Will nuclear power pay for itself?

Will Nuclear Power Pay for Itself?

JEFFREY R. PAINE* University of Illinois, Springfield

Will nuclear power ever generate enough revenue to cover its costs? Historical data covering capital, fuel, operations, maintenance, decommissioning, and waste disposal costs, and generation and revenue figures during the period 1953 through 1991 were analyzed and compared. The analysis shows that nuclear power is currently nowhere near meeting its costs. Scenarios projecting future costs and revenues were developed. Analysis of these projections suggests that even under the most optimistic conditions (where costs are cut considerably and revenues climb substantially), the current generation of the nuclear option over its lifetime may at best be economically marginal.

INTRODUCTION Just nine years after the first controlled fission reaction, the first generation of electricity from a nuclear reactor occurred on December 20, 195 1, at a small research reactor in Idaho.’ Planning for the first United States commercial nuclear power reactor began in 1953.* Between 1953 and the end of 1991, electric utilities in the United States spent hundreds of billions of dollars building and operating nuclear power stations, and received hundreds of billions of dollars in revenue from the sale of electricity generated at those stations. In theory, it is possible to estimate whether commercial nuclear power has been able to cover its basic reported costs. Enough information exists in the public domain to estimate the total production-plant expenses, and the non-production-plant utility expenses associated with nuclear power.3 Therefore, the questions at hand are: to date, *Direct all correspondence to: Jeffrey R. Paine, 2520 Portsmouth (evenines): (217) 529-8721.

Circle, Springfield,

The Social Science Journal, Volume 33, Number 4, pages 459-473. Copyright 6 1996 by JAI Press Inc. All rights of reproduction in any form reserved. ISSN: 0362-3319.

Illinois 62703.

Telephone

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has the revenue received from the sale of nuclear-generated electricity at least equaled the costs associated with building and operating the reactors? In the future, will the revenue received at least equal the costs associated with building and operating the reactors? Obviously, the financial and operating officers of the utilities that own and operate nuclear power reactors think so, based on the considerable detailed, and privileged, information available to them. For the rest of the public+specially investors, researchers, regulators, policy makers and politicians-the publicly available cost and revenue data does not provide definite answers. There is, however, enough information available to suggest some preliminary conclusions.4 The earliest studies of nuclear power economics were based on assumptions about how nuclear power reactors might work and on the early performance of both research reactors and reactors used to produce nuclear weapons material, rather than on substantial operational experience. Indeed, there were less than 100 reactor-years of operational experience in reactors of all kinds during 195 1, when industrial teams were first allowed to assess classified nuclear data for commercial potential.5 Most of that experience was on water-cooled graphite-moderated reactors used to produce plutonium for the atomic weapons program. The first electricity was not generated from nuclear power until the Industrial Participation Program was well under way. Since 1935, electric utility rates have been set under the requirements of the Public Utility Holding Companies Act (PUHCA). Historically, under PUHCA, state public utility commissions almost automatically allowed all capital expenditures into a utility’s rate base. The rate base was structured to allow the utility to recover the investment, plus return a steady profit. Non-capital expenditures, such as fuel and operating expenses, were passed on directly to the utility’s customers, without profit for the utility. Therefore, from a utility’s point of view, the road to high revenues and financial security lay on the path of high capital investment and low operating cost.6 The early expert estimates suggested that nuclear would meet these utility requirements. The experts expected that nuclear would have higher capital costs, low operation and maintenance costs, and very low fuel costs. Utilities could expect a reactor to operate at about 100 percent power for about 80 percent of the time during its estimated 40-year life span. Total costs were expected to be competitive with conventional generation systems in most areas of the nation, and would probably be substantially better in high energy-cost areas like the Northeast and Southern California. By the late 1950s and early 1960s some of this initial optimism was validated, based on the fulfillment of initial technical expectations in various research reactor programs, and on the known performance of naval propulsion reactors. Naval reactor performance was “known” only in the sense that some vendor researchers had access to and were able to include the naval design and performance data in their commercial development work. Naval reactors have apparently been very good performers over the years, although the actual operational data are still classified.7 From the late 1960s through the 1980s studies were based on a combination of earlier theoretical models and actual, albeit sparse, commercial operational data.’ In many of these studies, the focus was on taking data on limited aspects of nuclear economics (i.e, capital costs, reactor performance characteristics, et cetera), process-

