Having seen the other deliberation group in class discussing nuclear fuel as another source of fuel, I thought that I would discuss what the current financial situation is for the nuclear energy industry right now. That is to say whether the expansion of nuclear energy is practical at this point in time. It is my belief, that while nuclear energy does and will have it’s place in society, it does not have potential to be expanded upon in the near future based on current public perception, liabilities, and technology.
Before we move to the three main points that detract from the practicability of implementing nuclear energy in the US currently, we first have to discuss the entrepreneurs who would be able to begin a nuclear plant project. Based on current trends, the capital cost for creating a nuclear power plant is enormous. Looking simply at the construction, the construction of a plant costs somewhere in the ball park of 8-12 billion dollars (http://www.synapse-energy.com/sites/default/files/SynapsePaper.2008-07.0.Nuclear-Plant-Construction-Costs.A0022_0.pdf). This does not even factor in the cost of land, which based on location could increase this price by a significant amount. Furthermore, such a project tends to be delayed due to the long period of construction and unforeseen delays caused by the environment or other factors. This price is projected at 1.2 million dollars a day (http://www.world-nuclear.org/info/Economic-Aspects/Economics-of-Nuclear-Power/). As one can see, the capital costs of undertaking the construction of one of these plants is a significant hump to overcome.
Assuming one is able to find the financing to create a project, one has to then deal with the liabilities of owning a nuclear plant. In most scenarios this is the equivalent of playing with fire… Except fire that can get out of control in a moments notice and kill all like within a few miles. We’ll touch on the technological advancements later, but for now, one must assume that based on current, tested technology, there is a significant portion of risk associated with explosions. Now the question then turns to who is liable for these damages if a meltdown does occur. Based on current legislation, nuclear damage responsibility comes down to the following main points (http://www.world-nuclear.org/info/Safety-and-Security/Safety-of-Plants/Liability-for-Nuclear-Damage/):
- Strict liability of the nuclear operator
- Exclusive liability of the operator of a nuclear installation
- Compensation without discrimination based on nationality, domicile or residence
- Mandatory financial coverage of the operator’s liability
- Exclusive jurisdiction (only courts of the State in which the nuclear accident occurs have jurisdiction)
- Limitation of liability in amount and in time
Strict liability, the first point, means that no matter what occurred, even if the plant was sabotaged, whoever operates/owns the plant is completely 100% responsible for the incident, no proof needed, end of story.
Exclusive liability then means that everyone who was possibly effected by any accident the plant caused can bring any legal claim or prosecution against the operator/owner of the nuclear plant. So in the event of an accident you’re going to be sued…a lot.
Mandatory financial coverage means that a nuclear plant is required to have insurance at all times and also set aside a fund in the event of an accident to cover damages (Normally around 10 billion, based on national treaties, laws, etc) but this money probably won’t cover everything in the event of a meltdown.
Exclusive jurisdiction simply means the operator can only be legally charged within the country of residence.
Limitation of liability, the only pro-operator law in place, says the liability the operator has to pay for accident coverage is capped, and that the state or other organization will help pay for the rest. This makes sense as there is no possible way a single operator could every pay back the total price of everything within 6ish square miles. And no, even if you do manage to make it out of the accident still financially well off, the rest of your money is probably going to be lost within court due to that exclusive liability clause!
So basically the amount of risk tolerance an entrepreneur has to have in order to begin to invest in this undertaking is ridiculously high; this presents an enigma. Entrepreneurs who manage to make billions, aka those who could start a nuclear plant, are risk adverse. This is not to say that they didn’t take calculated risks, but the risk they would take on building a nuclear plant, given the liabilities, means that they would most likely not support the construction of a nuclear plant easily.
Now, if the risk was removed on the other hand, this would be a ripe opportunity for these entrepreneurs to invest. Given the relatively cheap runtime cost of a nuclear plant after the capital costs and infrastructure have been implemented, they are actually fairly profitable; the current drain on funds is the massive insurance policies they must take out in order to hedge against risk of upscale accidents. If this risk was removed, and these insurance policies could be scaled back, these would be very profitable ventures.
This brings up the idea of technology, like the liquid thorium focused plant and similar newer nuclear methods, which have relatively little danger. However, this technology is in its infancy, and giving the immense glut of technical knowledge required in the understanding of these new plants juxtaposed against the entrepreneurs business focused, do what works based on the past mindset, one can see why investors are not flocking to expedite the development of these newer technologies.
In addition, the current public perception of nuclear power plants following chernobyl and similar nuclear incidents, and the massive amount of legislature these events have sparked also detract from the attractiveness of entrepreneurs investing in nuclear plants. However, when technology does reach a point where the massive liability associated with a nuclear plant can be eliminated or limited, and the social stigma subsides as nuclear devices become more mainstream, resulting the the repeal of overly critical legislature, it is at that time when entrepeneurs acrosse the country will flock to the nuclear sector, resulting in a relatively seamless transition of much of our nation’s energy to nuclear reactions.
I agree wholeheartedly with this post. Private industry is not going to take the lead in developing LFTRs and other safer, more technologically advanced reactors, like I said in my blog last week. So, yeah, I think it’s true that nuclear as the general public knows it won’t be expanded upon in the near future, meaning the next 25-30 years. But, as the national laboratories of other countries develop exponentially safer reactors that require less containment, space, monitoring, etc., I wouldn’t be surprised if nuclear energy becomes much more profitable while becoming less risky. At least from what I know about them, if China or India manages to develop a large-scale LFTR, I think private industry would absolutely flock to it, as you put it.
Ben, I really like two things about this post. One is how you seem to incorporate elements of everything we have seen in the class thus far into it, being your mention of Liquid Thorium Reactors (which I know Zach has talked about), or just expanding on the nuclear side of the energy debate (which is, as you said, part of the other group’s deliberation). You just take a deeper approach to it all through an economic standpoint. Which brings me to the other thing I really like: the economics. So many people are concerned about whether decisions are good for the world, or for their children’s future etc. Now don’t get me wrong, those elements are extremely important, but I think viewing problems from an economic point of view is a completely fresh, different view that never gets seen. And you present it very well with many facts. Nice Job!
Personally, I never looked at nuclear energy from this perspective. It’s really interesting to see what goes into the early stages of building a power plant, and why we do’t see them everywhere at once.