Our Lost Competitiveness In Energy Construction

Due to a failure of our “de-regulation” initiative (I put it in quotes because we just re-regulated differently) with energy the United States has basically ceased investing in base-load power plants, which are comprised of 1) nuclear 2) coal 3) large-scale hydroelectric.  Instead we have been generally just extending the lives of our existing assets and building natural gas fired peaking plants and letting our reserve margins erode.

While this has many impacts to the United States over the long term (in the short term we benefit from lower rates as we delay the reckoning of having to invest massive amounts in capital construction in the future rather than starting it now and spreading it out over many years) one other extremely bad negative element has not been adequately discussed.  The United States is frankly losing any ability to construct or build nuclear or coal plants efficiently while China is using their scale and continued capital investment to refine construction techniques and standardize processes to build an industry that will be miles ahead of their US equivalent.

The December, 2010 issue of the magazine “The Atlantic” has an article titled “Why the Future of Clean Energy is Dirty Coal”.  While I don’t share their focus on “clean” energy, they did have a section on the scale of investment in China that was staggering.  From the article:

China is preparing, by 2025, for 350 million people that don’t exist now.  They have to build the equivalent of the US electrical system, that is almost as much added capacity as the entire US grid – by 2025.  It took us 120 years…As China meets its capacity, it is likely that the best technologies will be commercialized and applied here faster than everywhere else.

In addition to the scale of their investment, their specific investments are also growing more advanced:

For the last 30 years we have not been able to build a coal-to-gas conversion plant in this country… China has done many.  That is what we need to learn from them, all that production and operating experience.

Why are they able to get so much done?  Well for one thing they don’t have a lawyer and regulation plagued “system” that adds billions (literally) to the cost of a plant without necessarily improving its efficiency or safety; and it punishes new designs that might be INHERENTLY safer than older, operating designs by limiting the ability to move forward in the first place.

In America, it takes a decade to get a permit for a plant… Here, they build the whole thing in 21 months.

As discussed in many of my other posts, the “nuclear renaissance” in the US was an illusion, as is aptly summed up by the current state of ongoing nuclear construction projects in the USA from wikipedia:

As of September 2010, ground has been broken the Vogtle project and one other reactor in South Carolina. The prospects of a proposed project in Texas, South Texas 3 & 4, have been dimmed by a falling out among the partners. Two other reactors in Texas, four in Florida and one in Missouri have all been “moved to the back burner, mostly because of uncertain economics”.

Vogtle works only because Southern Company is a well capitalized utility, and South Carolina works only because SCANA (the utility in that state) has “old school” regulation that allows them to capture the costs of new construction in their rate base as they build it, which is how ALL of the existing nuclear plants in the United States were originally built.  We have hope for Texas and in general I always support nuclear power but it will be an uphill battle.

According to this article, China has TWENTY FIVE nuclear plants under construction.  While we are battling lawyers and regulators they are able to actually site, build, construct and start operation of brand new nuclear facilities, with designs that are significantly more advanced than the vast majority (existing fleet) of US reactors, which date to designs from the 1960’s and 1970’s.

China is learning lessons about large scale construction and operation of brand new designs while we are trying to extend the lives of our existing, ancient reactors and delivering hot air of plans that won’t materialize, such as the aborted plan to jump start construction in the US, a plan that I pointed out long ago won’t work for a variety of financial and regulatory reasons.

We are losing our ability to even compete.  Our only hope is that China will be helpful to us in selling us the technology 20 years from now to build the next generation reactors when our existing fleet has completely broken down and we realize that betting on “alternative” technologies is a drop in the bucket when compared to base load requirements.

Cross posted at LITGM

11 thoughts on “Our Lost Competitiveness In Energy Construction”

  1. this needs to be used more

    GOP lawmakers say they want to upend a host of Environmental Protection Agency rules by whatever means possible, including the Congressional Review Act, a rarely used legislative tool that allows Congress to essentially veto recently completed agency regulations.

    The law lets sponsors skip Senate filibusters, meaning Republicans don’t have to negotiate with Majority Leader Harry Reid (D-Nev.) for a floor vote or secure the tricky 60 votes typically needed to do anything in the Senate.

    The House doesn’t have the same expedited procedures, but it’s assumed the GOP majority would have little trouble mustering the votes needed to pass disapproval resolutions.

    A spate of contentious EPA rules that are soon to be finalized could be prime targets, including the national air quality standard for ozone, toxic emission limits for industrial boilers and a pending decision about whether to regulate coal ash as hazardous waste.

    “We’re not going to let EPA regulate what they’ve been unable to legislate. And if I’m chairman, we’re going to have a very aggressive, proactive schedule,” Rep. Fred Upton (R-Mich.), the likely incoming chairman of the Energy and Commerce Committee, told POLITICO.


  2. As I’ve noted here previously, the creation of a large and affluent middle class in the United States has been greatly enabled by the availability of low-cost and widely-distributed energy, particularly in the form of electricity.

    Bookworm suggested yesterday that falling economic expectations will make people more amenable to centralized control.

