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Financial support for nuclear power plants
Progress In Nuclear Energy, Vol. 7, pp. 125-126. Pergamon Press Ltd 1981. Printed in Great Britain
(079-065318110101--0073$05.0010
FINANCIAL SUPPORT FOR NUCLEAR POWER PLANTS KENNETH HOLLISTER First Vice President, Dean Witter Reynolds Incorporated, New York Much, if not all, of the future of nuclear energy relates to its cost and the ability of the utility industry to obtain financing. In an over simplified fashion, the question is, will money be available for a $3 billion project which may require 10-14 years to build, that provides for no earnings during most of that period, and may not be allowed to operate when and if it is completed because of political determinations ? Now I believe I am an optimist, but those conditions create a difficult hurdle. Nonetheless, that is the situation now facing the electric utility industry in the United States. In order for the nuclear industry to have a future the hurdle must be surmounted. It is not solely a question of safety, or of waste management, or nuclear proliferation. It is a question of special interest groups increasingly impinging on the technology thereby raising the cost, with the end result being to defeat its use. It is becoming the ultimate in circularity, (also known as Catch 22), where conditions, difficult to meet are cumulated by government agencies until the funding for the project becomes unwieldy and then stating that the facility should not be built because it is uneconomic. As an observer what amazes me is the persistence of industry management in providing what it truly believes is necessary equipment in the face of almost constant attack. To the degree they are successful in building and operating the equipment the thanks they may receive will be sparse indeed. I would add parenthetically this problem is not limited to nuclear facilities; the tribulations related to coal plant construction are not exactly child's play either. Here, however, we are dealing solely with the nuclear alternative. Many cogent arguments can be made in favor of nuclear power. One reason for not gaining a standing or respect for these ideas is a basic lack of interest on the part of the general public about the broad concepts of energy policy and, for Whatever the reason, lack of determination to face the issue. The political officers also are reluctant to enter the fray as criticism is the most likely reward. The United States, and most o f the rest of the
world, woke up late in 1973 to find that their historic fuel cost pattern was about to change, and change it has. Concurrently, although with only minimum correlation, several hundred years of dedication to growth by the western world had damaged the ecology sufficiently to attract attention and m o v e s were undertaken to seek absolute redress. While the two events were to be closely related in the ensuing years, each was treated as an isolated problem, (or mistreated as the case may be). The move from an economy based on cheap, readily available energy to one of scarcity and high cost is traumatic, and it shows. As we attempted to struggle through the conflicting pressures of repairing the ecological balance while still genuflecting to the god of growth, the need for redirection of the public's concept of energy availability and cost began to take the form of a 'National Energy Policy.' The goals of this effort were laudable, but they involved sacrifice, and, thus, in a society built on elemental greed, the result was, no coherent policy. The current prospects for a legislative solution remain just as bleak. As an example of the response of some in government 1 should like to repeat a paragraph written by the Honorable Morris K. Udall, Chairman, Committee on Interior and Insular Affairs, U.S. House of Representatives,? 'Just as Three Mile Island has caused introspection within the (utility) industry, it has led some of us in Congress to rethink our own positions and our views as to our role and that of the NRC. The inquiries into the accident have reinforced my long held belief that we erred in making a major committment to nuclear power in all good faith but without adequate understanding o f the pitfalls. Yet I recognize that the clock cannot I:e set back. The commitment has been made and the task now at hand is to correct the defects inherited from the past. Those o f us who have been skeptical must give i" Public Utilities Fortnightly, 19 June 1980, Vol. 105, No. 13, p. 82.
125
126
K. HOLLISTER
the nuclear option a fair chance. Those who advocate continued expansion must demonstrate a willingness to examine the way the technology has been managed; they must show an openness to change.' (Emphasis added). Can anyone reading that paragraph believe that Congressman Udall is going to aid in overcoming the rather large set of hurdles to nuclear power set forth in the opening paragraph of this article? If I interpret his words correctly he is saying, 'Tell me with certainty what the future will be and don't be wrong again.' That hardly bodes well for a legislative solution. F r o m another standpoint, in an article in Science Magazine,? Gus Speth, Chairman of the President's Council on Environmental Quality (CEQ), is referred to as follows: 'In part this means the [CEQ] overseeing compliance of other agencies with N E P A (National Environmental Policy Act). This function was strikingly illustrated recently when Speth followed up a CEQ-sponsored study by the Environmental Law Institute of impact statements prepared by the NRC. The study revealed that in nearly all of these statements the discussion of possible nuclear reactor accidents consisted largely of uninformative boiler plate and did not deal at all with the possibility of so called 'Class 9' accidents that might involve a core meltdown and breach of containment. In a letter to the NRC, Speth called for corrective action, and, at a meeting on 16 April, the commission indicated that it would be moving to adopt an N R C staff proposal that would meet most of the CEQ criticisms.' While it all sounds so easy and simple this little recommendation caused delays of many months in the licensing procedures for nuclear plants, finished and ready to operate. There was a cost of oil use for replacement power, and a cost to the consumer that was higher than it would have been otherwise. Was the delay necessary? I don't pretend to know. All I know is that nobody stopped to see if the delay had a justifiable cost associated with it. Further it did nothing to enhance energy 'policy', and if anything was counter productive. What is the accountability of those who interfere to the general welfare ? The author of the article further notes, ' . . . Speth
t Carter, Luther Jr., 'Gus Speth, Planning the 'Conservor Society'." Science Magazine, 30 May 1980 Vol. 208.
