.) During the bouts of the Democratic primary, Clinton proposed reducing (or eliminating? sorry don’t remember) the gas tax. This is, of course, the kind of short-sighted pandering that does not achieve anything significant. Many economists have actually advocated higher gas taxes because there are costs that are being incurred by society that consumers don’t have to pay. (Don’t worry, politicians aren’t returning the phone calls of economists.) Put more clearly, because we can store our carbon in the air essentially for free, we do a lot more of it than we would if we had to write a check for it. A tax that is designed to reduce some activity whose cost is not fully captured in market prices is called a Pigouvian taxes. Calls for Pigouvian taxes on gasoline have fallen on deaf ears.

The tax elimination/reduction proposal above is but one of the many suggested solutions that confront the same problem. The rub is this, anything one does to allieviate the pain at the pumps ultimately exacerbates the problem. I heard discussion of a mantra of “find more and use less” the other day on the radio. This is, of course, not how markets function. When supply rises, whether it be through reducing or eliminating the Strategic Petroleum Reserve, increasing off-shore drilling, or starting ANWR drilling, there are two corresponding results. Price decreases. Yeah! Quantity demanded increases. Booh! Because people demand more, you just postpone bumping up against global supply limitations because people are not adjusting their behavior to the degree they otherwise would and the rest of the world’s demand is still climbing.

I’ve written about “pain at the pumps.” This is a more apropos analogy than one might at first think. Price increases, like pain, are a signal to us to change our behavior. Pain tells you to pull your hand off a hot stove, and high gas prices tell you to … drive a more efficient vehicle, combine errands, carpool, etc. With pain we may think that we can just medicate it away, but this can have dire consequences (i.e. walking around on a broken leg while baked, believe it or not, can have results that are less than good.) With gas price increases, there is a tendency to believe that there is some quick fix to medicate the problem away but such a solution has not been stumbled on by a political candidate do date. If such a solution exists, it has not been discovered by much smarter people than I.

By some counts, as many as 43 countries are considering building a new capability to produce electricity by means of nuclear power plants (NPPs). A few of these would enter the arena as members of a consortium of states. That is, they would jointly build a nuclear power plant, and thus might not have a reactor on their territory per se, but would none-the-less have people involved in the nuclear utility and would be beneficiary of nuclear generated electricity. Some of these countries seem to be on the fast track to making this talk a reality (e.g. Indonesia and Turkey), and, for others, it is a distant possibility at best. The question at hand is how feasible is it that there will be a vast increase in the number of nuclear generating states.

At one end of the spectrum is the possibility that no new states will succeed in developing nuclear power, and, at the other, that all of them will. It is my belief that neither of the extremes is likely to describe reality over the next couple decades. There are many reasons why a majority of the states that have mentioned building a nuclear power plant are not likely to achieve it in the foreseeable future. These reasons range from political opposition (internal and external) to the hard economic realities of attempting to finance such high, front-loaded, capital costs on less-than-stellar credit.

At the same time, there are drivers that will influence the success of some of these states. These factors include cordial relations with nuclear supplier states, a pressing need to expand electricity generation capacity, and a desire not to be caught by surprise by carbon penalties that may be around the corner. In the early stages of research on the subject, I have not yet seen much in the way of disqualifying characteristics among the states that have put forth the suggestion of becoming nuclear generators. In other words, none of them seem to be too poor to manage it -if it is a national priority for the government, and for none of them does it appear to be geographically impossible. There are many varying and contradictory definitions of “developing nation”, but states that have per capita Gross Domestic Product (GDP) of less than $20,000 per year are building 25 of the 34 NPP units that the International Atomic Energy Agency (IAEA) currently list as being under construction.