A cost-free way to open up nuclear investment

Late last week, the Atomic Safety and Licensing Board (ASLB) rejected a license application for the proposed Calvert Cliffs Unit 3 (an AREVA EPR) build in Southern Maryland. The reason? It was against the law.

Specifically, when the build was originally proposed, it was to be a 50/50 joint ownership stake by Constellation Energy and Electricite de France (EDF, the state-owned French utility giant). However, in November 2010, Constellation sold its 50% stake in the reactor to EDF, making it the sole potential owner of the unit.

According to Federal law (10 CFR 50.38), foreign investors are ineligible to apply for a license to operate a nuclear facility in the U.S. While Unistar was still the nominal applicant, the ASLB determined that the venture was solely owned by EDF and thus EDF was the effective applicant - and thus, ineligible. (The lawsuit, incidentally, was filed by the anti-nuclear activist group NIRS, indicating that anti-nuclear groups will not hesitate use every tool at their disposal to block or shut down any nuclear power facility - and to hell with the cost to the environment as a result.)

If this seems entirely backward in a world of global production and investment, that's because it is. The current regulation is an artifact of the Atomic Energy Act of 1954, which first authorized private ownership of nuclear facilities. (Prior to this - per the Atomic Energy Act of 1946, all nuclear technology was considered a state secret, during the short time in which the U.S. enjoyed a monopoly on the technology.)

Is there any real compelling reason for restrictions on foreign ownership and investment in nuclear facilities to exist at a time when the U.S. holding a monopoly on the technology has long since passed? Issues of safety here of course are irrelevant - the facilities would be licensed and regulated by the NRC, just as any other nuclear facility is now. About the only salient objection is the political one - i.e., the implications of a foreign entity maintaining controlling ownership in key infrastructure. (Although it's hard to see anyone getting particularly upset about the reverse - U.S. entities owning a controlling stake in infrastructure in other nations.)

For those who have a bit of a longer memory, the controversy should ring familiar - i.e., it's the same arguments which were played out during the Dubai Ports World deal, in which DP World, a UAE-based company, would take over management contracts for six U.S. ports already under foreign management.

Meanwhile, an issue to consider is the fact that bringing together capital to complete a construction bid like Calvert Cliffs 3 is no mean feat (particularly in an economy where investors seem all too skittish about long-term investments in energy infrastructure). Given the difficulty then, it seems positively insane for any political leadership to turn away large investments in long-term energy infrastructure (especially non-emitting baseload like nuclear, which has a long expected operational lifetime).

Setting aside the politics of free trade for a moment, if Republicans have any seriousness behind their twin rhetoric of advocating for expanded use of nuclear energy and in relying on the free market to sort out our energy mix, then this one should be a no-brainer: let companies like EDF put up the investment and apply for a license. The same is true for Democrats as well - if they're serious about both jobs (nuclear construction has them in spades) and especially about creating clean energy sources for the future, investors like EDF should be welcomed with open arms, not turned away at the door.

Again, the best part of this? This costs nothing. Investors like EDF wish to voluntarily invest their money in a vital public good (carbon-free electricity) - all that needs to happen is for leaders to be willing to say, "Oui."

Does declining gas exploration indicate a price "explosion" or just a new equilibrium?

A few interesting points came out of the follow-up discussion on my prior post, in which I argued that, contra Rod Adams, natural gas prices are not set to "explode" anytime soon.

Meredith Angwin of Yes Vermont Yankee made a keen observation that over the last year, the number of new natural gas exploratory wells is collapsing. Why is this happening? Namely because of the cratering current price of natural gas.

In fact, a very interesting thing appears to be happening right now with shale / unconventional natural gas recovery boom - the industry appears to be a victim of its own success. Or rather, drillers have been sinking new wells without regard to price (again, see the sharp boom in new wells up until about October 2008, where new wells peaked). As a result, proven reserves have fairly substantially increased - and in particular, known reserves of "dry gas" (i.e., nearly pure methane, the most commercially valuable component of natural gas) have in fact "exploded" - nearly doubling over the last decade.

Meanwhile, neglected in these considerations is that shale fracturing wells in particular aren't cheap to drill; as a result, anomalously low natural gas prices means that some drillers have been losing their shirts over the same much-publicized "boom" in natural gas production. 