and the CEQ are now finding themselves in an almost constant struggle to keep existing environmental laws from being weakened or overriden. A high priority goal has been to keep the House and Senate conferees on the Energy Mobilization Board legislation from accepting a provision that would allow the EMB to waive or override substantive laws, such as the pollution and strip-mining control acts.' So much for circularity, but it certainly does not facilitate an energy policy. When one has to pass legislation to circumvent other legislation which caused a problem, the outlook for a coherent political solution is dim indeed. The ability of the human animal, faced with the insoluble to compromise, is not to be underestimated, And, that, is how I believe we will begin to move to a solution of 'our energy problem.' In may opinion our basic difficulty is not deciding whether we need nuclear, coal, solar or whatever, but whether we need or can afford anything. The response to that degree of uncertainty in a long lead time world could well result in miscalculation and further significant abberations of the economy. It also could lead to quick fix~solutions until we sort our priorities. Under that scenario, the outlook for construction of new nuclear plants of major size is not particularly promising in the United States. Certainly, until demands of the future can be seen with some additional clarity the cost burden of large nuclear (and perhaps coal fired also) plants is difficult to justify. As prices to the utility customer rise over the coming several years reflecting costs already in the system, but not yet being recovered, usage patterns will probably become even more significantly different than in the past. As those patterns emerge it will again be possible to plan with intelligence for an energy future. Whether nuclear will have a share in that future will depend on clarification and standardization of rules and regulations. Lastly, there must be a higher degree of surety that construction can be completed than now is the case. From the standpoint of financial support, currently it is too expensive to build large scale nuclear plants under present rules and regulation. Until it again becomes economic relative ot other energy sources or until there is again public acceptance of the process, I believe there will be a hiatus of construction of units not currently in latter stages of completion. I suggested at the outset that I am by nature an optimist, and I am. There will be energy. We will adjust to its availability and price. Innovation is yet to be heard from. All I can say about nuclear, however, is that its future in this country is uncertain.
(079-065318110101--0073$05.0010
FINANCIAL SUPPORT FOR NUCLEAR POWER PLANTS KENNETH HOLLISTER First Vice President, Dean Witter Reynolds Incorporated, New York Much, if not all, of the future of nuclear energy relates to its cost and the ability of the utility industry to obtain financing. In an over simplified fashion, the question is, will money be available for a $3 billion project which may require 10-14 years to build, that provides for no earnings during most of that period, and may not be allowed to operate when and if it is completed because of political determinations ? Now I believe I am an optimist, but those conditions create a difficult hurdle. Nonetheless, that is the situation now facing the electric utility industry in the United States. In order for the nuclear industry to have a future the hurdle must be surmounted. It is not solely a question of safety, or of waste management, or nuclear proliferation. It is a question of special interest groups increasingly impinging on the technology thereby raising the cost, with the end result being to defeat its use. It is becoming the ultimate in circularity, (also known as Catch 22), where conditions, difficult to meet are cumulated by government agencies until the funding for the project becomes unwieldy and then stating that the facility should not be built because it is uneconomic. As an observer what amazes me is the persistence of industry management in providing what it truly believes is necessary equipment in the face of almost constant attack. To the degree they are successful in building and operating the equipment the thanks they may receive will be sparse indeed. I would add parenthetically this problem is not limited to nuclear facilities; the tribulations related to coal plant construction are not exactly child's play either. Here, however, we are dealing solely with the nuclear alternative. Many cogent arguments can be made in favor of nuclear power. One reason for not gaining a standing or respect for these ideas is a basic lack of interest on the part of the general public about the broad concepts of energy policy and, for Whatever the reason, lack of determination to face the issue. The political officers also are reluctant to enter the fray as criticism is the most likely reward. The United States, and most o f the rest of the
world, woke up late in 1973 to find that their historic fuel cost pattern was about to change, and change it has. Concurrently, although with only minimum correlation, several hundred years of dedication to growth by the western world had damaged the ecology sufficiently to attract attention and m o v e s were undertaken to seek absolute redress. While the two events were to be closely related in the ensuing years, each was treated as an isolated problem, (or mistreated as the case may be). The move from an economy based on cheap, readily available energy to one of scarcity and high cost is traumatic, and it shows. As we attempted to struggle through the conflicting pressures of repairing the ecological balance while still genuflecting to the god of growth, the need for redirection of the public's concept of energy availability and cost began to take the form of a 'National Energy Policy.' The goals of this effort were laudable, but they involved sacrifice, and, thus, in a society built on elemental greed, the result was, no coherent policy. The current prospects for a legislative solution remain just as bleak. As an example of the response of some in government 1 should like to repeat a paragraph written by the Honorable Morris K. Udall, Chairman, Committee on Interior and Insular Affairs, U.S. House of Representatives,? 'Just as Three Mile Island has caused introspection within the (utility) industry, it has led some of us in Congress to rethink our own positions and our views as to our role and that of the NRC. The inquiries into the accident have reinforced my long held belief that we erred in making a major committment to nuclear power in all good faith but without adequate understanding o f the pitfalls. Yet I recognize that the clock cannot I:e set back. The commitment has been made and the task now at hand is to correct the defects inherited from the past. Those o f us who have been skeptical must give i" Public Utilities Fortnightly, 19 June 1980, Vol. 105, No. 13, p. 82.