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ing the data, and applying the resulting figures to “model” reactor situations. Unlike the earlier “predictive” studies, the results of these later studies were wildly variable: Conclusions depended largely on (a) the assumptions used to “build” the model plant, (b) the selection of data used as input, and (c) the laboriously constructed adjustment factors used to take the raw data from experience and bend it to fit a mathematical non-reality. The results of some studies by pro-nuclear researchers have made nuclear energy appear so favorable that it is difficult to understand, if their figures are accurate, why more plants weren’t ordered, why utilities ordered so many fossil fuel plants during the same period, or why so many of the ordered nuclear units were later canceled. Likewise, studies by opponents of nuclear energy have made it difficult to understand, if their figures are accurate, why any utility executive would ever be at all interested in the nuclear option. Generally speaking, pro-nuclear researchers focus on operational economics, national energy independence and energy diversity issues; anti-nuclear researchers focus on nuclear capital costs, security and safety issues; and both sides argue environmental and external cost issues, which differ between conventional, nuclear and alternative generation systems. Obviously, the truth lies somewhere between the extremes. Further, the range of costs and benefits presented by various researchers illuminates the difficulty of using theoretical models and limited data in analyzing real-world conditions. It has also been at least a decade since a comprehensive empirical economic analysis of the nuclear industry has been reported in the literature. Since the early 198Os, published nuclear energy studies seemed to focus on limited aspects of nuclear energy economics, just investigating, for example, improving operational characteristics, changing operation and maintenance costs, or historical capital expenditures. In addition, comparisons between nuclear and conventional generating systems highlight some economic relationships between the various systems, but do not necessarily highlight all the economic relationships. For example, nuclear generation may be relatively more economical than petroleum generation. But in an absolute sense, it is possible that neither system will generate enough revenue to recover the investment plus provide a profit. In this study I investigate whether nuclear electric generation is or is not economically viable. That is, has and will nuclear electrical generation collect enough revenue to pay for its reported and estimated associated costs, now and in the future? The direct costs that must be covered are initial capital investment, operations and maintenance, fuel, capital additions, spent fuel disposal, and plant decommissioning. Indirect costs that must be covered are portions of non-production plant capital expenditures, non-production plant operations and maintenance expenditures, and general utility operations expenditures.’ Nuclear cost and generation data are collected by the U.S. Department of Energy’s Energy Information Administration from the electrical utilities and are published in several different reports, including the Energy Annual, Electric Plant Cost and Power Production Expenses, Nuclear Power Plant Construction Activity, and others. Other data, including revenue data, are presented in publications such as Moody’s Public Utility Manual, Standard and Poor’s Industrial Surveys, the Edison Electric Institute’s

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Yearbook of the Electrical Utility Industry, Electrical World magazine and various trade publications. There are gaps and other limitations to the data, which are discussed in the appendices to this article (appendicies A and B are available on request from the author). However, these are the only data available that can be alleged to portray with any degree of accuracy the reality of the costs associated with the nuclear power industry. Statistical

DATA AND ANALYSIS Despite its considerable presence in the media and the American consciousness, nuclear energy historically represents only a small part of the electrical generation industry in the U.S. In 1993, for example, nuclear power stations made up about 14 percent of the installed capacity and generated about 22 percent of the nation’s electricity. Originally, industry experts anticipated nuclear becoming the major source of electricity in the U.S. As recently as the early 197Os, projections suggested that 500 to 1,000 nuclear units would be generating more than half the nation’s electricity by the year 2000.” However, developments during the 1970s and 1980s conspired to limit nuclear’s impact: construction costs grew at many times the rate of inflation, the credit markets for capital investment shrank, public opposition to nuclear energy increased, the demand for electricity slowed, and finally, the nuclear industry reeled in the regulatory and political aftershocks of the 1979 Three Mile Island accident.’ ’ Between 1953 and 1991, at least 265 nuclear power reactors were planned by U.S. utilities.12 but capital cost data were available for only 149 units. Of the 131 reactors that hav; generated commercial quantities of electricity in the U.S. through the end of 1991, operational data and costs were not available for eight reactors, and only partial information was available for several others (see Appendix A for a discussion of the various limitations and omissions of the data set for capital, economic and operational figures). Generally speaking, the errors and omissions in the data tend to cause the total costs to be underreported rather than overreported. Thus, the actual costs are probably higher than what is reported herein.

Comparison of

Table 1.

and Performance

Total Utility and Nuclear Spending in Billions of

in Billions of Killowatt-Hours,

Category

Industry Total

Production

Capital*

$591

Dollars

1982

in Selected Categories, 1958-l

991

Nuclear as % Industry

Nuclear Total

Low-Middle-High

Low-Middle-High $250-$300-$350

42.3-50.8.-59.2

$282~-$332-$382

27.9--32.9-37.8

Total Capital*

$1,010

Operations

$2,000

$174

8.7

$781

$39 $335

11.1

and Maintenance

Fuel

$3,020

Revenue Potential Actual

Generation

Generation

Capacity

137,600

11,500

8.4

61,200

6,400

10.5

44.5%

Factor

* Data is for 1953-I

991.

