What explains the diametrically opposed positions on nuclear power witnessed between France and Germany? France is arguably the most pro-nuclear energy country in the world, and Germany, while it may be having second thoughts, has been retiring its aging nuclear plants so as to gradually phase out of the nuclear energy business.

These two countries have quite a bit in common in addition to being neighbors. They have similar sized populations and economies. While Germany is a little bigger in terms of both population and Gross Domestic Product (GDP), the two countries’ per capita GDP figures are quite close. On a broad continuum of political governance, they are quite close together as republics with parliaments and constitutions. There is a paper that suggests that Frances nuclear power optimism is a product of a system of governance that makes it hard for dissenting interest groups to make headway into impacting policy. (Delmas & Heiman, J of Policy Analysis and Management, 20 (3), pp. 433 – 456) They both built considerable nuclear capacity initially.

First, it may be interesting to consider those commonly hypothesized explanations that don’t do so well at clarifying this divide. One might find it reasonable to expect that public opinion about nuclear energy in the two countries would be radically different, and that this is the root of the divide. However, there is a survey conducted by GlobeScan on behalf of the International Atomic Energy Agency (IAEA) that shows that, while Germans do have a slightly higher proportion of their population with negative opinions on nuclear, the differences were not, in fact, massive.

In France there is not a majority of the population clamoring for more plants, and, on the other hand, the percentage of Germans that want to see more nuclear power is only a couple percentage points below what is seen in France. These results could be deceptive. “Use existing facilities, do not build more”, which is the largest response category for both countries, could mean different things to citizens of the two countries. France might be considered to be at its saturation point with respect to nuclear power. Even though it is a major electricity exporter (including to Germany), France has so much nuclear capacity that it uses it not just for base-load production but also in a load-following role that is less optimal for nuclear plants. This is reflected in the lower capacity factors seen in France than most other advanced nuclear countries. (A capacity factor is a proportion representing what a plant actually produces over what it could theoretically deliver if it operated at its rated capacity constantly over a time period.) At any rate, when a Frenchman says don’t build more, he or she may just be saying that there is enough to meet the need and it would not be cost-effective to build more, whereas a German, not being near that saturation point, may be more likely to be expressing a negative view toward nuclear energy. However, if one examines the polling data for whether nuclear energy should be expanded to mitigate climate change, French and Germans are quite similar in the proportions that want expansion (about 40% each), but Germans have a somewhat higher proportion that are opposed to building more nuclear plants for this purpose (56% to France’s 43%).

Germany has been advancing renewable energy plants. However, as I have mentioned in past posts, these sources are not yet up to replacing coal and nuclear. While it has been posited that Germans are more environmentally conscientious, as observed in their build up of renewables, it should be noted that German emissions of greenhouse gases from energy production is significantly higher than France’s, even when one normalizes per capita or per GDP dollar (i.e. carbon intensity) the French come out ahead. It is also worth noting that it has only been quite recently that Germany has outdone France with respect to either the proportion of electricity coming from renewables or the absolute value of renewable electricity generated.

Besides differing policies toward nuclear energy, what else separates France and Germany? One prominent difference is that France is a nuclear weapons state, but Germany is not. This is not to imply that there is a connection between the difference on nuclear weapons and on nuclear energy – particularly given the fact that these two countries were building nuclear energy capacity side-by-side  in earlier times. However, it does act as a reminder that this policy gulf may, in fact, be idiosyncratic to the two countries in question. It may be tied to the history of each going back to the early days of the Cold War.

There are some differences that may have some generalizability. One factor is that French nuclear infrastructure is owned by firms that are super-majority owned by the French government, while German nuclear infrastructures are primarily owned by private sector firms. This may make a difference in that governments presumably have different attitudes towards risk and uncertainty than private-sector firms. Governments are used to being able to redistribute risk across the entire population, and, being expected to assume certain high consequence operations, are more used to such activities. Firms have to think about risk and uncertainty differently because they can only distribute their risk through costly insurance programs. If one considers the 53 nuclear power plants currently under construction, only two are being built in a country, Japan, where the private-sector dominates power plant ownership. Even the one plant currently under construction in the US is being built by the Tennessee Valley Authority, which is one of the few Federally owned corporations in the United States. It is very common to have mixed public-private ownership of nuclear power plants, but strictly privately owned plants are a rarity, even with the many policies put in place to facilitate them.

