Energy & Power Generation

Nuclear Energy Update

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Background on Nuclear Energy:

Nuclear energy provides a significant portion of the world’s base load power capacity, along with coal power, gas, and hydro-electricity. While “renewable” energy and conservation receive the lion’s share of the media coverage, in fact they make up a minuscule proportion of our total generation.

In the United States, for various reasons, there has been little or no investment in new base-load energy capacity, other than natural gas, and our existing plants are continuing to age. Since the plants have a long lead-time, if no new plants are started soon, we will have retirements and no reasonably priced options to replace them, which will drive up the total cost of energy and make our economy less competitive.

There are two viewpoints that I see frequently on this topic:

1) “The Greens” who view nuclear plants as a possible solution for greenhouse emissions and less “dirty” than coal, and I will put most of the government and media dreamers in this category
2) “The Engineers” who talk about new plant designs and how efficient they are and how technology can help us resolve this situation, which seems plausible given that most of the technology behind nuclear and coal plants actually in operation today stems from the 60’s and early 70’s

One viewpoint that I don’t see very often is what I will call “the bitter realist”. I am definitely in this camp, based on decades of experience with the utility industry, focused primarily on the financing side, which also requires a fair dose of regulatory experience (since they are closely intertwined). You can see much more detailed posts (50 and counting) on the energy industry in the US here.

Recent Events in Nuclear Power:

One event that didn’t receive the coverage that it deserved is the decision to abandon the Yucca Mountain storage plan in Nevada for spent nuclear fuel. Obama made this decision not to fund Yucca Mountain in the 2010 budget, although this has not been finalized. Over $9 billion has been spent on Yucca Mountain and work has proceeded on this effort since 1987. Utilities have been paying into a Federal fund to contribute to this storage site, and now each individual utility will need to determine how to store their own fuel on their own location indefinitely. There will also likely need to be some resolution to the amounts that the utilities have paid into the fund and whether these contributions will continue.

This plan was the signal monstrosity of the “greens / government” combined with the “engineers”. The site was studied to death but even 2 seconds into it the “bitter realist” could have told you that there was no way that thousands of shipments of nuclear waste were going to be shipped all the way across the USA and dumped into Nevada; this process could be halted anywhere by 1) bitter fighting by the state of Nevada (note that Harry Reid is now a big power in the Democratically controlled Senate, and he is celebrating) 2) lawsuits or even protests along the tracks 3) any sort of snafu (which seems inevitable, considering the logistics) along the way, the same way that the Three Mile Island incident was used to be the death knell of nuclear power in the USA.

So, now effectively we have abandoned any type of central storage (don’t believe the nonsense by the new energy secretary about a new plan; this one took 22 years to die and we haven’t even started thinking of another one) and now each of the utilities effectively need to plan for their own spent storage on site, indefinitely. This will also be something that the protesters can use to try to slow down / stop any new construction (do you want radioactive fuel in your neighborhood FOREVER? – I can see the signs in my head, now).

Another problem is that utilities have to plan for decommissioning their existing sites and pay for it “as they go”, unlike the Federal government, for example (which just issues debt and more debt). The cost of decommissioning is gigantic; you can only imagine the feast of lawyers and regulators that swoop to the site like seagulls at a garbage dump. The Nuclear Regulatory Commission recently cited 18 nuclear power plants to address these funding shortfalls – since they are not able to invest in risky securities, the current low interest rates will also mean that additional cash infusions will be required at some point in the future (although these policies mean that they didn’t lose money in the recent crash, either).

US Government Selects Four Companies for Federal Loan Guarantees:

The US Government recently selected four companies for Federal loan guarantees for new nuclear plant construction. Per the WSJ article titled “US Chooses Four Utilities to Revive Nuclear Industry”:

Seventeen companies applied for $122 billion of federal loan guarantees for 21 proposed reactors. In creating their short list, federal officials sought companies with strong development teams and plans that could be implemented quickly. They also wanted a mix of traditional utilities (Scana and Southern) and newer “merchant” generators (NRG, UniStar) that sell electricity at unregulated prices. Merchant operators have reaped big productivity gains in nuclear power in recent years. Foreign partners that might be able to contribute loans or equity were also considered a plus.