This is where we get back to the discussion of natural gas prices overall. What appears to be occurring is a basic disequilibrium; a disruptive event in supply (i.e., introduction of large new resources) prompted a rush to invest/explore this resource, which in turn created a significant rise in supply over the short term, rapidly dropping the price to a point where the market price is below the profitable price of recovery.

Thus, as far as exploration goes, we seem to be observing is basic mineral economics: exploration follows price. When price drops (i.e., we had an over-abundance of exploration), exploration drops. As prices rise to the point where new wells achieve a net profit, it's a relatively safe prediction that exploration will again begin to rise. What is essence is developing are two constraints on natural gas price - a "floor" on prices (i.e., below which it is not economically viable to recover gas from new wells) and a "ceiling" (driven by the large increases in known supply). My colleague Alan observed this some time ago when he speculated as to whether we are seeing the end of natural gas price volatility (at least for now).

So, will natural gas prices rise? Probably - but given the very large amounts of known reserves, price acts as a strong signal to start drilling again. Given the large known new reserves, this will inherently push back against any significant rises in price - as it gets more profitable to drill new wells, new producers will inevitably get into the game, particularly because we know the gas is out there. The real question is, "At what price does this happen?" I'm not an expert in gas recovery, so I don't know - but like Meredith, I suspect it will be around $5-6/MMBtu. A columnist at Forbes suggests it may be $8/MMBtu. Either way, I remain deeply suspicious at this point of the idea of prices "exploding" (and hence my bet with Rod) - what instead appears to be happening is the search for a new price equilibrium.

A final addendum - as commenter Robert pointed out, all of this really applies to the U.S. - something worth emphasizing. Other places, where either fossil resources like coal and natural gas are less abundant (i.e., South Korea and Japan) or where there these resources are more valuable as exports (i.e., UAE) have a completely different picture for the relative economics of nuclear versus natural gas. In particular, it is likely far easier to make the economic case for nuclear in these places - meaning even if new builds for nuclear may be slowed or delayed in the U.S. for the time being, the same is not true abroad.

Wishful thinking on natural gas prices

Rod Adams of Atomic Insights has posted a string of arguments in the general thread that natural gas prices are set to explode - or at least, precipitously increase - and that further, the current historic lows in natural gas prices are a mirage, one carefully put into place by gas producers to squeeze out competition, particularly in the electricity sector. In his latest post, "Where is the huge increase in US natural gas supply?" Rod points to EIA data indicating that the "flood" of new natural gas is anything but.

There's just a small problem in this assertion - the data doesn't support Rod's claims. And I say this as someone who obviously would like this to be true. Low natural gas prices have largely put the brakes on new nuclear construction - the latest casualty being Exelon's planned Victoria unit in Texas. Obviously, Exelon has made its position known on whether it will be investing in new nuclear units in an environment where natural gas is currently cheap (it won't), so this comes as a surprise to no one. In fact, the overwhelming majority of new electric generation capacity in the U.S. over the last decade has been natural gas.

Rod makes the claim that the cause of currently low natural gas prices is less due to new supply and more due to slumping demand for energy given the recession. As evidence of this, he points to this chart from the EIA, indicating gross withdrawals of natural gas at U.S. wells.

Rod's argument is that the new supply hitting the market isn't exactly overwhelming - and therefore, when demand picks up, so will prices. The data Rod is using to justify this reasoning is withdrawals at the wellhead - which indicates how much supply is hitting the market. The trend is easier to see on the annual withdrawals basis.

While we don't see an "explosion" in terms of orders of magnitude difference, looking at the data, it's clear that natural gas withdrawals have increased by over 20% since 2005 - hardly insignificant.

But frankly, this is the wrong metric to look at the begin with. If we want to know the real story with natural gas supply, we need to look at proven reserves (i.e., the amount of natural gas we have reasonable certainty of economical recovery from the ground). Again, going to the EIA data, we see the same trend; since 2003, proven U.S. reserves have increased from about 7.5 billion barrels to 9.3 billion in 2011 - a 24% increase. Again, while not mind-blowing, this is not insignificant.

However, we're still missing one last piece of the puzzle - natural gas consumption. This of course is the key to Rod's argument - we've demonstrated that supply has increased, although perhaps not "exploded." But Rod claims that much of what has contributed to temporarily low gas prices has been slumping demand due to a down economy. We can easily evaluate this claim by looking at total consumption data.