Another notable difference is that Germany has massive stocks of coal.While Germany’s reliance on coal has been dropping, it is still true that both its production and consumption of coal are several times that of France.  Coal, like nuclear, is ideal for base-load power production, and, for that reason, coal may be considered the primary competitor of nuclear power in its domain. It is true that natural gas, which is ideal for peak-load production, is also used widely for base-load capacity – particularly when natural gas prices are low.

The case of France and Germany is an interesting one for considering why one state might be bullish on nuclear power while another, facing many similar circumstances, is bearish. Of course, as mentioned it may or may not be possible to generalize from this case to others. It is certainly possible that there are idiosyncratic explanations for this difference in policy. Even some of the more generalizable explanations just beg further questions. For example, if the public-sector versus private-sector ownership is an important factor, this raises the question of why the two countries took different approaches to plant ownership. Applying the hypothesis that having an abundance of fossil fuel deposits reduces the incentive to build nuclear plants to a broader set of countries can yield ambiguous results.

Data Source: Energy Information Administration: Short-Term Energy Outlook, August 2009

 The answer to the question posed by the title, of course, varies depending upon the nature of one’s yardstick. As one can see, renewables are minor players in US electricity generation when compared with coal, natural gas, and nuclear. Geothermal displays less than 0.8% of the output of coal, and the figures for solar and wind are 0.07% and - a whopping  – 2.4% respectively.

If the point of comparison is how much other countries generate by renewables in absolute terms, the US is certainly prominent, coming in behind only a few other large countries. Of course, this may lead one to note that the US is a collosal juggernaut in terms of both electricity consumption and generation, and the fact that countries like China, Canada, and, recently and presumbly based on its bio-fuel pursuits, Brazil are bigger lead one to wonder where the US falls in electricity generated by renewables as a percentage of total electricity generated. At about 9% of net electricity generation coming from renewables, the US is not near the top of countries using renewables, and for 2005 (the most recent year for which their is widespread data) the US came in about 117th out of 212 countries.

The US has been ramping up wind power as of late, and did recently surpass Germany as the world’s number one country for wind generation of electricity. However, it should be noted that the total net electricity generation by wind in the US in 2007 (when Germany still reigned supreme) was about equal to the output of four typical nuclear power plants (i.e. assuming 1,000MW(e) plants running at a modest 90% of capacity.)

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.

Technology Review’s  “Top Ten Emerging Technologies for 2009″ issue is now out. (see: http://www.technologyreview.com/specialreports/specialreport.aspx?id=37)  Among the ten technologies anticipated to “change the way we live” is the Traveling Wave Reactor design developed by Intellectual Ventures. Intellectual Ventures is a Bellevue, Washington company founded by a couple former Microsoft executives that combines venture capitalism with research and development. The reactor in question would internally convert some of the non-fissile isotopes in natural uranium into fissionable components, and, therefore, breed its own fuel.

If its promise can be realized, such a reactor would offer a number of proliferation risk mitigating effects as well as some environmentally friendly benefits. First, it apparently reduces the amount of uranium enrichment that would be required. Apparently, the process uses only a small amount of uranium enriched in the Uranium-235 isotope, and, because it makes its own fuel, no fuel changes would be needed over the life of the plant. This means that the desire to build more enrichment plants globally to either meet expanding demand or to assuage supply disruption fears would be reduced. 

