Nuclear Power – Demolishing the Myth

In the media and in political circles there are debates on how electricity should be generated – while renewables are popular conceptually they don’t provide base load (reliable) power, and are responsible for a minuscule portion of our total electricity generation in the United States. In this fantasy “debate”, nuclear power has apparently had a mythical renaissance as public opinion among some greens notes that it emits little of the emissions that supposedly cause global warming.

Presidential candidates and others make pronouncements on nuclear power, such as John McCain’s call to build 45 nuclear reactors by 2030. Obama isn’t calling for a specific number of
nuclear plants, but doesn’t dismiss plans outright.


All of these discussions, and phony debates, ignore a critical element – nuclear plants don’t get built because politicians or activists want them (or even because we are running out of power) – nuclear plants get built:

1) when the regulatory climate in a particular state allows for recovery and financing of these costs
2) when individual utilities are financially strong enough to incur the debt and raise the cash to see through the 10+ year process from site selection through actually powering up the reactor and delivering power into the grid

Let’s tackle #2 first. The estimates for building a nuclear plant are between $5B and $12B. Note that this doesn’t take into account the “time value” of money – you need to get this money up front now and pay interest on it for all the years until the plant starts earning its keep – and this will substantially increase the cost. I don’t have specific information but when I was in the industry I was told that on the plants built in the 70’s maybe 20-40% of the total cost was “capitalized interest”, or the interest on the construction debt while the plant was being built. It is true that the 70’s were a time of high inflation, but we are seeing rising prices (and scarce availiabity) of key construction materials today, too. Let’s say that for discussion purposes this $5B to $12B becomes $7B – $15B in costs in nominal (not real dollars, but nominal dollars are the ones that you have to pay out).

OK, so now you need $7B to $15B to build a plant. How are you going to raise that money, and how big do you have to be in order to do this? Going to yahoo finance under electric and diversified (electric & gas) utilities (which is pretty cool because you can quickly sort by market cap, and see debt / equity or leverage ratios) here are the possible candidates that have market values > $7B:

$20B – $30B
Southern Company
Dominion Resources, Inc.
Duke Energy Corp.

$10B – $20B
FPL Group Inc.
Firstenergy Corp.
Entergy Corp.
American Electric Power Co. In
PPL Corporation
Edison International
Progress Energy Inc.

$5B – $10B
Xcel Energy Inc.
DTE Energy Co.
Edenor SA
The AES Corporation
Allegheny Energy Inc.

Diversified Companies:
Exelon – $37B

$10B – $20B
Public Service Enterprise Group
PG & E Corp.
Consolidated Edison Inc.

$5B – $10B
Ameren Corporation
Wisconsin Energy Corp.

To really build one of these without stretching yourself too far (remember, these giant companies need cash for transmission, distribution, and other generation projects, as well), you’d probably need a market cap > $20B. Another element to note is that these companies are ALREADY burdened with debt; thanks to the yahoo analysis tool, you can see that almost every company has a debt to equity ratio > 1, and many are closer to 2. This means that if you have a $20B market cap, you have $20B – $40B in debt BEFORE you even think about financing a nuclear plant.

So who can do this without breaking the bank? You are down to the “big four”

Exelon (Illinois, Pennsylvania, large nuclear operator)
Southern Company (Alabama, Georgia, Mississippi, Florida)
Dominion Resources (Virginia, North Carolina)
Duke Energy (Indiana, Ohio, Carolinas, elsewhere)

Now you need to combine the financial heft (above) with #1 – do their regulatory environments support building nuclear power plants and passing on to consumers the monstrous costs of construction?

You can pretty much cross off Exelon right there – they operate primarily in Illinois, which is sadly enough, about the least functionally sound state in the union. Pennsylvania isn’t much better.

The south is better placed to support generation; they haven’t dismantled their regulatory systems to the same extent as they did up north (preserving their cost advantage vs. the rest of the United States). On this score Southern Company has a decent shot, although Georgia has some strange state-run institutions. Duke and Dominion also would have options to do this, but for various local reasons they are less likely to champion nuclear.

