http://www.theecologist.org/News/news_analysis/2986749/after_60_years_of_nuclear_power_the_industry_survives_only_on_stupendous_subsidies.html
After 60 years of nuclear power, the industry survives only on
stupendous subsidies
Pete Dolack
4th January 2016
Almost 60 years since the world's first commercial nuclear power station
began to deliver power to the UK's grid, the industry remains as far
from being able to cover its costs as ever, writes Pete Dolack. But
while unfunded liabilities increase year by year, governments are still
willing to commit their taxpayers' billions to new nuclear plants with
no hope of ever being viable.
The ongoing environmental disaster at Fukushima is a grim enough
reminder of the dangers of nuclear power. But nuclear does not make
sense economically, either.
The entire industry would not exist without massive government
subsidies. Quite an insult: Subsidies prop up an industry that points a
dagger at the heart of the communities where ever it operates.
The building of nuclear power plants drastically slowed after the
disasters at Three Mile Island and Chernobyl, so it is at a minimum
reckless that the latest attempt to resuscitate nuclear power pushes
forward heedless of Fukushima's discharge of radioactive materials into
the air, soil and ocean.
There are no definitive statistics on the amount of subsidies enjoyed by
nuclear power providers - in part because there so many different types
of subsidies - but it amounts to a figure, whether we calculate in
dollars, euros or pounds, in the hundreds of billions.
Quite a result for an industry whose boosters, at its dawn a
half-century ago, declared that it would provide energy "too cheap to
meter"!
Then and now ... little has changed
Taxpayers are not finished footing the bill for the industry, however.
There is the matter of disposing radioactive waste (often borne by
governments rather than energy companies) and fresh subsidies being
granted for new nuclear power plants. None of this is unprecedented -
government handouts have the been the industry's rule from its inception.
A paper written by Mark Cooper, a senior economic analyst for the
Vermont Law School Institute for Energy and the Environment, notes the
lack of economic viability then: [page iv]
"In the late 1950s the vendors of nuclear reactors knew that their
technology was untested and that nuclear safety issues had not been
resolved, so they made it clear to policymakers in Washington that they
would not build reactors if the Federal government did not shield them
from the full liability of accidents."
Nor have the economics of nuclear energy become rational today. A Union
of Concerned Scientists paper, Nuclear Power: Still Not Viable Without
Subsidies, states: [page 3]
"Despite the profoundly poor investment experience with taxpayer
subsidies to nuclear plants over the past 50 years, the objectives of
these new subsidies are precisely the same as the earlier subsidies: to
reduce the private cost of capital for new nuclear reactors and to shift
the long-term, often multi-generational risks of the nuclear fuel cycle
away from investors. And once again, these subsidies to new
reactors-whether publicly or privately owned-could end up exceeding the
value of the power produced."
The many ways of counting subsidies
Among the goodies routinely given away, according to the Concerned
Scientists, are:
Subsidies at inception, reducing capital costs and operating costs.
Accounting rules allowing companies to write down capital costs
after cost overruns, cancellations and plant abandonments, reducing
capital-recovery requirements,
Recovery of 'stranded costs' (costs to a utility's assets because
of new regulations or a deregulated market) passed on to rate payers.
Yes, you read that last item correctly. Even when the energy industry
receives its wish to be rid of regulation, it is entitled to extra money
because of the resulting rigors of market pressures.
The amount of government subsidies for nuclear (and for oil and gas) is
far greater than that for solar energy, despite Right-wing attempts to
exploit the Obama administration's generous loan guarantees to failed
California solar-panel manufacturer Solyndra.
A primary source for right-wing disinformation campaigns against
renewable energy appears to be a report by the US Energy Information
Agency that lists direct federal government subsidies to renewables as
significantly larger than for nuclear or for natural gas and petroleum
liquids for fiscal years 2007 and 2010.
The report, prepared at the behest of three hard-line Republican members
of the House of Representatives, was narrowly focused, and notes that it
"do[es] exclude some subsidies."
And, as a snapshot, the decades of previous handouts to nuclear, oil and
gas companies are not accounted for. Nor does the Energy Information
Agency report account for legacy costs - solar and wind power, for
example, do not leave behind tons of radioactive waste as does nuclear
energy.
It's a global phenomenon
Numerous research papers paint a fuller picture. A Congressional
Research Service report found that nuclear power had received $74
billion for research and developmentby the US government for the period
1948 to 1998, more than all such money given for fossil fuels,
renewables and energy efficiency combined.
A report by the venture-capital firm DBL Investors, Ask Saint Onofrio,
reports that nuclear energy cumulatively has received four times more
subsidies than solar energy in California, and that nuclear subsidies
were higher than solar in 2011 and all previous years. Nuclear has
received $8.2 billion in subsidies in California, while providing the
state with 3% of its power in 2012.
The uneconomical state of nuclear power is a global phenomenon, not
limited to any one place. A comprehensive study prepared for the Green
Party of Germany's Heinrich Böll Stiftung, The Economics of Nuclear
Power: An Update, reports:
"Up to now, nuclear power plants have been funded by massive public
subsidies. For Germany the calculations roughly add up to over €100
billion and this preferential treatment is still going on today. As a
result the billions set aside for the disposal of nuclear waste and the
dismantling of nuclear power plants represent a tax-free manoeuvre for
the companies.