Second, it would presumably reduce the need to recycle / reprocess (proponents using the former term and opponents the later) spent nuclear fuel via external facilities, because this would be done internally within the reactor. Presently, good arguments have been offered for moving toward a closed fuel cycle ala France rather than the open one ala the US. An open cycle uses fuel once and then puts it into storage, a closed one (reprocessing/ recycling) extracts fissile material from the spent fuel and runs it through another reactor to get more electricity for the dollar. The arguments in favor of recycling fuel are based on both economics and environmental factors. For one thing, the closed cycle radically expands the amount of nuclear fuel that is available in the world. Another factor is that recycling the fuel reduces the amount of high-level radioactive waste that must be stored. 

So, given these upsides of recycling, why isn’t the US doing it? There are at least two reasons. One is that the process is expensive. Proponents of recycling will argue that not all the benefits are captured by those considering the expense of recycling. Such benefits include: a.)  a decreased amount that needs to be stored, and, thus, a need for fewer / smaller repositories; b.) a reduced longevity of the radioactivity of waste products; and c.) a vastly expanded stock of available fuel that will push out into the future the date at which short supplies lead to skyrocketing  prices. These may all be true, but the fact of the matter is that private companies don’t see it this way. This is because individual firms don’t calculate benefits accruing to society as a whole into their bottom lines, and the future is heavily discounted such that the difference between running out of nuclear fuel in hundreds of years versus tens of thousands of years is inconsequential (these timescales are  not based on calculations or even an educated guess, but are just a, possibly hyperbolic, literary device). This leaves government to take the task of capturing societal cost and benefits, but governments tend to be near-sighted themselves. 

The other downside of recycling or reprocessing is that the extracted fissile material from the spent fuel  translates into a potentially greater risk that such material will be diverted to military or criminal uses. Recycling involves transporting material, plutonium getting caught up in pipes, and whole new facilities to monitor. However, the traveling wave reactor would seem to achieves at least some of this within the reactor.  Since one can’t steal the fuel from inside a reactor (they tend to be both really hot and highly radioactive), some degree of recycling is achieved without the proliferation risk.

Before one gets too excited, it is important to realize that the reactor is at the moment a design, and idea. There are several hurdles that must be leapt before this technology can contribute to a change in the way we live. First, it has to be taken from a theoretically appealing concept to a physically preforming technology. The second, and no doubt harder chore, is that it must be made economically competitive with existing technologies. Finally, along the way there will be a number of powerful firms, in some cases closely tied to governments, that will stand to lose as such a technology takes over.

I tend to be inherently pessimistic; even when, as in this case, I am fundamentally ignorant of the technical issues involved. Things that are easily achieved are readily done, and most of what isn’t fails. That being said, I am hopeful that this and other technologies that can offer us the environmental benefits and energy security of nuclear power while simultaneously reducing the proliferation threats will succeed sooner rather than later.

Natural Gas Power Plant in Budapest, Hungary

I use the term the Russian gas weapon hesitantly, realizing that it sounds like something that comes from eating too much cabbage. The conflict between Gazprom and the Ukraine over whether the Russian energy giant is being adequately compensated for all of the natural gas used by Ukrainian customers continues to make parts of Europe a collateral damage zone. Quite a number of European countries obtain much of, if not most of, their natural gas from Russia, and the pipeline through the Ukraine serves many countries in southern Central and Eastern Europe (CEE).  With mid-winter heating needs and natural gas serving as an important source of peak-load electricity, countries such as Serbia, Bulgaria, Slovenia, Slovakia, Hungary, and Moldova have been feeling the pinch. Countries that had no other natural gas source began having factories shut down and heating cut-off, and many of those that did initially began to horde.  Hungary was holding its stocks in country, but, noting the dire situation in Serbia, both the Hungarians and Germans began to release natural gas to the Serbians recently.

Gazprom’s withholding of gas is a prime example of the type of threat to energy security that countries around the world have dire concerns about. Furthermore, it is particularly disheartening because it shows that states can be cut off for reasons that apparently have nothing to do with their own behavior. No doubt  the Russians figured that hitting Europe would lead to pressure on the Ukraine, but, besides that side-effect, it does not seem that closing the spigots is directed at Europe. (While one might think that they also had it in their head to show the new NATO members how Russia can put a hurt on them, the fact that their long-time friend and ally Serbia is about the worst hit would seem to serve as evidence against that speculation.) 