The first commercial

operation

starting in early 1958.

SolIKe:

See endnote

3 and Appendix

A

5.0

nuclear

125.2

55.7% plant was ordered

in 1953,

with

construction

beginning

in 1955

and

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Will Nuclear Power Pay for I&e/f?

As illustrated in Table 1, from the beginning of 1958 through the end of 1991, U.S. electrical utilities generated approximately 6 1.2 trillion kWh. l3 Nuclear generation contributed approximately 6.4 trillion kWh, or about 10.5 percent of total production. During that same period, nuclear stations represented only 8.4 percent of the total U.S. potential generation (that is, installed capacity), 8.7 percent of all operations and management expenditures, and about 5 percent of all fuel expenses (all in constant dollars). However, during the period 1953 (when the first commercial reactor was ordered) and the end of 199 1, nuclear amounted to about 54 percent of total utility production plant capital expenditures. In Table 2 the range of station-only costs that nuclear stations have incurred is illustrated. Station-only expenses total between $436 billion and $616 billion in constant dollars. In Table 3 the range of station-plus-general utility costs associated with nuclear power is set forth. Total expenses range between $561 billion and $741 billion. In addition to the reported and estimated costs, there are other costs and benefits that are not easily determined and are therefore not included in this analysis. These include, but are not limited to: nuclear liability insurance; the disposition of nuclear non-electricity production facilities; state and federal regulation; emergency response planning and preparation; replacement power during unplanned outages; early federal investment in nuclear research and subsidies for development; reduced dependence on foreign energy sources; reduced air pollution; the risks of proliferation; and the assumption of risk for nuclear technology development and implementation. Some

Table

2.

Reported and Estimated Nuclear Energy Costs, 1953-l 991, at Production Plant Level, in Billions of 1982 Dollars

Cost

Category

Low Estimate

Middle

Estimate

High Estimate

$250

$300

$350

$81

581

581

New Fuel

539

539

539

Capital Additions

526

526

526

Spent Fuel

520

530

540

Construction Operations

and Maintenance

Decommissioning Total

550

520 $436

580

$526

$616

Source: See endnote 3 and Appendix A.

Table 3.

Reported and Estimated Production Plant and Non-Production

Plant Utility Construction and Operations and Maintenance 1953-l 991, in Billions of 1982 Dollars Cost Category

Low Estimate

Costs,

Middle Estimate

High Estimate

Total Nut-lear Plant from Table 2

$436

$526

$616

Non-Production-Plant-Construction

532

532

$32

Non-Plant Operations

593

593

and Maintenance

Total Source: See endnote 3 and Appendix A.

$561

$651

593 $741

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researchers have attempted to assess these concerns, often using the results to bolster their own pro- or anti-nuclear positions.14

ELECTRICAL GENERATION AND REVENUES Electrical revenue is determined by the net kWhs of generation sold to consumers times the price per kWh that consumers pay. Between 1958 and 1991, the constant-dollar price of electricity varied from a low of about $0.036 per kWh to a high of about $0.062 per kWh, with the mean at about $0.052 per kWh. Total utility electrical revenues for the period were about $3 trillion (constant).t5 One can estimate nuclear revenue based on its annual share of total generation, which gives a total of about $335 billion in constant dollars, which is about 11.1 percent of total revenue. Estimating the revenue based on the nuclear share of total generation (10.5 percent, see Table 1 above) during the 1958-1991 period gives nuclear revenue of about $3 16 billion (constant). Also, one can establish high and low bounds for the estimated nuclear revenue by assuming that nuclear electricity sold on average for 20 percent more (about $0.06 per kWh) or 20 percent less (about $0.04 per kWh) than the average price of kWhs. The upper value is about $402 billion and the lower value is about $268 billion. In Table 4 the low, middle and high scenarios for total nuclear costs with low, middle and high scenarios for nuclear revenue are presented. Historically, the fleet of nuclear plants has operated at a capacity factor of about 56 percent.16 If nuclear stations had operated at a higher fleet capacity factor, say 75 percent, and all other factors remained equal, nuclear generation would have brought in considerably more revenue. To determine if revenues exceeded costs under the various scenarios, revenues were divided by costs to give a decimal ratio. Ratios of less than 1 mean that costs exceeded revenues. A ratio of 1 means that costs and revenues were equal, and ratios above 1 mean that revenues exceeded costs-that is, nuclear energy paid for itself with something to spare. As demonstrated in Table 4, even if nuclear had performed at a higher capacity with the same costs, the revenues would have been less than expenses under most scenarios.