"In addition the liability of the operators is limited to €2.5 billion -
a tiny proportion of the costs that would result from a medium-sized
nuclear accident."
The paper later says: "Successive studies by the British government in
1989, 1995, and 2002 came to the conclusion that in a liberalised
electricity market, electric utilities would not build nuclear power
plants without government subsidies and government guarantees that cap
costs. In most countries where the monopoly status of the generating
companies has been removed, similar considerations would apply."
Yet new plants are being built, with new subsidies
Significant cost overruns are the norm in building nuclear power plants,
and it isn't investors who are on the hook for them. Three nuclear
projects are under construction in the United States and two in Western
Europe, a group that features an assortment of cost overruns and
generous guarantees:
The two new Vogtle reactors in Georgia are already $3 billion over
budget although their completion date is three and a half years away.
The largest owner, Southern Company, has received $8.3 billion in
federal loan guarantees. Overruns at this plant are not unprecedented;
the two existing reactors cost $8.7 billion instead of the promised $600
million, resulting in higher electricity rates.
The Watts Bar 2 nuclear reactor in Tennessee, which received its
license to operate in October, has seen its cost rise to $6.1 billion
from $2.5 billion. (This is technically a restart of a unit on which
construction was suspended in 1985.) The existing reactor at this site
has a history of safety problems.
The Summer 2 and 3 reactors being built in South Carolina have
already caused rate payers there to endure a series of rate increases.
Cost overruns just since 2012 have totaled almost $2 billion.
In October 2013, British authorities approved a new nuclear reactor
at Hinkley Point, England, that features subsidies designed to give the
owner, Électricité de France, a guaranteed 10% rate of return on the
project. Power from the plant will be sold at a fixed price, indexed to
the consumer inflation rate.
In other words, The Independent reports, "should the market price
fall below that [agreed-upon] level the Government would make up the
difference." The agreed-upon fixed price set by the Cameron government
at the time was double the wholesale price for electricity. Since then
the gap has only widened.
Olkiluoto-3 in Finland was supposed to have cost €3 billion, but is
10 years behind schedule and €5 billion over budget.
High costs despite high subsidies
There would at least be a small silver lining in this dark picture if
the electricity produced were cheap. But that's not the case. From the
mid-1970s to the mid-1990s, the cost of producing electricity from
nuclear power in France tripled and in the United States the cost
increased fivefold, according to the Vermont Law School paper [page 46].
Then there are the costs of nuclear that are not imposed by any other
energy source: What to do with all the radioactive waste? Regardless of
who ultimately shoulders these costs, the environmental dangers will
last for tens of thousands of years.
In the United States, there is the fiasco of the Yucca Mountain nuclear
waste dump in Nevada. The US government has collected $35 billion from
energy companies to finance the dump, which is the subject of fierce
local opposition and appears to have no chance of being built.
Presumably, the energy companies have passed on these costs to their
consumers but nonetheless are demanding the government take the
radioactive waste they are storing at their plants or compensate them.
As part of this deal, the US government made itself legally responsible
for finding a permanent nuclear waste storage facility.
And, eventually, plants come to the end of their lives and must be
decommissioned, another big expense that energy companies would like to
be borne by someone else.
As the Heinrich Böll Stiftung study says, [page 17], "there is a
significant mismatch between the interests of commercial concerns and
society in general. Huge costs that will only be incurred far in the
future have little weight in commercial decisions because such costs are
'discounted'. This means that waste disposal costs and decommissioning
costs, which are at present no more than ill-supported guesses, are of
little interest to commercial companies.
"From a moral point of view, the current generation should be extremely
wary of leaving such an uncertain, expensive, and potentially dangerous
legacy to a future generation to deal with when there are no ways of
reliably ensuring that the current generation can bequeath the funds to
deal with them, much less bear the physical risk. Similarly, the
accident risk also plays no part in decision-making because the
companies are absolved of this risk by international treaties that shift
the risk to taxpayers."
Without 'liability caps' the industry would have been dead long ago
The British government, for instance, currently foots more than
three-quarters of the bill for radioactive waste management and
decommissioning, and for nuclear legacy sites. A report prepared for
Parliament estimates that total public liability to date just for this
program is around £50 billion, with tens of billions more to come.
Liability caps for accidents are also routine. In the US the
Price-Anderson Act, in force since 1957, caps the total liability of
nuclear operators in the event of a serious accident or attack to $10.5
billion. If the total is higher, as it surely would be, taxpayers would
be on the hook for the rest.
As a further sweetener, the Bush II / Cheney administration, in 2005,
signed into law new nuclear subsidies and tax breaks worth $13 billion.
The Obama administration, attempting its own nuclear push, has offered
an additional $36 billion in federal loan guarantees to underwrite new
reactor construction, again putting the risk on taxpayers, not investors.
The Vermont Law School paper aptly sums up this picture with this
conclusion: [page 69]
"If the owners and operators of nuclear reactors had to face the full
liability of a nuclear accident and meet the alternatives in competition
that is unfettered by subsidies, no one would have built a nuclear
reactor in the past, no one would build a reactor today, and anyone who
owned one would exit the nuclear business as quickly as they could."
If we had a rational economic system, they surely would.
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