It is interesting how fragile supply lines are for such commodities. Within a day after supplies were shut off, these countries started feeling the effects and were taking actions to get them through the gas draught. As someone who lives in an area serviced by the Gulf of Mexico region refineries, I can attest that short refinery shut downs due to storms quickly affect gasoline availability at the pumps.

As the conflict continues, it is already having wide ranging effects. Both Slovakia and Bulgaria have considered restarting Soviet era VVER-440 reactors to prevent disruptions in their power grid. When Slovakia initially suggested this it was rebuked by other European countries as a violation of their EU accession agreement. No doubt the old Soviet era nuclear reactors are considered a safety concern, and probably are.

It will be interesting to see what effects this event will have on long-term policy, if any. While it is certainly demoralizing, it seems as though it may be difficult to do anything about it in the short term. Some European countries have taken considerable actions to reduce dependency, but it seems to be a drop in the bucket. When I was flying back from Hungary in December I could see massive wind farms over what I believe would have been Germany. While laudable, that isn’t going cut it, particularly if the Germans maintain a stance of eliminating their nuclear plants.  Though they can always continue to import electricity from France.

I saw “The Day the Earth Stood Still” this weekend. Those who haven’t seen it may have gathered from the trailer or the original that,… SPOILER WARNING… the essential premise is that an alien, Klaatu (played by Keanu Reeves), is tasked with making a determination about whether humanity can turn around its behavior before it destroys a rare planet capable of sustaining life. Among the major complaints of reviewers seemed to be that the film was high on preachiness and Computer Generated Imagery (CGI) and low on story and acting. This aside, I think an interesting question is raised about what it takes to change fundamental human behavior. (A more interesting critique might be why the producers / writers thought a  benevolent species that used energy so wastefully [giant orbs creating light that served no purpose] without apparently causing pollution would opt for destruction of humanity rather than sharing this high intensity – low waste energy source.)

While there is still a debate about whether climate disruption is real and the degree to which it is created by humanity (versus natural processes), the scales seems to have tipped in favor of those who think human activities must be changed in order to reduce a very high risk of catastrophic results. The question is whether anything can and will be done about it on a revolutionary time scale (we are of course already making changes on a more gradually paced time scale.)  President-elect Obama has stated his desire to create a green energy revolution that would create a jobs building energy capacity based on more environmentally friendly energy sources. However, there are difficulties that have historically prevented not only the US, but the world more generally, from moving full-speed ahead in this direction.

At its heart, the issue is that green energy technologies are, for the most part, not cost-effective at the current time. This means that the commercial world will not switch to them of there own volition. A firm cannot take on higher energy costs than its competitors without reducing its profit or, possibly, driving itself out of the market altogether, and, therefore, there is an incentive to let others change without doing so oneself. Using a more expensive energy technology translates to fewer dollars for spending on other goods and services. Our economy is based on the ability of people to perpetually buy more and better stuff and if people have to spend more of their incomes for a given amount of a staple like energy the less they have available for what passes for enhanced standard of living (more and better stuff.)

Nuclear is cost competitive (though it is hard-pressed to compete with coal in the absence of a carbon tax) and reduces carbon emissions for a given energy output, but it can’t meet all our green energy needs. First of all, nuclear plants are expensive to build and take about six years to build (and this length will grow much longer as the number of plants under construction increases because of limited suppliers of certain components and shortages of qualified /certified labor.) Second, in an era of tight credit, financing such huge capital costs may prove challenging. Third, there are just not enough qualified people to build and run these plants. Finally, no good policy has yet developed for dealing with spent fuel.

