We hear this debate rage about how US has lost its “nuclear prowess” to countries like China, Japan, South Korean and EU countries. I must admit I feel some angst when looking at the peaceful use of nuclear power that began as an industry in the US and see countries taking that technology and deploying it to further the objectives of their citizens. When we see countries rich in energy resources, such as the Middle East states looking to nuclear power to conserve their natural resources for export, an obvious question is raised in one’s mind. Why is the US not taking advantage of a technology we invented decades ago?
Over three decades ago I entered the nuclear industry. In leaving college I wanted to be engaged in a cutting edge industry. This was instilled no doubt growing up during Sputnik, the space race and Neal’s “One small step…” When I left college there were two industries to consider if you wanted to be on a new frontier, aero-space and nuclear power. In choosing nuclear power it has become intertwined into the fabric of my being as it has for many of the professionals that have come and gone in the industry. With that said, America’s path with nuclear power has been charted by a series of circumstances. I would like to explore just a few of them here that have changed the landscape for this industry.
Let’s look at those who own and operate commercial nuclear power plants, the electric power utilities. Not to automatically blame the regulator, but our system of electricity supply originally set-up regulated monopolies to make the investment to provide power to citizens. Monopolies were needed to create adequate incentive and protection for investors to build and create the power plants and delivery systems necessary to serve customers at a reasonable price for the service. At the time many of these service areas were established the investor was more worried about compactness and customer density than size of the service area. In fact the regulatory bodies made the services areas larger most of the time to drive the power companies to serve less dense areas in exchange for the more densely populated areas. To further assure some level of competition on a macro scale, regulators would look to assure multiple investors/power companies had opportunities and the powerful few power companies didn’t get too large. Now over time there has been consolidation and acquisition, but always with regulatory oversight and the mindset that too large is not good for the customer.
To compare the American model to many other countries we see some stark differences. Many countries have large government or partially government owned utilities with huge (sometimes country wide) service areas considering the number of customers. As an example we can consider EDF (Electricity De France). As a partially owned government utility, energy policy can be directly set by the government through the utility’s investment in technologies. As the largest nuclear operating company backed by the full faith of the French government, the risk of poorly executed projects are easily absorbed through rates or taxes. An American utility on the other hand because of its relative size is betting the company with every nuclear plant it builds due to the cost and capitalized value of the power company. For those of us in the industry we understand the upfront cost is offset by improved operating and fuel costs over the lifecycle of the plant. This has been the case even with significant investment in plant capital programs driven by lifecycle and regulatory issues. Understanding this long term view is of little consolation for the investor that is looking at quarterly returns in lieu of the forty to eighty year lifecycle of the plant. In contrast a government investor in a policy driven investment can afford to wait and reap long term benefits of the policy. So the size and financial backing of the utility or the group of utilities building the new nuclear plants is important in the growth of the use of nuclear power to generate electricity.
The next obvious question is about cost. Why does it cost so much to build a new nuclear plant? As in all things there are multiple parts to the answer of this question. A big piece currently is basic supply and demand for raw materials needed for the plants. The cost of steel, concrete and copper has all gone up tremendously due to a worldwide demand from construction. China’s effort to create new infrastructure has affected the cost of many infrastructure projects from roads, to bridges, to water and wastewater projects as well as power plants.
Another cost driver in the US is the regulatory environment. Ask anyone who builds anything in this country. From housing, to office parks, to roads, to ditching farm land, permits from local, state and federal agencies are required. This takes time, money and delays projects. Nuclear power has this in spades not only with the Nuclear Regulatory Commission, but with permits and issues to address with state and local authorities, regional water authorities, EPA, OSHA, FAA and myriad of other combinations of letters that have come to be important constituencies in building a new nuclear plant.
We focus most often on the NRC’s regulatory authority. While the principles that have been the foundation of industry have made commercial nuclear power one of the safest heavy industries, some might say we are victims of our own success. We are here today by way of Three Mile Island, environmental consciousness of the 1980’s and 1990’s, lack of public education on nuclear power and radiation, and an investment in a regulatory body of scientists and researchers that are seeking zero risk in a risky world. If similar aversions to risk were applied by regulators in other industries, many of those industries would fail to exist as we know them. This is not to suggest increasing regulatory controls over other industries, but points to how “nuclear” power is treated different from even other energy sources and uses.
Considering risk’s role as a contributor to cost is also a regulatory founded cost. Going back to the TMI accident and the impact of the regulatory response on the plants in construction after the 1979 accident, one sees major delays and cost over runs. Most who lived through this recognize the impacts on those projects having been tied to a moving regulatory regime that forced plants in construction to be redesigned and modified to gain approval for operation. This is an impossible task to accomplish on the original schedule and original budget. It is likened to making fundamental design changes to the major systems of a Lexus while it is on the assembly line. It makes for a very expensive car. Well the financial impact on this era of plants is still being felt today as owners seek funding for their new projects. Even the loan guarantees from the DOE have financial risks built in tied to the fears developed in the 1980’s nuclear plant projects, which was the last real US nuclear plant construction experience.
On paper, the answer to this question for America is much easier stated than implemented. In the examples cited the resulting landscape is pretty much institutionalized. State regulators could permit or reduce barriers to mergers and acquisitions, or create incentives for new investment. In most likelihood the regulatory breadth of authority and political will don’t exist for the PUC’s and PSC’s to take action on a scale necessary to greatly shift the equation. They would have no impact on the merchant plants and competing utilities. Like many US investors, these regulators’ time horizons are too short and their framework doesn’t permit the creativity to allow utilities to adequately grow to a size where building new nuclear power plants is not a “bet your company” proposition.
In addition, the regulatory environment for permitting and operating new nuclear plants in the US is not likely to change significantly. As a developed nation, we have developed rules and structure to assure good citizenship with regulators continuing to develop regulations seeking perfect stewardship, all for the greater good. The investment in regulatory bodies assures the addition of new regulations not a reduction in regulation.
The US utilities don’t have the financial capacity seen in nationalized power companies in other countries, nor should we want such a system. We don’t have a sympathetic regulatory environment that advocates on behalf of the nuclear power industry. While it would be nice to have regulations that considered environmental trade-offs for human benefit, we should never have a regulatory environment that ignores risk to safe operations to support political expediency.
There are many other barriers not discussed that further add resistance to new nuclear projects. So how does the US nuclear power renaissance get traction? The way America has always advanced important priorities, through coalescing around the creative ingenuity of hard working people in combination with those who see investing in their vision of a better future as necessary. If this is done supportive policies will follow since this is still a government that is by the people.