On a month-by-month basis, peak consumption (in January) did decline from 2011 to 2012 - by about 5%. This may be partly due to a sluggish economy, but probably more so due to an anomalously warm winter. To get a better feel for total consumption trends however, one should look at the annualized data, "smoothing out" some of these peaks.

On an annual basis, natural gas consumption has been rising - since 2003, net consumption has increased by about 10%. Looking at just the last six years (from a minimum in 2006), gas consumption has grown at a maximum of about 14%.

So now to recap - natural gas supply, in terms of proven reserves, has increased by about 24%, while natural gas consumption has only grown by 14%. Basic economics allows one to predict what happens to price under this circumstance - supply has, in the short-term, outstripped demand. However, while demand has dropped off a little in 2012, supply has been outstripping demand for the last 10 years - this is not a temporary phenomenon.

Now, one can make the argument that eventually demand will catch up with supply - in which case, prices certainly will begin to creep back up. But there is no evidence that proven reserves themselves are declining, which means predictions of the imminent explosion of natural gas prices have, unfortunately for nuclear, little basis in reality.

This gets me back to a recurring point I make many, many times - for nuclear to be viable, reducing capital costs and eliminating the risk premium must be the absolute first priority. (A second, equally important priority would be in establishing a clear price signal on carbon dioxide - very much contrary to the giveaway to natural gas producers which the EPA's current target amounts to.) 

Expecting a deus ex machina spike in natural gas prices to save new nuclear construction simply isn't going to happen in the short-run. It may be true in the long-run - a decade or more away. And certainly any utility looking to hedge against future price volatility in fuels would be smart to invest in nuclear. But there isn't any evidence that a sudden increase in gas prices will come to nuclear's rescue in the near-term, and this is important - not because I don't want to see new nuclear get built, but because nuclear advocates need to be clear-eyed about the reality confronting them. Self-deluding arguments might feel good in the short-run, but they do little to see to it that new nuclear plants actually get built.

Update: In the spirit of Bryan Caplan of Econlog, Rod has made a wager ($50) with me; that there will be at least one month by end of 2014 in which natural gas prices at Henry Hub will exceed $10/MMBtu (Rod is betting that they will exceed this). I have to say, I respect anyone willing to put their money where their mouth is. I hope I'm wrong, but I doubt I will be.


For reference, here's the historical EIA data on natural gas prices. (For clarification: 1 MMBtu = 1000 Btu; 1000 cubic feet of natural gas contains about 1020 Btu, or 1.02 MMBtu)

Rolling Over the Odometer

We just got our 100,000th pageview today.

It's been a wild ride over the last year and a half, where this blog began with a baptism by fire in the early days of the Fukushima crisis with our first post, "Fukushima in Layman's Terms", where our first and foremost goal was to attempt to as much as possible distill the events in Japan accurately in a way the general public could understand. I'd like to believe we've made some impact on that goal - and at the very least, we're doing something right.

Thank you to all of our loyal readers!

Cultural signaling and energy

An image that struck me recently and has stayed with me since was a license plate. Specifically, a jet-black Kentucky license plate, emblazoned "Friends of Coal."

The first thing that ran through my mind was, "Who in their right mind proudly trumpets supporting that?" It struck me as about the same contrarian attitude as waving around a Confederate flag (or its more common contemporary, sporting a Confederate flag bumper sticker; which again, some people actually do that). These are things that, to an uninitiated Midwestern exile like myself, should seem embarrassing to display, to say the least.

Yet, oddly enough, much like the confederate flag paraphernalia one encounters with depressing frequency south of the Mason-Dixon line, Kentucky's "Friends of Coal" license plate is the state's most popular custom license plate design - more popular than veteran's plates and those supporting the University of Kentucky. As it turns out, several other states in the area have their own variations, including Virginia and West Virginia.

Obviously, coal is a major economic player in Appalachia, so strong support is to be expected. But the image in my mind started making me think about a broader issue in energy politics, and perhaps why it seems why so often it seems like there are two sides talking past one another (where, incidentally, nuclear tends to be neglected in the crossfire). Specifically, a part of me wonders if what one sees in trends of public support for various energy sources has to do with the economic phenomenon of "signaling" behavior.