Coal is an incredibly inexpensive fuel if one doesn’t count the marginal social cost of carbon emissions. There are technologies such as carbon sequestration that may make coal more environmentally palatable, but it is not yet cost-effective in the absence of a carbon tax.

Unless it turns out that the time is ripe for various green technologies to become cost competitive, I have trouble imaging that there can be much success in developing such a revolution. In essence, it seems that the policies designed to create substantial numbers of jobs may have to follow the technology development rather than leading it. Of course, there are any number of  good policies to be enacted to motivate research and development, but developing jobs around these technologies before they are adequately mature may not be feasible. 

South Africa just dropped its plan to build 2 or 3 new nuclear plants. The state-owned firm Eskom was looking to borrow roughly $15 billion USD (150 bil. SA Rand), and, having faced a recent cut in its credit rating, was unable to proceed. Areva and Westinghouse were competing to build 3,300MW(e) or 3,420 MW(e) of new capacity,respectively, to meet South Africa’s thirst for more electricity.

It will be interesting to see whether this is an event entirely idiosyncratic to South Africa, or whether global credit woes will put the kaibosh on other countries’ plans to expand or create their nuclear power infrastructures. Nuclear power plants come with huge price tags, and are financed in a number of ways from bond issues to bank loans to combinations of the above that all rely on willing lenders with available cash. (Taxation is often another possibility for state-owned utilities, but not one without difficulties.) The $1,500 – $2,000 per kilowatt estimate (translating to $1.5 – $2 billion [USD] on a  typical 1000MW(e) plant) that is often quoted doesn’t account for the costs of financing the plant or the all-to-common costs or for going over schedule, let alone other substantial incidental costs incurred before the plant starts making any money.

It should be noted that, while South Africa is postponing its nuclear expansion, others are simultaneously going forward. Turkey said that it will make a decision by the latter half of this month on a bid from a Russo-Turkish joint venture to build that country’s first plant. Even Singapore announced that it was interested in the possibility of nuclear power, though it would probably have to wait for some of the autonomous underground plants that are being developed- given a high population density and no ground to spare.

Lest one think that the stories mentioned in the proceeding paragraph indicate that the nuclear renaissance is alive-and-well, there are some counterpoints that should be considered. First, it is not the first time that Turkey has gotten well into the acquisition process. Daniel Poneman, in a book published in 1982 called Nuclear Power in the Developing World, wrote about how a Turkish deal for a nuclear power plant fell through in the late 1970’s as they were in negotiations to sign a contract. Second, the Singaporean case is typical of many countries that see all the benefits of nuclear power, but have trouble fathoming all the difficulties until they get into the meat of the process. This is not to say that nascent nuclear power states’ intentions should be discounted. While countries like Turkey, Indonesia, and Bangladesh may have a long history of talking up nuclear power reactors without actually obtaining them, that does not mean that things will not be different now. After all, while  Santayana might have been correct that “those who cannot remember the past are condemned to repeat it”, it is also true that ‘he who makes judgements solely on history is bound to suffer great surprises on occasion.’ The world is a different place both in that there is a great deal of concern about carbon emissions and some of the emerging market countries with big populations are developing into huge economies. Having said that, a history of not following through constitutes risk, and, while lenders may like the rewards that accompany risk, these risks are of a company-killing scale.

I am interested in what people’s thoughts are regarding the effect of energy scarcity on the future of the US. Historically, competition for resources has been the root of conflicts, financial turmoil, but also a driver of innovation. Now due to the newly expanded capabilities of WordPress and PollDaddy, I am able to gather this imformation. The poll linked to below asks a series of questions regarding your thoughts on nuclear energy, bio-fuels, petroleum, and environmental/energy issues.

