Carl from Chicago

Business executive interested in history, economics, taxation and energy policy.

Texas Nuclear Plant In (High) Doubt

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I always start these posts by saying that I am a big supporter of nuclear power and believe that it is good for America to have a solid foundation of base load nuclear plants. As a realist, however, I am bound to continually explain the frankly insurmountable obstacles that are in place to any sort of plan to build new nuclear units in the USA. As soon as any of the nuclear events in Japan started I put up this post saying “it’s over”.

While it isn’t final, it looks like it is almost over with the two units that they are building in Texas. You can find this news everywhere but here is a small summary.

Utility company NRG has put the brakes on a plan to build two new nuclear reactors at its South Texas plant, CEO David Crane said Wednesday.

All along I have said that NRG was a lousy candidate to build a nuclear plant. Since they are more of an IPP (Independent Power Generator) than a baseload utility subject to traditional “rate of return” regulation (in a state that has that, like South Carolina or Georgia, where it is NO SURPRISE that the only plants are being built), they need to continually raise money and hit profit targets in the near term and they can’t just pour billions into construction and endless delays.

One of their partners is the Tokyo utility struggling to contain the recent nuclear plant issues in the wake of the Japan earthquake – TEPCO (Tokyo Electric Power Company).

Tepco holds a 10% stake in the NRG expansion project, with the option to purchase an additional 10% share. A spokesman for NRG confirmed the company has been in touch with Tepco following Japan’s twin natural disasters — but only to offer assistance.

On top of that, the US has announced a plan to review nuclear safety throughout the country. Given our relatively poor record of utility planning and regulation (see the Yucca Mountain Storage fiasco for a primer on how our government can’t plan or execute and wastes billions while accomplishing nothing), there is little hope for a near term answer from our regulators.

“The timing of this from where our project stands could not be more unfortunate,” Crane said. “And time can be the biggest enemy for a project like this.” It’s unclear how long the review will take. “We actually agree that we need the review,” Crane said. “But the question is what are we looking at? A three month review or longer?” Crane said he hopes his plant will be among the first to be given the green light by regulators. He stressed that the proposed reactors will sit 10 miles from the Gulf Coast, in a non-seismic area.

It is unfortunate in its timing. This project was already seriously weakened by the pull out of municipalities that used to contribute to new baseload growth; these sorts of alliances were behind many of the nuclear plants that exist in the US right now. But even prior to this disaster in Japan the municipalities were “spooked” by the prospect of unlimited delays and cost over-runs and also under a financial gun more or less to start with.

We will see what happens in Georgia and South Carolina. I will bet that South Carolina is “all in” because they are in a small state and if they have to “eat” this massive hit by writing off their investment and passing it to taxpayers they will be embroiled in rage, so they have little choice. As for Georgia, Southern Company is much bigger and can absorb more pain, so they may be able to take an (unfortunately) more pragmatic approach.

Cross Posted at LITGM

The Austro-Hungarian Empire Revisited

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A while back Dan sent me a book by an Austrian author and intellectual Stefan Zweig titled The World Of Yesterday. This book is the author’s auto-biography that he wrote from Brazil in the early 1940s when Hitler was at the apex of his power and had overrun France and his beloved Paris and basically destroyed the Jewish intellectual culture in the region; after sending it to his biographer the author killed himself. You can see the post-it note that Dan put on the book – “one of the best books I have ever read”.

Stefan describes Austria under the regime of the Austro-Hungarian empire, when Vienna was the cultural center. The portrait is of an intellectually enlightened culture where music and the arts are held in high esteem; part of this is due to the fact that the author’s family owned a successful business and they also resided in what was presumably the wealthiest part of the empire.

It is my own ignorance but I generally lumped the Germans and the Austrians into one ethnicity in my mind and this book calls out the differences. The Germans are seen as the efficiency-expert types and the Austrians are by comparison tolerant and focused on the arts. As the climate against the Jews turns from bad to worse it is the Germans (whether in Germany or the ethic Germans in the borders of the empire) that lead this effort.

All in all a great book about an intellectual leader who was part of a proud and ambitious art culture but watched it all laid waste under the rise of the Nazis. In the end his entire world was effectively destroyed, as the Austro-Hungarian empire fell (replaced with deprivation for the surviving states) and then finally almost all of continental Europe fell under the boot of fascism.

In parallel I purchased an award-winning book about a WW1 front of which I knew very little, the war between Italy and Austro-Hungary on the Italian border called The White War by Thompson. This book describes the futile Italian offensives as the multi-ethnic Austro-Hungarian army attempts to hold them off against the provinces of its empire.

My knowledge of the Italian front was limited and incomplete; the combined offensive with the Germans at Caporetto in 1917 was well known not only because Rommel won his Pour Le Merit (highest military honor) at this engagement but that Hemingway documented it in fiction through “A Farewell to Arms” as the Italians collapsed. The time of 1915-1917 and repeated battles in the mountainous region consumed armies on both sides in difficult mountainous conditions and in harsh winter weather. In fact Caporetto is also known as Twelfth Battle of the Isonzo, to put the series of attrition-like engagements in context.