I've of course speculated about how cultural perceptions might play a role in public opinion over energy sources numerous times before, but what struck me here was whether support for energy sources - and specifically, some of the most stark divides that manifest - are perhaps deeper expressions of the cultural and aspirational values of the proponents, trumping factors including economics and environmental considerations (as well as basic issues of numeracy).

To back up a bit - in economics parlance, "signaling" is usually used as a way which people convey information which can't always be directly inferred or observed. Signaling can exist both in the banal, uncontroversial sense - wearing a suit and tie signals conformity, particular conformity to societal expectations of professional behavior - to somewhat more contested areas (such as whether higher education acts as a signal to employers as to characteristics including intelligence, diligence, or again, conformity).

Thus, my hypothesis - I am left to wonder if strong, highly polarized opinions on energy sources - particularly on divides such as coal (and to a lesser degree, natural gas) as well as wind and solar don't perhaps serve as signaling "stand-ins" for statements of individual values and cultural affinity.

In particular, the coal industry has capitalized on this in a particularly effective way, with their "America's power" re-branding, and in particular attempting to link coal exclusively to the idea of low-cost, reliable energy generation (again, despite the fact that the levelized costs of nuclear, with its capital costs folded in, are not wildly out of line with coal, particularly if carbon capture and sequestration is a mandated component.) Coal is, in effect, a signal of working-class values, and in particular an expression of solidarity with the working-class communities typically associated with coal-mining.

In a less regionally confined sense, one has to wonder whether some of the pushback from the right over President Obama's "War on Fossil Fuels" also has more to do with outward expressions of cultural affiliation than it does practical concerns over energy. (Nevermind that favoring one fossil source over another hardly consistutes a "war" on fossil fuels). Consider if you will how often right-wing pundits complain about how curtailing fossil fuel use for electricity would spike energy prices - again, as if nuclear energy weren't supplying a fifth of our electricity at the lowest marginal cost of baseload production next to hydro.

I can't help but feel like the effect is intentional - although perhaps not for the reasons folks like Rod Adams might assert (i.e., no, this is not a fossil-fueled conspiracy). Instead, look to the numbers - while support for nuclear energy is strong among self-identified Republicans, it trails far behind support for exploration of new fossil sources. Ultimately, one has to wonder if such public rending of garments pertains more to a cultural push-back response - rallying around fossil sources because of perceptions of the other - and less about actual, considered evaluation of economic and environmental trade-offs of different energy sources.

Contrast this with renewables - support for renewables is much like recycling - a token expression of environmental concern which can be done for minimal required effort. It is, in essence, expressing support for the environment without actually requiring any kind of substantial commitment from the individual. Considerations such as reliability of supply, economics, or even sheer scale are immaterial - support for renewables is, in essence, "green cred." Among the more radicalized, the inherent limitations of renewables are even considered a feature, not a bug - the limited capacity and availability of renewables are an exhortation to consume less, and ultimately to de-industrialize. In either case, support for renewables is less about the practical reality of the enormous challenge in powering an industrial society at the whims of nature and more about the value expression (or, as it were, aspiration) that it entails.

This process playing out prominently on the campaign trail right now. In Iowa, President Obama blasted Mitt Romney for his support of allowing a wind power production tax credit to expire. Meanwhile, Mitt Romney and his supporters have been slugging back, contending that Obama has been waging a "war on coal." (Note as well the targeted blue-collar audience.)

One can easily see where this one is going. Orphaned from any such discussions is nuclear; something at least now (mercifully) given tepid support by both sides, if only because excluding nuclear from energy discussions on the grounds of both environmental and economics grounds is inherently a politically self-marginalizing position, even if it doesn't seem to command strong feelings among most.

So what does support for nuclear energy signal, if you will (and likewise, its opposition)? I would hypothesize that the dividing line for nuclear turns on issues of technological optimism and energy abundance. A common thread I have observed among many nuclear professionals and advocates is a belief that the technology can consistently be made cheaper, more abundant, and ever safer. In particular among these people - myself included - is a belief in the imperative of energy abundance (this in fact was part of the reason I became a nuclear engineer). By contrast, nuclear opponents are frequently (although not always) in the opposite role - sometimes technological pessimists and with a shocking frequency advocates of energy austerity - believing that the answer always is to consume less (despite the unmistakable positive correlations between prosperity and energy consumption, namely due to what energy enables us to do in modern society).