Table 4.

Comparison of Low, Middle and High Estimated Historical Total Utility

Expenses with Low, Middle and High Estimated Historical Revenue at 55% Capacity Factor and at an Estimated 75% Capacity Factor, in Ratio of Revenue to Expense, for Years 1953-l 991 Revenues at 56% CF

Revenues at 75% CF

Plant Plus at $O.O4/kWh at $O.O5/kWh at $O.O6kWh at $O.O4/kWh

at $O.O5kWh at $O.O6/kWh

Utility Expenses

$268

$335

$402

$366

$457

$548

$561

,478

,596

,717

.652

,815

.977

$651

,412

,515

,618

,562

,702

.842

$741

,362

,452

,543

,494

.617

,740

Source: Tables2,3,AppendixA.

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Will Nuclear Power Pay for kself?

The available data make it possible to suggest that by the end of 1991, nuclear energy was nowhere near covering either the plant or associated non-plant utility costs.

PROJECTIONS While nuclear energy appears not to have paid its associated costs through the end of 1991, there is nothing in the available data to say that in the future revenues will not exceed costs. Indeed, utility electrical rates are set up to recoup an investment over a period of future years, not balance income and spending at the time the investment is made. While predicting the future is often futile, I provide here a range of projections to suggest what the future may hold for the current generation of nuclear power stations. I address various issues affecting these projections in Appendix B. For the purposes of this exercise, I assume that there are no additional premature reactor retirements, that the nuclear utilities choose retirement over renovation and life extension of existing reactors, that the remaining six incomplete reactors are not completed, and that no new reactors are ordered, built and enter operation. In building the base case for the set of projections, I assume that the fleet performance is steady at 70 percent until the last reactor retires, that all currently operating reactors operate for a full 40 years, that the price of electricity remains steady at $0.05 per kWh in constant dollars, and that the average cost of operating each nuclear power station remains essentially constant at its 1987-1991 average.” The primary variable in projecting future costs is annual plant operations cost, including operations, maintenance, fuel and capital additions costs. All other costs (i.e., capital investment, decommissioning, et cetera) were assumed to be fixed. Costs

Tab/e 5.

Total Nuclear Expense Scenarios with Revenues at $O.OS/kWh, for Various Station Lifetimes at Various Capacity Factors,

in Billions of Constant Dollars, and in Ratio of Revenue to Expense, and Annual % Return over 67-, 72-, and 77-Year Nuclear Eras Fleet Lifetime Capacity Factor (CF)

Expenses during a

Revenue during a

67.year

67-year

Nuclear Era

50%

60%

70%

80%

$772

$860

$947

$1,035

Nuclear Era Ratio Annual %

Total, Low $1 ,017

=.759

=1.13%

,846

‘1.26%

,931

1.39%

1.018

1.52%

Total, High $1,118

.691

1.03%

,769

1.15%

,847

1.26%

,926

1.38%

Expenses during a

Revenue during a

72-year

72.year

Nuclear Era

$1,000

$890

$1,110

$1,220

Nuclear Era

Total, Low $1 ,121

,794

1.10%

,892

1.24%

,990

1.38%

1.090

1.51%

Total, High $1,249

,713

0.99%

,801

1.11%

,889

1.23%

,978

1.36%

Expenses during a

Revenue during a

77.year

77-year Nuclear Era

Nuclear Era

$1,141

$1,007

$1,275

$1,410

Total, Low $1,226

821

1.07%

.931

1.21%

1.040

1.35%

1.150

1.49%

Total, High $1,380

,730

0.95%

,827

1.07%

,924

1.20%

1.022

1.33%

Source: Appendix B. Notes: The 77.year Nuclear Era and 80 percent Capacity Factor scenarios are considered Appendix

6. A 67.year

to a 35-year

nucear era corresponds

average lifetime,

and a 77.year

to an average 30.year era corresponds

lifetime

to a 40.year

unlikely

for reasons discussed

for existing reactors. A 72.year

average lifetime.