The states that historically were most favorable to this type of regulatory environment were Florida, except that their utilities are smaller and it would be a big stretch for them to raise that much cash. Texas utilities are now on their knees based on deregulation, the fact that TXU went private (they’d laugh in your face if you mentioned nuclear; they want to make money TODAY), and they are also paying for hurricane damage. Wisconsin and some other states also have good regulatory regiemes, but they’d have to really stretch to finance a new plant.


Government entities of various stripes exist in the US. The Tennessee Valley Authority, or TVA, would be counted on to build a nuclear plant if anyone would. Don’t ask why the generation for the state of Tennessee is essentially run by the Federal government, but it is the case, and they have turned around their plants and would be game for more investing of your Federal tax dollars. There are other potential candidates but they are all less likely than TVA, and I wouldn’t bet on any of them raising the money and pulling it off, espcecially since most of the available funding of the US Treasury is likely to be stuck propping up our moribund financial sector for some time now.


In conclusion, very few utilities have the financial heft to fund even ONE nuclear plant, and if all the cards broke in an optimistic fashion, we wouldn’t even be able to bring enough capacity online to offset the nuclear capacity that is going out of service because it is reaching end of life. These companies would essentially have to bet everything to pull off the construction, unless state and Federal entities under-wrote the costs, which is getting less and less likely by the day.

Many of the regulatory environments that are most favorable to this type of future investment have small(ish) utilities that would be hard pressed to come up with this investment, and it would burden them to the edge of extinction.

Once again – I am a big proponent of nuclear power – but people have to be realistic about the high, high hurdles that these plans face. They simply are not realistic.

Cross posted at LITGM

15 thoughts on “Nuclear Power – Demolishing the Myth”

  1. I think that the money is not the real problem. Note the size of the checks that have been written to the big banks over the last few days. It is the terrorists in black robes and their pinstripe suited lackeys that make the deals undoable. And things are about to get much worse. Just wait until the D’s have filibuster proof majorities in the senate and Hussein appoints all the Clinton retreads to their old jobs.

  2. 1)How much of the 10+ years, and the $5-12B in costs, is due to the hostile regulatory and political climate? How does it compare to the costs & times in nuclear-friendly France?

    2)For comparison, what are the costs & times for a conventional coal-fired steam plant?

    3)Note that there are serious supply-chain problems with the expansion of wind power.

  3. The arena this needs to be worked on (and this is one more brain-dead obvious reason why we don’t need a faux-nuke-friendly bozo like Obama) are threefold:

    1) Reduce the regulatory burden. I’m not saying eliminate it, just make it something rational. Back in the 70s, when nuke plants were still getting built, I recall reading that there was something like 115 different inspections and sign-off authorizations just to DIG THE FIRST HOLE. Surely this sort of thing can be boiled down to a half-dozen or so?

    2) Standardize, standardize, standardize. This has a twofold advantage —
    a) not only will it lower costs — training, maintenance, and construction — it will lower the cost of overall production and operation by making the whole shebang interchangeable — parts, people, and so on.
    b) It can be sold around the world, with the same advantages above becoming major selling points. This allows places like China to substantially lower their coal-fired generation development.

    3) Streamline regulation dealing with low and high level waste transportation and processing. We know how to do this, but it’s “not through my back yard” on even the transportation to the processing facilities, much less the actual storage act itself.

    4) Some rational legislation regarding liabilities. Right now, someone finds out that there’s been a release of 50 lbs of radon gas, undetectable at the fenceline boundary of the plant, some two bit shyster lawyer hears about that and brings a $47 billion class action lawsuit on behalf of everyone living in a 1000 mile radius, claiming “excess cancers”. This sort of BS lawsuit needs to be “reformed” any way. If a plant screws up and hurts anyone, sure, they should pay — and even more if they ignore a problem or sweep it under the rug. But damages for “theoretical” injuries should be tossed out on their asses, preferable in a manner such that they bounce three times on granite, followed by a forty-food slide.