Hmmm…. when I saw this list I was pretty confused.

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Explaining Oil Prices

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[update 2009-06-12 10:00am: Please keep in mind that this post is about how people’s economic intuition goes awry when thinking about oil. The features internal to the oil industry are not as important as the differences between the oil industry and all other industries. It is these difference that cause people to misunderstand oil pricing.  ]

Oil prices are headed up even though the world economy is headed down. [h/t Instapundit] What gives? Shouldn’t a declining economy lead to  decreased  demand which keeps down prices?  

Well, yes and no. Oil is a strange commodity. It doesn’t change price and  availability  in the same pattern as other commodities that are based on natural resources. This  strangeness  arises out of the technology of oil production, distribution and refining.  

Several factors give oil an unusual economic profile:

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A Delayed Feedback Loop from 1982

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Western Europe is currently a shining example of Normalization of Deviance.

Why?

This is why.

In his book Riding Rockets, Astronaut Mike Mullane explained that NASA ignored known risks with the Shuttle because the craft had flown without those risks manifesting themselves in an incident. It is a common feature of humanity. Someone tells you that riding motorcycles without a helmet is dangerous. But you do it once and get away with it. You do it twice. A thousand times. But on the thousand-and-first, someone cuts you off, and you spray your brains all over the landscape, realizing, in your last, painful instants on this Earth, exactly why doctors call people like you “rolling organ stockpiles”.

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Non-Leftist Reality Versus Leftist Fantasy

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Reason Hit & Run has a good post defending Milton Friedman against leftists’ charges that his ideas contributed to the current financial crisis. I made the following comment:

Leftist always claim that the economic crisis du jour indicates the failure of the free market. Embedded in the assertion is the unstated premise that if leftist ran everything, we would never have economic crises. This in turn reveals the leftist’s wildly exaggerated sense of their own understanding of the economy and everything else.  
 
The left’s critique of Friedman in this context is especially silly because I’m pretty sure setting up giant government sponsored enterprises to buy up half the residential mortgages in the country and thereby distorting the markets assessment of risk, isn’t a plan that Friedman would have come up with.  
 
The left doesn’t actually have an developed system of thought regarding the economy. They can’t actually explain why the real world political process will systematically make better decisions than the free-market. Instead, they simply point to any reversals in the real economy, regardless of cause, and then assert that in their imaginations, leftist politicians could have done better.  
 
It’s hard to argue against people’s imagination. You end up with a discussion much like two D&D geeks arguing over whether a dwarf with a +10 axe could take an Elf with a vorpal sword.

Leftists are fantasy driven. They create elaborate fantasies and then force everyone else to argue for reality against the fantasies.  The real-world system always comes out the worse in the comparison for the same reason that the people we have sex with in our fantasies are usually better looking than the people we have sex with in real life.  

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What Happens When the Wind Stops Blowing?

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At 6:41 PM, Feburary 26th, 2008, The Electric Reliability Council of Texas (ERCOT) activated a Stage Two emergency response to keep the power grid that supplies most of Texas from failing and triggering rolling blackouts.  

The operators balanced the grid by cutting off power to “interruptible” customers. These are customers such as industrial sites that have their own power generators and that pay lower rates in return for being kicked off the grid during emergencies.  

Several factors contributed to the emergency. Unusually warm weather caused increased consumption. Two coal plants were offline for scheduled maintenance. The major trigger, however, was an easily  foreseeable  problem:

Preliminary reports indicate the frequency decline was caused by a combination of events, including a drop in wind-energy production at the same time the evening electricity load was increasing, accompanied by multiple power providers falling below their scheduled energy production. In addition, the drop in wind energy led to some system constraints in moving power from the generation in the north zone to load in the west zone, resulting in limitations of balancing energy availability. The wind production dropped from more than 1700 MW three hours before the event down to 300 MW at the point the emergency procedures were activated.  

[More details here.]

Let me translate that for you: The wind suddenly stopped blowing. It does that sometimes. The grid couldn’t adapt to the sudden loss of wind-generated electricity and they had to kick people off the grid.  

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