125
126
K. HOLLISTER
the nuclear option a fair chance. Those who advocate continued expansion must demonstrate a willingness to examine the way the technology has been managed; they must show an openness to change.' (Emphasis added). Can anyone reading that paragraph believe that Congressman Udall is going to aid in overcoming the rather large set of hurdles to nuclear power set forth in the opening paragraph of this article? If I interpret his words correctly he is saying, 'Tell me with certainty what the future will be and don't be wrong again.' That hardly bodes well for a legislative solution. F r o m another standpoint, in an article in Science Magazine,? Gus Speth, Chairman of the President's Council on Environmental Quality (CEQ), is referred to as follows: 'In part this means the [CEQ] overseeing compliance of other agencies with N E P A (National Environmental Policy Act). This function was strikingly illustrated recently when Speth followed up a CEQ-sponsored study by the Environmental Law Institute of impact statements prepared by the NRC. The study revealed that in nearly all of these statements the discussion of possible nuclear reactor accidents consisted largely of uninformative boiler plate and did not deal at all with the possibility of so called 'Class 9' accidents that might involve a core meltdown and breach of containment. In a letter to the NRC, Speth called for corrective action, and, at a meeting on 16 April, the commission indicated that it would be moving to adopt an N R C staff proposal that would meet most of the CEQ criticisms.' While it all sounds so easy and simple this little recommendation caused delays of many months in the licensing procedures for nuclear plants, finished and ready to operate. There was a cost of oil use for replacement power, and a cost to the consumer that was higher than it would have been otherwise. Was the delay necessary? I don't pretend to know. All I know is that nobody stopped to see if the delay had a justifiable cost associated with it. Further it did nothing to enhance energy 'policy', and if anything was counter productive. What is the accountability of those who interfere to the general welfare ? The author of the article further notes, ' . . . Speth
t Carter, Luther Jr., 'Gus Speth, Planning the 'Conservor Society'." Science Magazine, 30 May 1980 Vol. 208.
and the CEQ are now finding themselves in an almost constant struggle to keep existing environmental laws from being weakened or overriden. A high priority goal has been to keep the House and Senate conferees on the Energy Mobilization Board legislation from accepting a provision that would allow the EMB to waive or override substantive laws, such as the pollution and strip-mining control acts.' So much for circularity, but it certainly does not facilitate an energy policy. When one has to pass legislation to circumvent other legislation which caused a problem, the outlook for a coherent political solution is dim indeed. The ability of the human animal, faced with the insoluble to compromise, is not to be underestimated, And, that, is how I believe we will begin to move to a solution of 'our energy problem.' In may opinion our basic difficulty is not deciding whether we need nuclear, coal, solar or whatever, but whether we need or can afford anything. The response to that degree of uncertainty in a long lead time world could well result in miscalculation and further significant abberations of the economy. It also could lead to quick fix~solutions until we sort our priorities. Under that scenario, the outlook for construction of new nuclear plants of major size is not particularly promising in the United States. Certainly, until demands of the future can be seen with some additional clarity the cost burden of large nuclear (and perhaps coal fired also) plants is difficult to justify. As prices to the utility customer rise over the coming several years reflecting costs already in the system, but not yet being recovered, usage patterns will probably become even more significantly different than in the past. As those patterns emerge it will again be possible to plan with intelligence for an energy future. Whether nuclear will have a share in that future will depend on clarification and standardization of rules and regulations. Lastly, there must be a higher degree of surety that construction can be completed than now is the case. From the standpoint of financial support, currently it is too expensive to build large scale nuclear plants under present rules and regulation. Until it again becomes economic relative ot other energy sources or until there is again public acceptance of the process, I believe there will be a hiatus of construction of units not currently in latter stages of completion. I suggested at the outset that I am by nature an optimist, and I am. There will be energy. We will adjust to its availability and price. Innovation is yet to be heard from. All I can say about nuclear, however, is that its future in this country is uncertain.