Nuclear Power Cost Over-runs

The United States (and many other countries, such as Britain) faces an energy crisis of its own making. Due to a variety of bone-headed “deregulation” schemes, there is now no financial incentive for companies to build new large, baseload generating plants (nuclear, coal, hydro) and there are massive dis-incentives in the form of zealous greens and myopic regulators that will fight them every step of the way should they attempt to solve this problem.

While these facts are on the ground and manifestly self-evident (no new nuclear plants have been built in decades, not counting the TVA re-powering one site) and new baseload coal plants are extremely few and far between, journalists have been touting the “re-emergence” of nuclear power based on almost no hard evidence. As soon as these articles came out, I immediately pointed out the immense difficulties in building one of these plants, which range from the fact that there are 1) no financial incentives large enough to offset the massive risks 2) these estimates are “pie in the sky” and not backed up by cases of building in the USA 3) the history of these sorts of projects, on the other hand, is well documented and grim. This type of “reporting” is typical when reporters have only the barest knowledge of the facts at hand; as such they “humanize” the story and take uninformed or biased opinions verbatim without challenging the facts.

The Wall Street Journal had an article in their May 12, 2008 issue titled “New Wave of Nuclear Power Plants Faces High Costs”. Per the article:

“A new generation of nuclear power plants is on the drawing boards in the U.S., but the projected cost is causing some sticker shock: $5 billion to $12 billion a plant, double to quadruple earlier estimates.”

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Number Gut Part II

Way back in 2004 I wrote about how the lack of an intuitive sense of scale prevented many people from viewing the Lancet Iraqi Mortality survey with skepticism. The same lack of sense of scale shows up in other areas such as in this article (via Megan McArdle) about ending subsidies to the oil industry instead of levying a windfall-profits tax.

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Stupid Quote of the Day

With Earth Day as a backdrop to the concern about use of fossil fuels, Sen. Dianne Feinstein (D. Calif.), said that “until we build the replacements for gasoline…there ought to be a prohibition on market speculation.”

(Source: “US Senators Grow Louder In Call For Oil-Market Probe”, Dow Jones Newswires, 4/23/2008)

UPDATE: Fixed the link. Note that the subtly different WSJ title for this article is, “Democrats Demand Probe Of Oil-Market Speculation”.

Energy Mess, Continued

UNRELIABLE SERVICE

Today’s Chicago Tribune carried an article reflecting a reality that will become more and more common as time goes by. The article is titled “Deerfield files suit against ComEd” in their Friday, April 18 edition. Deerfield is a suburb of Chicago and ComEd is the local electrical distribution company that provides power, a wholly owned subsidiary of Exelon. ComEd’s “solution” is to raise rates to fix the problem, while Exelon’s stock is at an all-time high due to the money that they make selling power that costs them very little to generate (our broken regulatory system in Illinois at work).

The city of Deerfield claims that their electrical supply is unreliable. They state that they have had 1,377 outages between 2000 and 2007 and only 13% of these outages were weather related. These outages typically caused flooding due to shut off sump pumps, food to become spoiled, and are a general nuisance.

This type of activity will grow more common in the future, since lack of continuity in generation causes a lot of the outages (poorly run and maintained distribution and transmission systems also contribute significantly to these outages). I wouldn’t be surprised if in the future homes had built-in back up generating capacity, especially high end homes, to insulate them from at least short term fluctuations in the grid.

NEW JERSEY NUCLEAR PLANT

New Jersey is also considering building another nuclear plant, their first plant since 1973, according to this article. While I applaud Corzine (their governor, the guy who got into a car accident without a seat belt & almost died) for trying to do this, the odds of this plant ever seeing the light of day are near zero. The NIMBY’s are already going nuts – from the article:

“Environmental groups were sharply critical of Mr. Corzine’s 15-year energy plan. Jeff Tittel, director of the New Jersey chapter of the Sierra Club, said the governor “needs to step up and lead New Jersey to a cleaner, greener future with more wind, solar and better energy efficiency goals.”

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Carbon Emissions

The US is known as “The Saudi Arabia of Coal”. We have massive amounts of coal deposits within our borders.

If you look at photos of Dubai with all the skyscrapers and massive construction or read about Russia, likely the most expensive place to live today in the entire world, you see countries whose economies and wealth are being buoyed by commodity wealth. While there are also downsides to riding on commodities, there are positive instances of well run countries (i.e. the UK with North Sea gas and oil) benefiting from their commodity wealth.

The US has basically stopped building coal plants due to environmental concerns. Sure, there are a few coal plants being built here and there (I profile an Illinois coal plant under construction at this post) but the energy is basically dead in its tracks. According to this excellent analysis (which I highly recommend reading in full) from the National Energy Technology Laboratory, here is a summary:

“Actual plant capacity, commissioned since 2000, has been far less than new capacity announced; the year 2002 report of announcements reflected a schedule of over 36,000 MW to be installed by 2007, whereas ≈ 4,500 MW (12%) were achieved. The trend over several years has reflected the bulk of power plant developments shifting out in time due to project delays Delays and cancellations have been attributed to regulatory uncertainty (regarding climate change) or strained project economics due to escalating costs in the industry.”

Beyond typical NIMBY activities and our broken deregulation system, a key factor stopping construction of new plants are the emissions and ties to warming by environmental groups.

However, this recent article by the BBC (a fairly reliable source, historically) says that China is now the world’s top carbon polluter, and probably passed the USA back in 2006-7. China, of course, has no problem whatsoever in putting up coal plants and sensibly (from an economic perspective) utilizes coal heavily since they have their own deposits and don’t have to import fuel, while coal is also a proven technology for power generation. There are various accounts of their coal construction but I continuously see the reference to “a plant a week” but I would have to do more research to verify those claims; in any case many sources point to a massive construction boom of coal plants in China.

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