  4. Carl,

    I can’t dispute that new nuclear power plant construction projects face daunting obstacles.

    Is it possible though, that recent technological advances have changed some of the capital cost figures you have assumed? Obviously, they haven’t actually already built such a new, cheap nuke but some firms (Hyperion Power Generation in this case)claim to be able to construct small-scale nukes.

    carl, is this all pie-in-the-sky science fiction?

    If not, then the primary obstacles remain political. I don’t underestimate the challenge of political obstacles but they can be overcome—unlike physical ones.

  5. The villains at work:

    Are sonar tests harming whales? The Supreme Court weighs in” by Bill Mears at on 2008-OCT-08:

    * * *

    Environmentalists successfully sued the Pentagon over the practice, forcing major changes the Navy’s annual offshore training exercises in March. President Bush had issued an emergency waiver to allow the exercises to go on without the filing of an environmental impact study (EIS), but the lower court ruling blocked the use of sonar.

    Military officials are asking the justices to intervene, arguing the restriction could hamper military readiness in time of war, since new sonar technology is needed to detect increasingly sophisticated enemy submarines.

    Justice David Souter expressed repeated skepticism that an emergency existed allowing the president to try to bypass normal environmental reviews. …

    But Justice Samuel Alito worried the executive constitutional authority is being eroded. “Isn’t it incredibly odd about a single [federal] district court judge making a determination [limiting exercises] that is contrary to the determination that the Navy has made?”

    * * *

    We will not have nuclear energy until the last lawyer is strangled with the entrails of the last environmentalist.

  6. Obama can say anything he wants in a debate, on the stump, or in a campaign ad. But if he does the exact opposite later, who is going to call him on it? The media? Yeah, right. They are so distracted by that tingle that Obama sends up their legs, that they can’t think straight even if they wanted to or had the capacity.

    Fun days ahead when the emotive self-contradicter in chief gets handed the controls. He will have all the agencies of government going in so many different circles at once that the malaise of the Carter presidency will seem like euphoria in comparison.

  7. Jerry, please cite your sources.

    I find little reference to either substantial dampening in Japan or substantial accidents.

    Further, given that several organizations (two in Japan, one in Korea, one in Russia) are adding or ramping up their production lines for containment vessels, the industry apparently disagrees with you as to the future of nuclear power.

    There are also many new designs, some of which do not require containment vessels which show promise — and some of them use Thorium rather than Uranium, and contain no usable fissile materials at all, greatly reducing the threat of proliferation.

    In short, there are some technical decisions which need to be made, but, once made, the obstacles are entirely political, and most of them are based on the Green tendency to go into anaphylactic shock at the sound of the word “radiation”.

  8. > do not require containment vessels
    Sorry, by that I meant the sort of “one piece forged” containment vessels produced at the limited number of locations (four) which I listed above. They obviously still need full containment, and I did not mean to suggest otherwise.

  9. Thanks for the link.

    ONE suggestion that comes to mind as a possible solution: use vertical-axis windmills rather than the normal horizontal-axis ones. This would basically move the gearbox and generator to the ground rather than being stuck up in the air, possibly therefore reducing the weight constraints on the machinery to something easier to manufacture.

  10. > Japan Steelworks is one of only two companies outside the former Soviet Union capable of making the 600 ton castings required for containment vessels.

    Mitsubishi is adding the capability, as is a South Korean company, in addition to the Russians.

    That’s at least four.

    I’m not claiming I know otherwise from your claims (beyond the above), but I’m asking you for the second time for any actual support for your claims. I want to know how you “know” this. Nothing personal, but I don’t know you or your ability to divine good from bad sources, and I’ve seen plenty of people who could not recognize BS if it came out of the cow in mooing front of them.

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