One item that stood out to me throughout the book was how they would identify the Austro-Hungarian troops based upon the regions from which their units were raised; whether they were Czech riflemen or Bosnian soldiers. And although the armies faced terrible hardships, in general these troops from differing nationalities fought for their empire right up to the end.

Despite blizzards of propaganda by Czech, Yugoslav, Polish and other separatist groups; half a million POW s returning from Russia, many of them newly politicized and loudly critical; extremely degrading conditions at the front, and the disappearance of any hope of victory – despite all this, the Hapsburg army remained loyal. There were no mutinies on the Italian front until late October, just before the last battle; even these were limited to a few units.

In today’s world there is a view among intellectuals that differences among groups are receding and that entities like the European Union or the UN can bring them together for coherent and common purposes. On the other hand, there is the reality “on the ground”, as nations split into smaller and smaller pieces, such as the Yugoslavian split, the Czech / Slovak split, and the likely impending Belgium split.

In the twenty first century the world is continuing a tradition of splintering nations into tinier entities, along ethnic lines, and with resources or major cities being the main prizes that are fought over. While this occurs there is a “gloss” of cooperation and collaboration that is more theater and for show.

It is interesting how this “false” world of collaboration (where it is in everyone’s best interests) contrasts with the much more public and up-front efforts of running an empire like Austro-Hungary. In fact the monarchs were aware of public opinion and for its day attempted to preserve customs and religions of the areas under its control, and to leverage the resources and skills of its far-flung citizens. While the downsides of the empire are well known (lack of self determination for every nationality), the empire as a whole had rapid economic growth, a consolidated foreign policy, and investment in areas such as transportation (rail) and post systems that benefited everyone.

The Austro-Hungarian empire also provided the Jewish culture in Vienna and elsewhere with relative protection compared to what they faced elsewhere (Russia) and later (with the rise of Hitler and the ultimate annexation of Austria). It is this world that dissolved and was utterly destroyed in the Zweig book, leading to his eventual suicide at the time of Paris’s occupation by the Germans in the early 1940s.

While you’d be seen as “insane” to advocate anything similar to the Austro-Hungarian empire in today’s world of hyper-local countries with a pan-gloss of cooperation, it would be an interesting thought experiment to see if nationalities could work together for a common good, even including military efforts. Today’s EU has a poor standing military; it is the member states that provide specific firepower. In 1914-8 the Austro-Hungarian empire brought soldiers together willing to die for their common goals, and in the context of that era (not by today’s context) they were relatively successful, until toppled by the two “isms” of nationalism and the incipient communism / fascism that was to plague the thirties and forties.

Cross posted at LITGM

Around Key West

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Upper left top – the inevitable “Eat it Raw” photo near the docks. In high school I wore a shirt with this image and they made me go home and change. Upper left middle – a view of Duval street from the 2nd level of the Hard Rock Cafe. Left bottom – they came to our hotel and cut all the coconuts off the palm tree and then cleaned everything up. We appreciated it the next day with high winds. Right top – a view on Duval street as the night heats up. Middle bottom – a large cruise ship along the docks. Lower right – the frozen drinks on tap on Duval street. Someone walked by and shouted “You can’t drink all day if you don’t start in the morning!”

Don’t know what it was about Key West but they had a lot of odd cars. I like Red Stripe because I always associate it with hanging out on the beach and relaxing so a truck full makes me very relaxed.

Cross posted at LITGM

The End of the Nuclear “Renaissance” is Now

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I am a big supporter of nuclear power but have written numerous posts on the financial, regulatory and legal issues that make the “nuclear renaissance” in the United States an illusion that could be deflated by the simplest of journalistic research.

One issue that I have touched on is “contagion” which basically means that the entire nuclear industry can be sent into a deep freeze by a single event hitting any nuclear plant anywhere around the globe. Mention “Three Mile Island” (which effectively halted new reactor construction in the US) or “Chernobyl” (which put a bullet in most reactors in the Western world) and you can see how a single event can dramatically impact the entire industry.

With this single photo that I got from the BBC site here (I usually don’t put up other people’s photos but in this case the image will soon be so iconic I think it was appropriate) now you can see the end of the Nuclear Renaissance in the United States.

That photo or some variant will be everywhere… the risk of a catastrophic event at a nuclear plant (even though the Japanese seem to be handling it well so far, all things considered) will be played up continuously, which will be more fodder for protests and will make financial executives think that much harder before committing all their company’s capital to such an uncertain venture as building a nuclear plant in the litigious USA.

The inflection point of a major event is rarely so obvious as this. I guess the real issue is whether this is even an inflection point anyways, since nuclear activity in terms of new construction in the US was confined to a couple of units in Georgia, a couple in Texas, and one in South Carolina anyways. We’d be lucky if out of these 5 units even 3 saw the light of day and were commissioned (remember that even if built protesters can shut it down – see what happened to Shoreham in Long Island). As for new ones beyond these, it goes from unlikely to remote.

All natural gas from here on out.

Update – It only took a few minutes for the French “Greens” (I don’t know how they are against nuclear power and call themselves green but they are all really against any progress whatsoever) have already started their calls to end nuclear power – find it here and wait for a million more just like it.

Cross posted at LITGM