I remark that nuclear opponents are not always technological pessimists, namely because one occasionally encounters the odd nuclear opponent with delusional beliefs about the capability of renewables - although almost universally they fall back to the position of energy austerity when the limitations of renewable sources are brought up.

What do you think? Is energy advocacy a marker for more deeply-held cultural values? And if so, what does a strong preference for nuclear indicate?

Aside: On a personal note, I hope to be back to more regular blogging soon; this month I started out as a new faculty in the Nuclear Engineering department at the University of Tennessee, and suffice to say, the life of a new faculty can at times be... overwhelming.

Deconstructing anti-nuclear economic myths - a response to Veronique de Rugy

Let me start things off with a disclaimer - I am not an economist. I don't even pretend to be an economist; I'm a nuclear engineer by training (I hold Ph.D. in Nuclear Engineering). That notwithstanding, economics (and specifically, the economics of energy) are a side interest of mine. So it was with mixed interest and trepidation when I read a recent piece by libertarian economist Veronique de Rugy from the upcoming July issue of Reason, entitled "No to Nukes."

Plausibly, de Rugy's animating complaint (given Reason's market-oriented focus) is in the subsidies for new nuclear (specifically, when I followed up with de Rugy on Twitter, she pointed out the issue of loan guarantees, although nowhere does this specifically appear in her piece). The piece itself is nothing new, however - the bulk of it is in fact a retread of a suspiciously-timed nuclear hit piece which appeared literally two weeks after the Fukushima disaster. (One gets the distinct impression that, despite her protestations to the contrary, de Rugy is more than happy to dance on what she perceives to be nuclear's grave, particularly given her timing and choice of targets.) In reality, the piece seems to follow on to a frustrating trend of pro-fossil contrarianism as of late, particularly in libertarian circles (contrarian in the sense of singling out the most economical, carbon-free competitor to fossil fuels for special scorn on economic grounds); although perhaps this contrarian turn owes to the fact that conservative heavyweight think tank Heritage has cornered the market in advocating nuclear energy as a free-market energy source. (Who said hipsterism is limited to fashion and terrible beer?)

de Rugy's piece begins with an overly long introduction detailing to the reader why nuclear power was destined to fail to live up to its promises, including citing public opinion which she describes as having " remained steadfast against the technology ever since [Three Mile Island]" (although someone may want to refer de Rugy to the latest polling data on the subject), along with other issues, such as "[d]isputes over waste disposal [which] have never been resolved" (once again however, these are political rather than technical matters).

Finally we get to the meat of the matter - it would appear that a restart of the nuclear industry is, "[...]not just bad politics. It’s awful economics." Well.

To this end, de Rugy characterizes the recent decision by the NRC to grant Southern Nuclear company a license to build two new AP1000 units at the Vogtle site - the first new units in 30 years, as "[...]an act of desperation by a president who has realized he is running out of other options." Fortunately, contrary to the opinions of a economists with a particular axe to grind, the decision to award Southern Company is not in fact in the hands of the president, nor are operating licenses granted upon individual opinions about economic viability of the project - they are voted on by the commissioners of the NRC on the basis of safety alone. This fundamental misunderstanding of the process is pervasive throughout the rest of the piece.


Much of the piece is particularly scarce on actual sources and utterly devoid of hyperlinks (however, given the fact that the piece is a re-tread of her prior post-Fukushima piece, most of her sources appear to be taken from there). de Rugy cites a 2009 MIT study by Ernest J. Moniz and Mujid S. Kazim as evidence of nuclear's uncompetitive costs; one assumes she is referring to MIT's "Future of Nuclear Power" project which includes cost projects of nuclear compared to other conventional fossil sources under a variety of circumstances. In the 2009 update, it reports the following cost comparison: assuming current cost of capital, coal clocks in at 8.4 ¢/kWh, natural gas at 6.5 ¢/kWh, and nuclear at 8.4 $/kWh. The authors specifically note however that this includes a current "risk premium" to capital costs for nuclear - recalculating capital costs at comparative market rates (absent the "risk premium"), they come up with a number far closer to gas and coal: 6.6 ¢/kWh. Even assuming the risk premium stays, with a carbon capture and storage the cost for coal and gas quickly reaches near-parity with nuclear once more. Such an analysis is also borne out in applying levelized cost of electricity estimates to EIA data, resulting in similar conclusions.

