Monetary roadblocks lessen nuclear prospects

Will more nuclear silos dot the U.S. countryside? These are in Grohnde, Germany.
REUTERS/Morris MacMatzen
Will more nuclear silos dot the U.S. countryside? These are in Grohnde, Germany.

As Gov. Tim Pawlenty and a gaggle of DFL and Republican legislators press for nuclear-power development by initially removing Minnesota’s ban on the controversial plants, a respected investment analyst has issued a sobering report on skyrocketing costs and sinking prospects of building nuclear generators.   
In fact, it appears to many observers that the only way to advance nuclear power in the United States is to sharply increase government subsidies to an industry that’s already far ahead of other electric-generating forms in receiving direct and indirect taxpayer support. 
According to recent estimates, building a new nuclear plant is nearly four times more expensive than installing wind turbines and 2.5 times higher than coal-fired plants yielding equivalent electricity. And while uranium fuel for nuclear plants is inexpensive relative to coal and gas, wind has zero fuel costs.

“It’s more than just the high cost of nuclear that will mean more subsidies,” said state Rep. Jean Wagenius, DFL-Minneapolis, who chairs the House Environment and Natural Resources Finance Committee. Wagenius said that renewable sources like wind, solar, biomass and even geo-thermal are home-grown industries that generate local dollars that remain local. Nuclear plants require uranium fuel that is mined elsewhere and shipped in, and most of the scientific support for building the plants would come from out of state. 
Many supporters don’t favor subsidies
“It’s interesting to me that so many of those who don’t like subsidies and who don’t like government regulation are pushing an industry that requires a lot of both,” Wagenius said.  
(For a comparative cost analysis of various energy forms, go here and scroll down to “New generation resources and costs.”)
As Pawlenty has stumped for Republican presidential hopeful John McCain here and nationwide, he has expressed steadfast support for nuclear power each time the energy issue is raised. Sen. McCain of Arizona is also a strong proponent of nuclear power.
In the Minnesota Legislature, Pawlenty’s pro-nuclear stance is gaining traction, and advocates have been promised hearings in the Senate and House sometime early next year. DFL Sens. Steve Murphy of Red Wing and Jim Carlson of Eagan have joined DFL Reps. Tom Huntley of Duluth and Tim Mahoney of St. Paul in pushing to lift a 16-year-old nuclear ban in the state. Many Republican legislators, led by veteran Steve Dill of Dassel, have lined up for nuclear power. 
Nationally, no nuclear plant has been built in 30 years because of safety concerns and the lack of a long promised federal waste-disposal facility for spent fuel rods that remain radioactive. About 20 percent of the nation’s power comes from 104 aging nuclear generators; by contrast, Western Europe and Japan rely heavily on nuclear power (80 percent of France’s power comes from nuclear), and China, Russia, and India have announced plans to build more than 100 nuclear plants.
McCain seeks 45 new generators by 2030
McCain has advocated building 45 new nuclear generators in the U.S. by 2030, which is a lightning-fast pace for an energy form that takes years just to plan and site, and to gain approval from federal regulators who are supersensitive to nuclear safety concerns.   
Edward Garvey, director of the Minnesota Office of Energy Security and the Pawlenty administration’s point person on energy, said that nuclear power should be in the mix of available energy sources.
“We believe that nuclear power plays an important place in Minnesota’s current reliable, low-cost and environmentally superior resource mix,” Garvey said. “It should not be dismissed out of hand.”     
No Minnesota utility is considering a nuclear plant, and a report by Moody’s Investment Service may explain why. In a nutshell, building costs have become prohibitive. 
“There are risks to adding new nuclear generation capacity for public power utilities that could potentially affect credit,” Moody’s said. “These include potential for construction cost overruns; negative public reaction to potential safety and security problems at nuclear plants, lack of experience with new plant designs, and a lack of a long-term federal solution for storage of radioactive waste, thus leading to long-term cost uncertainty.”
17 plants in various stages of planning
Of the 17 nuclear plants at various stages of being planned nationally, it’s expected now that few if any will be built anytime soon — mainly because of the high construction costs.  
Moody’s report said the same construction-cost uncertainties facing nuclear plants are problematic for new coal plants. Costs for building materials like steel and concrete are increasing rapidly, significantly outpacing the standard 2.5 percent annual inflation rate.     
But it’s the magnitude of rising costs that has observers agog. 
According to a report in one energy journal, Florida Power & Light told that state’s Public Service Commission last year that the cost for building two new nuclear units could be $8,000 per kilowatt (kw), more than twice the $2,000 per kw that the industry estimated in 2005. 
There are 1,000 kw in a megawatt (mw). Base-load nuclear plants like Xcel Energy’s twin plants at Prairie Island near Red Wing and its Monticello reactor are each about 600 mw. Applying Florida Power’s estimates to building those plants today would be $8,000 x 1,000 x 6, or $4.8 billion.
Fuel for nuclear costs about $1 per kw hour, or half the equivalent cost of coal and an eighth the cost of natural gas. 
Wind’s favorable costs
Wind has zero fuel costs. The cost of building generators is about $2,000 per kw, and so the cost of building 600 megawatts of wind capacity would be about $1.2 billion (compared with $4.8 billion for nuclear). 
The favorable cost for building wind turbines is not lost on the nation’s utilities. Xcel Energy operates in 11 states and leads the nation in commercial wind-power generation with a building boom so strong in Minnesota that the utility and others are seeking to increase transmission capacity to carry all the wind power to the Twin Cities and other demand centers. 
The cost factor also isn’t lost on what may seem an unlikely investor: billionaire oilman T. Boone Pickens. Pickens recently announced that he’ll build 2,700 turbines (figure $5 million apiece) in the Texas Panhandle, and that would be the world’s largest wind farm.
An advantage of nuclear, coal and gas-fired generating plants is that they operate at between 85 and 90 percent of rated capacity, shutting down only infrequently for maintenance. Wind turbines, however, operate at 30- to 40 percent of capacity because of vagaries of wind and wind speed.         
In addition to Minnesota’s moratorium on nuclear plants, the Legislature has mandated that a quarter of the state’s electricity be produced by renewables by 2025. That means the state’s present capacity of 1,000 mw of wind would have to increase sevenfold. 
Carbon-emissions reduction also mandated
The Legislature has also mandated sharp reductions in carbon emissions linked to climate change, which places pressure on utilities to justify building coal-fired plants. The controversial 550-mw coal plant proposed by Otter Tail Power of Fergus Falls, Minn., and five other utilities has drawn opposition because of its massive carbon emissions. The Minnesota Public Utilities Commission has a pending decision whether to issue a “certificate of need” for transmission lines carrying power from the South Dakota border plant into Minnesota. 
Free market, regulatory, and social costs are at the root of Moody’s Investment Service’s dour view of nuclear power, and even coal. 
But what about the favorable budgetary item enjoyed by every energy sector — taxpayer-supported government subsidies? 
The U.S. Government Accounting Office (GAO) issued a report last October that summarized subsidies for major electrical-production sectors; it said (PDF):