  3. This also means they will be able to expand their nuclear weapons program to a level that the US simply cannot.

    The current US strategic nuclear warheads must be maintained to be of any good. Without the money for that maintenance, the US may simply find itself without a usable deterrence factor, relying on a potemkin village effect instead.

  4. This administration seems to be at war with energy production. They have just created a new arctic zone that prevents more oil drilling on the Alaska north slope. Salazar has been reviling oil production from Alberta oil sands. There is no chance that new nuclear power plants will be built while this administration is in power. Obama has boasted that he will cause coal production to go bankrupt.

    I can’t tell if this is ignorance or ideology that results in the same thing.

  5. From a book called “English Culture and the Decline of the Industrial Spirit, 1850-1980,” by Martin Weiner.

    “At the time of the Great Exhibition of 1851, Britain was the home of the industrial revolution, a symbol of material progress to the world…By the nineteen-seventies, falling levels of capital investment raised the specter of outright “de-industrialization”…The emerging culture of industrialism, which in the mid-Victorian years appeared, for good or ill, to be the wave of the future…was itself transformed….the later nineteenth century saw the consolidation of a national elite that, by virtue of its power and prestige, played a central role both in Britain’s modern achievements and its failures. It administered the most extensive empire in human history with reasonable effectiveness and humanity, and it maintained a remarkable degree of political and social stability at home…It also presided over the steady and continued erosion of the nation’s economic position in the world. The standards of value of this new elite of civil servants, professionals, financiers, and landed proprietors, inculcated by a common eduction in public schools and ancient universities and reflected in the literary culture it patronized, permeated by their prestige much of British society beyond the elite itself. Those standards did little to support, and much to discourage, economic dynamism. They threw earlier enthusiams for technology into disrepute, emphasized the social evils brought by the industrial revolution, directed attention to issues of the “quality of life” in preference to the quantitative concerns of production and expansion, and disparaged the restlessness and acquisitiveness of industrial capitalism.”

  6. The costs of not building infrastructure are simple, you don’t build enough of it and people end up dead. It might be from cold. It might be from the mugger you didn’t spot because the street lights are too expensive to light. It might be because you were the poor sap on the bridge when it finally collapses. Failing infrastructure has many ways to kill you. And even when a lack of infrastructure doesn’t actually kill you, it makes you poorer as the pricing mechanism increases the cost of the goods whose production is constrained by inadequate infrastructure.

    To the vast majority of people, the above paragraph is just a story. It’s a tale that’s far away and not affecting their day-to-day lives. In reality, it’s a tale that they play a part in every day.

    Now you can make reports that bring the reality of what infrastructure you personally use and what is the state of that infrastructure and how you are literally rolling the dice on whether the deferred maintenance and construction is going to kill you or just inconvenience you with high energy prices, traffic jams, and other costs that invisibly trace back to a lack of infrastructure investment.

    The trouble is that nobody’s doing those reports. Nobody’s paying for it. And so the vast majority of the people go on with their daily lives in complete ignorance of the status of the the infrastructure that they personally depend on. And that’s a real shame.

  7. The British suffered from the cult of the gifted amateur. Germany invented organic chemistry and replaced Britain as the industrial powerhouse of Europe. One example of this was in surgery. Antisepsis and the prevention of infection was a creation of Joseph Lister. His father had been a gifted scientist who improved the microscope and telescope. Lister’s paper on antisepsis came out in 1867. By 1880, the Germans had developed asepsis with steam sterilization of instruments. The great advances in surgery followed this development and occurred in Germany and the US where the best surgeons were German trained. In the meantime, asepsis was not adopted in England until after the turn of the century and many well known surgeons still rejected the entire germ theory of infection until just before the war. In World War I, blood transfusion was brought by the US and Canadians. Fortunately, the sciences revived in England in time for the second world war and gave us sonar and radar.

  8. While Mr. Love has raised interesting points about the impediments to new nukes in the US, one US company (Shaw) just put up $250 million as equity in a partnership with Toshiba to build new reactors worldwide. $100 million was a credit line in the South Texas Project 3 and 4 units which appear to be next in line for a federal loan guarantee.

    Apparently, some responsible business leaders are willing to put some major skin in the game.

    As to federal loan guarantees, this looks like one area where Republicans and Democrats think they can act in a bipartisan fashion and achieve some sort of progress. The Democrats are not so “green” that they would pass up a chance to buy some votes.

    Doing big things is never easy and building new nuclear power plants is doing a big thing. The regulation of nukes does indeed inhibit investment but it need not eliminate it.

    Business in the US will fulfill the needs of the market if there is money to be made. For a long time, since completion of the first fleet of commercial nukes, there hasn’t been much profit in nuclear power. “Show me the money” brings out supply. My company, a long-time global major, is hiring like mad and growing employees as fast as the famous Silicon Valley stars.

  9. Business in the US will fulfill the needs of the market if there is money to be made. For a long time, since completion of the first fleet of commercial nukes, there hasn’t been much profit in nuclear power. “Show me the money” brings out supply. My company, a long-time global major, is hiring like mad and growing employees as fast as the famous Silicon Valley stars.

    And for the last thirty years or so, the laws and regulations have been written such that you can’t make a profit building nuclear power plants.

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