Taking up the example of the French (with their nuclear-heavy energy portfolio), de Rugy asserts that because of the France's (state-subsidized) industry, French consumers pay more for electricity. Specifically, she writes:

But producing nuclear energy in France is not magically cheaper than elsewhere. French citizens are forced to pay inflated costs to support grand government schemes, such as the decision made 30 years ago to go nuclear at any cost after the first oil shock in 1974. 

Really? Going to the data, the opposite is in fact true: France has one of the lowest retail electricity prices (the 7th lowest in the E.U.); compare this to Germany, which has recently phased out nuclear entirely, which pays the second-highest rate. (Again, these are not hard things to find, but something de Rugy asserts with no evidence and in clear contradiction of the data.) She might try to argue that consumers pay indirectly, but nowhere has evidence been presented to support this, nor is it supported by retail electricity price data.

de Rugy's main thrust here of course is that capital costs for nuclear in the U.S. are little different than those than in nuclear-friendly France, relying on the analysis of the Vermont Law School's Mark Cooper, an individual who isn't exactly private about his own agenda when it comes to nuclear. (Hint: he's not a fan.) Again, one gets the impression the data is being cherry-picked to fit the desired conclusion. de Rugy makes an incomplete comparison here, citing the high "overnight cost" estimates for nuclear capital costs compared to coal and natural gas, while neglecting to inform her readers that this alone is a highly misleading comparison. (To see how this process is properly unpacked, even with natural gas still coming out favorably compared to nuclear, I invite you to see how Dr. James Conca unfolds the data).

To wit: "overnight" cost is a rough estimate of total capital cost (i.e., total money which must be invested to build the plant), assuming the plant "overnight" - i.e., without the borrowing costs (in other words, interest on loans which continues to pile up while plants are being built and not generating revenue), something which particularly dominates nuclear costs. However, a more accurate comparison is the levelized cost of electricity  (LCOE)- something which calculates both the capital cost and operations & maintenance costs (which include fuel - a cost which dominates natural gas economics). The LCOE calculates the "break-even" cost of electricity from a plant given the projected costs over the plant's lifetime, with a reasonable discount rate (for example, the expected return of ~3% on treasury bonds) over the life of the facility. Given that the expected lifetimes of different facilities can vary widely by type (i.e., the current fleet of nuclear plants will almost all be relicensed to operate for a total of 60 years, with some potentially operating up to 80 with facility improvements and upgrades), this makes for a more useful comparison of the actual cost of electricity. Once again, something absent from de Rugy's analysis.

Indeed, taking this out to the logical extension - if nuclear plants were wholly unprofitable to build and operate, why in the world then would operators of the existing fleet of 104 reactors not simply turn each one off tomorrow, much less put a dime into maintenance outages which run up into the millions of dollars? The answer of course is because this is not true; nuclear plants are indeed expensive to build (due to capital costs, including the borrowing costs associated with construction times), but the marginal cost of power from a nuclear unit is tiny - namely because most of the cost is in the cost of capital itself. Nuclear in this sense represents the opposite economics of natural gas, which has a low front-end cost but whose costs are generally dominated by fuel price. (Thus, the levelized cost - something de Rugy does not look at - is extremely dependent upon assumptions of future fuel prices - hence why nuclear is often seen as a hedge against future fossil fuel price increases.)

However, de Rugy comes back with the follow-up that such estimates of nuclear cost come "after taking into account a baked-in taxpayer subsidy that artificially lowers nuclear plants’ operating costs." Looking at the broader picture of historical energy subsidies however, this point doesn't seem to carry the impact de Rugy seems to think it does - from the period of 1950-2010, nuclear has been the recipient of about 9% of total federal energy subsidies, compared to a shocking 44% for oil. (For those following at home, the rest include: Natural gas - 14%, Coal - 12%, Hydro - 11%, Renewables - 9%, Geothermal - 1%). Most of nuclear's subsidy has, contra de Rugy, not been focused on the regulatory side (although the study does point to an approximate regulatory subsidy of $16 billion over the total time period) but R&D, which should surprise few who are conversant with the history of nuclear. (Oil, by contrast, receives the whopping share of its calculated subsidies from tax policy and regulation, while natural gas has almost exclusively benefited from tax policy).