• Of $11.5 billion in energy research support, nuclear power received $6.2 billion, fossil fuels (coal and natural gas) received $3.2 billion, and renewables (wind and solar) got $1.4 billion.

• For direct subsidies over the same period, fossil fuels (coal and gas) received the lion’s share at $13.7 billion, renewables (wind and solar) got $2.8 billion, and nuclear received nothing because a production tax credit for new facilities did not take effect since no new plants were built. However, nuclear plants did benefit from the Price-Anderson liability limitation The Price-Anderson Nuclear Industries Indemnity Act in the event of an accident, something that analysts say is worth hundreds of millions of dollars per year in saved insurance costs. (In fact, without he liability protection that was enacted in 1957, the nuclear power industry likely would not exist in the U.S.)

As they push nuclear power, neither McCain nor Pawlenty — nor other advocates, for that matter — discuss whether they would favor increasing government subsidies for the energy source. But without subsidy support, observers say it’s unlikely that Wall Street financing will be readily available.

Ron Way, a former reporter for several Midwest newspapers, covers the environment and energy issues. He can be reached at rway [at] minnpost [dot] com.

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Comments (3)

  1. Submitted by Glenn Schuster on 07/23/2008 - 10:44 am.

    What a bunch of bull squeeze. Wind costs 5 to 10 times as much as nuclear on a lifecycle basis. Wind requires a 54% subsidy to be anywhere close to being competetive. In addition it takes 175,000 acres of wind turbines to replace one 1000MWe thermal plant and you have to build the thermal plant anyway as backup for the days when the wind doesn’t blow. The one downside to nuclear is waste management and that is only a problem because we make it one. Reprocessing nuclear waste into mixed oxide fuel reduces waste volume to just 3% of the original volume and that is mostly relatively short lived isotopes. Reprocessing of fuel gives us an essentially unlimited fuel supply for nuclear power plants.

  2. Submitted by David Grider on 07/22/2008 - 03:42 pm.

    Ron –

    I thought your discussion was wonderful, as far as it went. Three other points that I have heard mentioned seem worth repeating. One is related to the long lead and construction times associated with both coal and nuclear. Another is related to their size – very large (0.5 – 1 Gigawatt). Because of these two characteristics, advanced planning is required for either type of plant. Either represents about a thousand times as much capacity as a commercial scale wind generator. Thus wind can be expected to match needed load increases much more accurately (in smaller “chunks”) and more quickly. The fact that a wind generator needs no additional fuel means that it will always be cheaper for customers to use whenever available. That means that all available wind energy will be used first (rethink what base-load power means?). Studies have suggested that wind power can be easily and cheaply accommodated up to 20% of the electrical load, (so in 10 years 25% should not be a problem). Thus, if we are going to pay for additional electrical capacity, it makes sense that it at least be renewable. However, even government planning is not necessarily very accurate over 10 to 20 year time periods. If the electric demand in Minnesota does not rise, as expected, additional renewable supply capacity will idle existing coal or nuclear power plants. That means building additional coal or nuclear power plants would be a very expensive, bad decision.

    This brings me to the third point. Energy use in the United States is roughly twice what it is in Europe and Japan per dollar of gross domestic product. Many conservation efforts have payback periods from 10 years down to less than a year! These produce savings rather than costs. For a variety of reasons, it seems likely that we will be taking advantage of some of these opportunities for conservation over the next 10 to 20 years. As prices for fossil fuels go up, conservation looks more attractive. Our businesses have to compete with world suppliers, so reducing energy costs looks attractive. Even if our expected electricity use goes up 50%, the actual energy use could drop by 25% if we used it twice as efficiently, or produced it where we use it (both future trends being seen right now). To maintain relatively affordable prices for electricity, we should encourage conservation and renewable energy in quantities that maintain our economic vitality and match our electricity usage at the least possible cost. That does not seem to include nuclear or more coal.

  3. Submitted by Bert Reed on 07/22/2008 - 04:44 pm.

    Ron admits that, “An advantage of nuclear, coal and gas-fired generating plants is that they operate at between 85 and 90 percent of rated capacity, shutting down only infrequently for maintenance. Wind turbines, however, operate at 30- to 40 percent of capacity because of vagaries of wind and wind speed.”

    So the question is, do you want your electronics running half the time, or all the time? I say go with coal because it’s safer than nuclear and the new plants are very clean. Heck, go tour the current Big Stone plant and you’ll see it’s cleaner than most people’s homes.

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