era corresponds

in

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for the base case were considered in the plant-plus-general-utility category. High- and low-cost scenarios were established by assuming that the operations costs were increased or reduced by 20 percent. With revenue held constant at $0.05 per kWh, the primary variables for revenue are average station lifetime and fleet capacity factor. Scenarios of 30-, 35 and 40-year average lifetimes and fleet capacity factors of 50, 60, 70 and 80 percent were used to calculate potential revenues. For the reasons discussed in appendix B, the 80 percent lifetime fleet capacity factor and 40-year lifetime scenarios are unrealistic. They are included to demonstrate the optimistic limits of the model. To determine whether and by how much revenues exceed or fail to exceed costs under the 24 possible combinations of cost, lifetime, and performance, revenues were divided by costs to give a decimal ratio, the same as in Table 4. This ratio was then divided by the number of years of nuclear operation to determine a simple-interest per-year return on investment, as if the total cost of nuclear energy was a single investment made at the date of commercial operation of the first reactor. The results of this comparison are displayed in Table 5. Revenues exceeded costs in only 5 of 24 cases, all among the unrealistic scenarios. In Table 6, the effects of electrical prices being 20 percent higher ($O.O6/kWh) and 20 percent lower ($O@UkWh) over the remainder of the nuclear era under the more realistic operating and cost scenarios is presented. Higher prices for nuclear electricity improve the ratios considerably, so that revenues exceed costs in 6 of the 18 cases, but only by a maximum of 12.8 percent. Of course, for nuclear to remain competitive at higher prices, the price of all electricity must also rise, but under competition, many experts expect the price of electricity to remain steady or fall.

Table 6.

Comparison of Projections of Future Nuclear Revenues Based on Average

Operating

Lifetime, Fleet Capacity Factor, and Total Generation

Multiplied

by

Various Prices, with Projected Future Expenses, in Constant Dollars Estimated Cost,

Fleet

Estimated

Estimated

Estimated

Revenue

Revenue

Trillion kWh at $O.O4/kWh

Lifetime Operating

Capacity

Generation

Revenue

Years

Factor

at $O.O5/kWh

at $O.O6/kWh*

30

50

15.1

$618 billion

$772 billion

$926 billion

30

60

16.8

$688 billion

$860 billion

$1,032

30

70*

18.5

$758 billion

$947 billion

$I,1 36 billion

30

80*

20.2

$828 billion

35

50

16.9

$712 billion

35

60

0.2

$800 billion

$1,000

$1,035

Bill;ons Low

High

$1,017

$1,118

$1 ,121

$1,249

$1,226

$1,380

billion

billion

$1,242

billion

$890 billion

$1,068

billion

billion

$1,200

billion

35

701

23.6

$888 billion

$1 ,l IO billion

$1,332

billion

35

80*

27.0

$976 billion

$1,220

billion

$1,464

billion

40’

50

19.6

$806 billion

$1,007

billion

$1,208

billion

40’

60

22.3

$913 billion

$1,141

billion

$1,369

billion

401

70

25.0

$1,020

billion

$1,275

billion

$1,530

billion

40%

80*

27.7

$1,128

billion

$1,410

billion

$1,692

billion

* For reamns outlmed m Appendix 6, the factorsdesignated with an asterlsk(and therefore the resultingrevenue figures)are considered unrealistic.

Will Nuclear Power Pay forItself?

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Figure 1 graphically compares the range of projected costs with revenue estimates based on different combinations of lifetime, capacity factor and price developed in Tables 5 and 6. Only 14 of 36 combinations are within or above the projected range of costs. These 14 points represent the least likely combinations of high performance, long life and high price. Investors and corporate managers look for the highest rate of return possible on investments. In general, large industrial investments are expected to return 10 percent to 15 percent annually before inflation, perhaps 5 percent to 10 percent after inflation. Utilities have been unique because they have been regulated monopolies. Expected returns on investment in utilities are generally less than on other investments, but are

0

l 0

e

0

0 0 0

0

0

0

:

600!....,....,....,....0 10

15

20

25

Fleet Lifetime Generation in Trillions of Kilowatt-hours o Revenues at SO.O4/kWh m Revenues at $O.OS/kwh l Revenuesat SO.O6/kWh 0 Range of estimated cust Table 6 and Appendix B

Figure 7.

Comparison of Possible Future Revenues under Different Combinations

of Lifetime, Capacity Factor and Price per kWh against Range of Possible Future Expenditures, in Constant Dollars

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more reliable because regulation reduces the risk of competitive markets. Only under the most optimistic of scenarios does the nuclear return on investment achieve a simple-interest return as high as 1.8 percent per year. From this analysis, I suggest that nuclear power will cover its associated costs only if: (1) future operational expenses can be reduced considerably below present levels; (2) future reactor performance levels can be raised considerably above historical levels; and (3) the price paid by consumers for nuclear electricity rises considerably higher than the present national average price. However, with increased competition as utilities lose their special monopoly status, the prospects for electrical price increases appear to be limited. Even if electrical revenues can be increased significantly beyond what I have posited above, the return on investment will probably not be sufficient to interest or satisfy investors or utility executives, especially in comparison to other utility investments.” DISCUSSION