Your participation would be greatly appreciated. 

http://www.polldaddy.com/s/97433363EA181C3C/

Data Source: Energy Information Administration

If one considers nuclear plant capacity (the amount of electricity a plant could generate if it ran at full power) plotted against plant age for all US reactors, one sees a clear cut tendency for capacities to be higher for newer plants. While this may in part have to do with technological advances that have allowed larger plants to be made, it is emblematic of beliefs about economies of scale in nuclear power plants. In essence, if a 1000 Megawatt (MW) plant doesn’t cost twice as much to build as a 500 MW plant, there is an incentive to build the larger plant. This has been the prevailing notion for quite some time, and it has had a profound influence on the nature of the development of nuclear power globally.

Over the years, some have questioned this thinking about economies of scale. A notable example comes from Marshall and Navarro who wrote in the Rand Journal of Economics in 1991. Marshall and Navarro essentially argue that economies of scale for nuclear power plants are an illusion created by a false paradigm of not accounting for the cost of money over time. That is, if the measure of cost one uses is the lump sum value of present-day dollars one would have to pay today for the plant, then these economies of scale clearly exist. However, in reality plants have to be financed, and there is a long period during which they are being paid for but are not yet generating revenue. If a measure of cost is used that accounts for the effects of interest payments, the economies of scale effect becomes statistically insignificant.

It should be noted that electricity is an interesting beast as a commodity. Not only is there a constant need to balance supply and demand in real-time because storage is not possible, but the farther a plant is away from the the consumer the more waste occurs. Electricity is not like oil with which there is a time delay in getting the product from producer to consumer but without significant loss enroute, but, instead, is more like oil if there was a leak in the tanker. In such a case, there would be very little loss if the producer were near the consumer, but could be vast losses if they are far apart. For example, according to data from the Energy Information Administration, the US (a geographically big country and a huge electricity consumer) lost more electricity to distribution losses in 2005 than the entire country of Spain consumed in that year. 

I mention this because one can imagine that if smaller plants could be built that would be more proximal  to customers on average, there would be advantages to be had over massive plants that are more distal to consumers on average. Nuclear power has an interesting intensity in that 0.6% of US generating plants constitute 10% of the capacity, but, because of limited shut-downs and the ability to run these at near capacity much of the time, they produce 20% of US electricity. However, as nuclear plants are substantially larger than other plants (and because people don’t want them too close to large metropolitan areas) one would expect they have much higher distribution losses on average than other types of plants which are typically of much smaller scale. (I use the fudge words because I am not an engineer but rather an economist, and my assumptions may lack technical merit.)

For nuclear power to be a feasible option for some of the nations that have expressed interest in it, it would have to be cost effective to make plants on a smaller scale. Having one plant make up too high a proportion of a given electrical grid’s power is apparently problematic. The risk of system collapse becomes much larger if a lot of the power is coming from one source. When the plant has to shut down, and the remaining generators cannot meet the base load, the precarious balance between supply and demand is disrupted. The problem is that some of the developing countries that would like to develop nuclear power would derive a high proportion of their overall electricity (well over 10-15%) from one reactor built on the scale typically seen these days in places like France, Japan, China, or, soon, the US.

I am interested in the feasibility of small reactors. There are a wide range of possibilities- from the floating power plants that the Russians have been working on to smaller fixed plants. In some cases these raise interesting questions about nonproliferation and spent fuel management that must be worked out in advance. While the financial arguments about the lack of economies of scale under realistic assumptions about cost  are intriguing, there is no indication that they are swaying behavior. It may, therefore, take technological advancements rather than economic ones to change the trend toward bigger plants. Small reactors could change the nature of the nuclear renaissance, and such a flowering of nuclear power in the developing world is probably unlikely to occur under the current notions of scale in any but a few emerging economies.

I am interested as an electrical power neophyte to here more informed views on this post.

Senator McCain made a speech yesterday advocating the need for an increased nuclear power generation capability in the US. Let me first say that I agree with a number of the positions proposed by the Republican nominee. Nuclear power will have to be part of the solution to the energy and environmental challenges confronting the world today. Wind, solar, and tidal power should be developed to their utmost, but, considering their limited capacity into the foreseeable future, they are incapable of meeting anywhere near our demand. If we are serious about cutting carbon emissions in a manner that is not crippling to our economy, nuclear expansion has to be on the agenda. 