Image: Wikipedia

Notably absent from de Rugy's analysis is how the most important subsidy fossil fuels (especially coal) have come to rely upon, which is treating the atmosphere like an open cesspool. Indeed, looking to the above costs from the MIT study, were we truly dealing with a "level playing field" in the sense that carbon-intensive industries were required to give their waste products the same degree of scrutiny that nuclear already does, the much-ballyhooed "cost difference" largely vanishes. (Again however, discussions of energy subsidies invariably seem to only go one way: like a claymore.)


No doubt though de Rugy is invoking the issue of nuclear liability insurance of course (known under the moniker of the "Price-Anderson Act", passed in 1957). What is not noted is the exact taxpayer liability to date under Price-Anderson - which is exactly $0. Again, contrary to the claims of nuclear opponents like de Rugy who dress up their objections in economist's language, nuclear is not "uninsurable" on the private market - in fact, each nuclear unit is required to carry an individual liability of $375 million; following the exhaustion of the individual commercial policy, each operator-licensee is required to kick in up to another $111.9 million (pro-rated), producing what amounts to a collective cross-insurance arrangement of $11.975 billion. One can dispute whether such a sum is "sufficient," but the idea that the industry is utterly absolved of tort liability is clearly at odds with the the current reality.

When I pressed de Rugy over what particular subsidies she was complaining about and why her complaint so specifically singled out nuclear (looking at her publication history, there is nary an article devoted to the issue of energy subsidies for other sectors), she responded by pointing me to an analysis she did on the market-distorting effects of loan guarantees. (This after I pointed out that I was in favor of removing all subsidies - but it would seem, like many in the punditry business, the conclusion comes first).

Frankly, I won't get into all of the analysis - because once again, I am not out to defend loan guarantees or any other form of energy subsidy. However, one thing that did jump out at me once more was the use of extremely cherry-picked data in her report - the few items that do mention nuclear (most of the piece pertained to loan guarantees for solar - which incidentally, was not required to pay the credit subsidy fee which nuclear was) are, shall we say, "factually challenged." de Rugy rolls out the several-times-over debunked trope of the 50 percent default rate with nuclear loan guarantees - based on poorly-documented projections over a program which was never passed. While de Rugy immediately pointing out that the CBO revised this number (without specifying how much), the supporting evidence she gives to this revision doesn't even pertain to civilian nuclear power - rather, the study she points to is a comparative economic analysis of nuclear power for naval propulsion.

The only other nuclear-specific studies de Rugy cites in this study come from Peter Bradford - a well-known anti-nuclear activist with the Nonproliferation Policy Education Center (simply google "Bradford" and "nuclear" if you don't believe me) - along with Henry Sokolski (also affiliated with the same). The extremely selective use of sources known to have a hostile agenda to nuclear (that is, when the sources even accurately refer to de Rugy's claims) again strongly implies a rushed, cherry-picking approach that implies a "conclusion-first, evidence later" approach that is all too familiar with established punditry. Indeed, it might make for impressive-looking studies (and good sound bites), but it hardly suffices for serious scholarly work. Indeed, if the evidence is as strong as she claims it to be, it would behoove her case greatly to find such evidence from more objective and less clearly agenda-driven sources.

Of course, all of this is the problem: even rather sloppy studies like this, particularly when attached to someone with a Ph.D. in economics, sound plausible and require the time and energy to deconstructing their myriad of errors and misplaced assumptions - something which amounts to a non-trivial task for one when most of their day is typically occupied by honest employment, alas.

Questions for MacFarlane

Dr. MacFarlane (Image: George Mason University)

The nomination of Allison MacFarlane has drawn a considerably mixed reaction among the nuclear community, ranging from NEI's rather speedy endorsement and Rod Adams' similarly rapid denouncement. Others (including myself) have chosen to withhold judgment for the time being, although I do recomend Margaret Harding's list of desirable qualities in a potential NRC chair.

Given that MacFarlane's hearing before the Senate Environment and Public Works committee is scheduled for tomorrow, here are some questions which I believe would better inform the discussion both of whether MacFarlane is a good candidate to lead the NRC and what her leadership might entail.