AND CONCLUSIONS

Have the revenues received from the sale of nuclear-generated electricity at least equaled the associated costs of nuclear energy? The answer appears to be “No,” given the magnitude of the difference between reported historical expenditures and revenues. Will nuclear energy be able to pay for all its historical and future associated costs? Because of the limited data and the necessity of making assumptions about the future, the possible answers range from a guarded “Yes” to an emphatic “No.” On the basis of the available data, one is led to suggest that the current fleet of nuclear power plants is probably uneconomical, or at best, economically marginal. Even the most optimistic projections suggest that nuclear energy is not a fiscal bonanza for the nuclear utilities. And the uncertainties of an increasingly competitive generation marketplace make high-capital investments like nuclear less appealing. It must be remembered, however, that this analysis is based on incomplete data. By no means do I suggest that nuclear power either definitely is or is not economical: many individual stations appear to have been quite good investments. Nor have I made an attempt to investigate the reasons why conditions appear so unfavorable for the current fleet of nuclear power stations. But the available data and this analysis are suggestive: it appears that it is primarily the high initial capital costs that hurt the industry. Nor do I suggest that nuclear power is necessarily desirable or undesirable from other standpoints. Among other arguments, there are the debates about the environmental and health impacts of various electrical energy generation alternatives, the issue of energy security, and the question of jobs for American citizens. But without a firm grounding in the economics of nuclear power (including its relationship to the economics of conventional fossil electrical generation, other forms of electrical generation, and other energy alternatives, and including all the direct and indirect costs and benefits of all options), the validity of various positions on these issues cannot be resolved. The question of overall competitiveness with other energy options deserves some consideration here. From the early days of the nuclear age, and especially after the oil

Will Nuclear

Power

Table Year

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Pay for Itself!

7.

Selected Facts About World Petroleum Supplies, 1950-I 990 Reserves

xlOll

bbl

Consumption do

bbl

Pricelbbl

Pricelbbl

Depletion

(Current $)

(7 982 $) 8.61

Years to

1950

0.77

0.35

21.9

2.43

1960

2.90

0.78

37.2

2.88

8.62

1970

5.30

1.69

31.4

3.18

8.09

1980

6.42

2.24

28.8

21.59

24.53

1990

6.42

2.22

45.1

20.03

16.80

Source:

American

Petroleum

Institute; Oil and Gas louma/;

The Pelroleum

Encyclopedia;

U.S. Bureau of the Census.

shocks of 1973 and the early 1980s industry supporters touted nuclear power as an alternative to using petroleum for electrical generation.” Table 7 displays selected data concerning the world supply of petroleum between 1950 and 1990. The reserves of petroleum have grown 13-fold in 40 years, while the rate of consumption has increased slightly less than seven-fold. The static ‘years-to-depletion’ figure has therefore more than doubled, from about 22 years to about 45 years. Most of the price changes in the last four decades are the result of political interference in the market, such as cartel activity, wars and embargoes. Although these changes were significant, over the long term (and in constant dollars) the price of crude petroleum has only doubled since 1950. Table 7 reflects the price spike caused by the Gulf War in 1990. Since 1986, the real price of petroleum has generally been less than $15 per barrel.20 What does the future hold for this competition between nuclear and petroleum? Uranium has suffered extremely low prices for many years now,” a situation that is likely to continue. But the cost of nuclear electric generation lies primarily in capital and operations, not in fuel. With abundant supplies of petroleum at low prices, and low capital costs associated with petroleum electric generation, nuclear does not appear to have any significant price advantage, and may in fact be handicapped. Coal and natural gas, like petroleum, are versatile, abundant, and both currently and over the long term, inexpensive fuels with lower associated capital costs than nuclear. Even alternative energy sources, such as wind and solar electric, are becoming increasingly competitive, especially in niche markets.22 At the same time, nuclear is constrained by the fact that it is not a versatile-use energy system, its technology limited to a central-station format capable of generating electricity, process or district-heating steam, or maritime propulsion. The latter two have never been significant applications worldwide. In addition, there are significant security constraints on nuclear energy.23 When competing with abundant, versatile, low-cost supplies of energy, there has been and will be little political or economic incentive to further develop the nuclear option, at least for the foreseeable future. Despite this, the nuclear vendors have been developing new reactor designs, regulatory agencies have been developing regulations to apply to those new designs, and industry sources hint that utility orders for new reactors may be placed with vendors shortly after the turn of the century. Utility economists and executives have access to the detailed cost and revenue data necessary to determine economic viability of various electrical generating systems. Such information is part and parcel of how they determine the what, where, when and how of electrical generation. Their reluctance to share this information publicly makes

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it difficult for the general public--especially investors, researchers, regulators, policy makers and politicians-to make rational, informed decisions about selecting nuclear energy or other alternatives in the future. To provide a more accurate picture of reality, to reach more definite conclusions, and to make better-informed rational decisions about the future of nuclear power, the public needs access to all the data. Acknowledgment:

The author wishes to express appreciation to Dr. John Munkirs, Dean of the University of Illinois, at Springfield School of Business and Management, for his advice in conducting this research and for his valuable critique of this article.