Recycling spent fuel may make good sense too. It reduces the amount of the waste product and, as I understand it, it decreases the half-life of those radioactive waste products that must be stored. Furthermore, it gives you more power out of the same material. It is true that plutonium reprocessing/recycling has not been cost-effective historically, and I would not advocate government subsidization of it. This process must be cost-effective, but possibly with a greater accounting of costs it would be considered so. The French certainly believe spent fuel recycling is worth the investment. Despite scares involving “plutonium hang-up” – the tendency for plutonium material to get stuck in pipes and fixtures at reprocessing facilities so as to create the impression that material has gone missing- the experience of France gives reason to believe that spent fuel recycling can be done safely and securely.

Where the train went off the rails was with the statement about 45 new nuclear power plants by 2030. Now I am not saying that McCain is self-medicating with medicinal marijuana, but he may want to get urine samples from his staff - starting with whomever gave him this suggestion. It is true that a number of advances have been made that could increase the speed of reactor deployment. The most notable of these is the shift to using a few standardized reactor designs instead of making each plant a unique entity unto itself. This cuts time in the early phases because the Nuclear Regulatory Commission (NRC) does not have to evaluate every aspect of the design every time, but rather whether the site is suitable and whether any design modifications are acceptable.

The above being said, there are a number of realities that make 45 reactors in less than a quarter of a century a difficult prospect to swallow.  First, there is a huge human capital deficit. The skilled craftsman and engineers needed for an undertaking of this scope are not available. The US certainly hasn’t been producing them at the rate needed for such a boom, because we haven’t been building new nuclear power plants in recent decades. It is true that we should not need to think solely within our own borders. However, besides the French, much of the rest of the world has seen a lull in new reactor production as well - at least since Chernobyl. Furthermore, one can expect all manner of delays resulting from attempting to use international firms. Consider what happened to the Air Force when they made the dread mistake of giving a contract to the lowest bidder who offered to make a plane meeting their specs (which happened to be a consortium including European Aeronautic Defence and Space company [EADS]). That is, one can expect political fall-out, perhaps even considering the security ramifications of having foreign firms build something as sensitive as nuclear reactors. Not that there should be any problem, but nor should there have been with a Dubai company contracting to manage US ports, but one should expect hang-ups due to alarmism and nationalist sentiment.

Second, there will be political resistance every step of the way. It may be true that resistance of the American citizenry to nuclear power seems to be waning, and that the greatest supporters of nuclear power are those who have a nuclear plant in their communities already. (People often point out that this effect is because the nuclear plant is the bread and butter of such locales. True enough, but if they were having 8-toed 3-eyed babies it would hard to imagine that the support wouldn’t falter.) All this being said, there is still a vocal faction of the populace that will drag their feet every step of the way, and who have the political acumen to succeed in holding things up.

My final point is that the utilities who would be the ones actually building these plants would have to be ready, willing, and able to plonk down a lot of money over a relatively short time-frame in an investment with an uncertain future. Not that there is a particularly great deal of uncertainty, but the future is always uncertain. Carbon sequestration technology improvements might make nuclear an uncompetitive producer of base-load power compared with coal – even with the costs of carbon included, or any number of other events could occur (a freak accident causing panic) that could make the investment flop. McCain may intend to offer public financial support. Such a plan suffers a couple problems. One is a political resistance problem not only from the aforementioned anti-nuclear power establishment, but also from the coal suppliers, mining labor, etc. Nuclear competes with coal as a base-load power supply, and the coal establishment has a right to resist subsidization of its competitor. The other thing is that we are running persistent national debt, and, in my opinion, we should avoid shoveling more money into government subsidization of for-profit firms.

I could be wrong about this, but these words will long be forgotted by 2030. Of course, I suspect Senator McCain was thinking the same thing. Barring breakthroughs in genetics or cyrogenics, I don’t think anyone will be holding the good Senator accountable.