NRC & Leadership

1. Given the size and relative impact of the NRC, it is not an agency known for its amenability to on-the-job leadership training. A particular concern is in your lack of organizational leadership experience on your resume. Why do you believe you are qualified to lead the NRC, and what leadership qualities do you believe you bring to the table?
2. Describe what you feel are the key challenges currently facing the NRC. What areas would you focus on as chair, and how would you work to overcome them?
3. Your attitudes appear to have evolved from being a self-described "nuclear agnostic" to indicating that "we absolutely need" nuclear energy with respect to climate change. What provoked this evolution?
4. A prominent concern regarding your appointment to the chairmanship of the NRC is that your background has generally not focused on nuclear fuel cycle technology per se. How do you believe you can overcome this experience gap?
5. Much of the NRC's policy comes down to producing an appropriate balance of safety with economic considerations in regulation. Please describe your thinking on what constitutes socially acceptable risks. Should the safety threshold for nuclear energy systems be higher than other commonly accepted risks, such as air travel? What about in comparison to other energy sources?
   
6. A decision which has been roundly criticized by many nuclear experts was outgoing Chairman Jazcko's unilateral decision to establish a 50-mile evacuation zone for U.S. residents in Japan, contrary to both existing U.S. evacuation guidelines and the Japanese evacuation guidelines. Do you agree with this decision? If so, upon what basis? If not, where did the Chairman err and how would you handle the situation differently?

Nuclear Waste Management

1. As an outspoken critic of Yucca Mountain, both on technical and procedural grounds, how do you view the decision by your predecessor Gregory Jazcko, along with President Obama and Secretary Chu to terminate the licensing review process in light of amendments to the 1982 Nuclear Waste Policy Act which legally mandate Yucca Mountain as the nation's sole geologic repository? Would you allow the licensing process to move forward? If not, how then do you square this under existing federal law?
2. One of your significant contributions to the Blue Ribbon Commission was a strong focus upon a more consent-based process of involving communities in the repository licesing process. What do you view as the NRC's role the siting process for a potential repository (if any)?
3. What immediate actions (if any) do you believe the federal government should take with respect to spent fuel management?

Nonproliferation

1. Your academic background includes several publications on the topic of nuclear nonproliferation policy. In particular, you have publicly stated your opposition to spent fuel reprocessing on nonproliferation grounds. Do you believe President Carter's decision to suspend civil reprocessing in the United States was ultimately effective in achieving its stated nonproliferation goals?
2. How do these nonproliferation concerns relate to the NRC's recent license to GE to construct a laser enrichment test facility, given similar nonproliferation concerns?
3. Please describe why you believe reprocessing of reactor-grade plutonium to be a viable proliferation concern, particularly in nuclear weapons states.
4. What role (if any) do you see for the NRC in establishing U.S. nonproliferation policy?

Licensing and new construction

1. A particular challenge to the development of novel reactor concepts such as small modular reactors as well as entirely new reactor concepts such as TerraPower's traveling wave reactor has been the difficulty in getting such designs through the NRC licesning process. In particular, this has been described as a "chicken-and-egg" problem, with the NRC refusing to prioritize designs with no present commercial interest, while utilities are generally only interested in designs that are expected to receive NRC review. As a result, some designers - such as TerraPower - plan on circumventing the U.S. market entirely. What do you believe the NRC should do to address this issue?
2. Nuclear experts such as Rod Adams have pointed out that the existing COL process relies on the assumption that no amendments to the design will need to be made after construction begins. Does this process need to be improved? If so, how would you propose improving it?
3. Departing chairman Jazcko was frequently the lone dissenter on several recent votes for involving reactor licensing and construction, including the construction licenses for Vogtle and VC Sumner reactors as well as the recent 20-year license extension for the Pilgrim nuclear facility. Do you believe Jazcko's dissenting votes were justified? If so, on what grounds? If not, how would you approach the situation differently?

What questions would you ask MacFarlane, given the chance?

Update: Margaret Harding presents her own list of questions, and Rod Adams posts a transcript of his 2007 interview with Dr. MacFarlane in which she declares herself as an "atomic agnostic."

Update II: Jack Spencer at Heritage's blog similarly poses his questions. Some substantial overlap in themes arises - particularly over issues such as Yucca Mountain and new reactor licensing.