NOTES 1. 2. 3.

Raymond L. Murray, Understanding Radioactive Waste, 2nd Edition. (Columbus, OH: Battelle Press, 1985). U.S. Council on Energy Awareness, Historical Profile of U.S. Nuclear Power Development, 1988 Edition (Washington, DC, 1988). There is apparently no one single centralized collection of this data. The following data sources overlap somewhat. Secondary sources are listed in appendicies A and B; Electric World “Annual Statistical Report.” Various dates, 19651993; Edison Electric Institute. Statistical Yearbook of the Electric Utility Industry, Annual (Washington, DC 1970, 1980, 1991); Moody’s Investor Service, Moody’s Public Utility Manual. 1993; United States Department of Energy, Energy Information Administration, Electric Plant Cosf and Power Production Expenses, DOE/EIA-455. Annual 1988 through 1991 (Last in series). U.S. Government Printing Office, Washington, DC, 1990-1993; United States Department of Energy, Energy Information Administration, Annual Energy Review 1991. DOWEZA-0219. Annual. U.S. Government Printing Office, Washington, DC, 1992; United States Department of Energy, Energy Information Administration, An Analysis of Nuclear Power Plant Operating Costs: A 1991 Update. DOE/EIA-0547. U.S. Govemment Printing Office, Washington, DC, 1991; United States Department of Energy, Energy Information Administration, Nuclear Power Plant Construction Activity. DOE/ EZA-0473. Annual. U.S. Government Printing Office, Washington, D.C., 1987; United States Department of Energy, Energy Information Administration, An Analysis of Nuclear Power Plant Operating Costs. DOWEIA-0511. U.S. Government Printing Office, Washington, DC, 1988; United States Department of Energy, Energy Information Administration, Historical Plant Cost and Annual Production Expenses for Selected Electric Plants. DOE/EIA-455. Annual 1982 through 1987. U.S. Government Printing Office, Washington, DC, 1983-1988; United States Department of Energy, Energy Information Administration. An Analysis of Nuclear Power Plant Construction Costs. DOW EZA-0485. U.S. Government Printing Office, Washington, DC., 1986; United States Department of Energy, Energy Information Administration, Survey of Nuclear Power Plant Construction Costs. DOWEIA-0439. Annual 1982 through 1985. U.S. Government Printing Office, Washington, DC, 1983-1987; United States Department of Energy, Energy Information Administration, Thermal-Electric Plant Construction Costs and Annual Production Expense. DOWEIA-0323. Annual 1979 through 1981. U.S. Govemment Printing Office, Washington, DC, 1980-1982; United States Department of Energy, Energy Information Administration, Steam-Electric Plant Construction Cost and Annual Production Expenses. DOWELA-0033. Annual 1975 through 1978. U.S. Government Printing Office, Washington, DC, 1976-1979; U.S. Department of Energy, Office of Nuclear Reactor Programs. “Nuclear Power Program Information and Data.” Update.

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Washington, DC, July/August, 1980; United States Federal Power Commission, Steam-Electric Plant Construction Cost and Annual Production Expenses. Annual Supplements number 13 through 27, [FPC-S-149 (1960), -154 (1961), -166 (1962-63). -171 (1964), -179 (1965), -185 (1966). -192 (1967), -199 (1968), -209 (1969), -222 (1970a), -230 (1971), -237 (1972), -250 (1973), -259 (1974)]. U.S. Government Printing Office, Washington, DC, 1961-1975. Numerous sources were consulted to develop the historical aspects of the electrical utility and nuclear power industries, and the history of nuclear economics studies. More significant among those used are listed here; others are listed in appendicies A and B; W.W. Brandfon, “Is Nuclear Power Competitive?’ in Nuclear Power in the Midwest, Proceedings of the Twelfth Annual Illinois Energy Conference (Chicago: Energy Resources Center, The University of Illinois at Chicago, 1984); John L. Campbell, Collapse of an Industry: Nuclear Power and the Contradictions of U.S. Policy (Cornell University Press, 1989); Robin Cantor, and James Hewlett. “The Economics of Nuclear Power: Further Evidence on Learning, Economies of Scale, and Regulatory Effects.” Resources and Energy, 10 (1988); Steve Cohn, “The Economics of Nuclear Power.” In Energy Economics: Theory and Policy, edited by Robert L. Priog and Stephen C. Stamos, Jr. (Englewood Cliffs, NJ: Prentice-Hall, 1987). James Cook, “Nuclear Follies,” Forbes, February 11, 1985; Gordon R. Corey, “An Economic Comparison of Nuclear and Coal-Fired Generation.” INFO Reprint. (Washington, DC: Atomic Industrial Forum, Inc., 1980); Paul P. Craig, and William B. Marcus. “An Economic Evaluation of the Economics of the Rancho Seco Nuclear Reactor,” Energy, 16 (3) (1991); Edward Edelson, The Journalist’s Guide to Nuclear Energy, 2nd ed. (Washington, DC: Atomic Industrial Forum, Bethesda, MD, and U.S. Council for Energy Awareness, 1988); Richard Hellman, “Competitive Economics: Nuclear and Coal Power,” In Nuclear Power in the Midwest, Proceedings of the Twelfth Annual Illinois Energy Conference, Energy Resources Center, (The University of Illinois at Chicago, 1984); Richard Hellman, and Caroline J.C. Hellman, The Competitive Economics of Nuclear and Coal Power (Lexington, MA: Lexington Books, 1983); Mark Hertsgaard, Nuclear Inc (New York: Pantheon, 1983); Richard F. Hirsch, Technology and Transformation in the American Electric Utility Industry. (Cambridge, U.K.: Cambridge University Press, 1989); John F. Hogerton, “The Arrival of Nuclear Power,” Scientific American, (February 1968); Charles Komanoff, “The (MAL)Practice of Nuclear Power Economics.” In Nuclear Power in the Midwest, Proceedings of the Twelfth Annual Illinois Energy Conference, Energy Resources Center, (The University of Illinois at Chicago, 1984); Anthony C. Krautmann, and John L. Solow, “Nuclear Power Plant Performance: the Post Three Mile Island Era.” Energy Economics (July 1992); Phillip G. LeBel, Energy Economics and Technology (Baltimore, MD: John Hopkins University Press, 1982); Moody’s Investor Service, Moody’s Public Utility Manual (1993); Raymond L. Murray, Understanding Radioactive Waste, 2nd ed. (Columbus, OH: Battelle Press, 1985); Peter Navarro, “Comparative Energy Policy: The Economics of Nuclear Power in Japan and the United States,” The Energy Journal. 9 (4) (1988); John R. Siegel, “Nuclear Power: Year 2000,” In Nuclear Power in the Midwest, Proceedings of the Twelfth Annual Illinois Energy Conference. Energy Resources Center, (The University of Illinois at Chicago, 1984); Standard and Poor’s Corporation, Industry Surveys: Utilities-Electric, Vol. 160, No. 15, Sec. 1, (April 9, 1992); Standard and Poor’s Corporation, Industry Surveys: Utilities-Electric, (August 8, 1991); Time, “Pulling the Nuclear Plug.” (February 13, 1984); United States Department of Energy, Assistant Secretary for Nuclear Energy, Office of Support Programs, Nuclear Energy Economics. DOE/NE-0061. (U.S. Government Printing Office, 1984).

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Hogerton 1968, Hirsch 1989, Hertzgaard 1983, and others discussed the Industrial Participation Project of 1951. Using information in DOE/OSTI 1988, it was possible to determine which reactors were in operation or had operated, and for how long. The total at the end of 195 1 was less than 100 reactor years; United States Department of Energy, Office of Scientific and Technical Information. Nuclear Reactors Built, Being Built, or Planned: 1987. DOE/OSTI-8200-RSI, Annual. (Washington, DC: U.S. Government Printing Office, 1988). 6. Byus 1993, Campbell 1989, Cook 1985, Hertzgaard 1983, Time 1984, and others have discussed the bias toward high capital investment encouraged by PUC commission rate settings under PUHCA; Linda C. Byus, “Shaping the Future of Electric Utilities.” Nuclear News, (February 1993). 7. While detailed performance data remains classified, nuclear Navy vessels in April 1994 surpassed 100 million miles under nuclear power, as reported in Atomic Energy Clearinghouse 1994; Atomic Energy Clearinghouse, “Naval Nuclear Ships Reach 100 Million Miles,” (May 20, 1994). 8. Among the studies cited by the various sources listed above are: the Oyster Creek study and several responses to that study cited by Hogerton 1968; Corey’s 1980 assessment of nuclear power in the Commonwealth Edison Company system; Hellman and Hellman 1983, and Hellman 1984 discuss the 1974 Atomic Energy Commission study, the 1976 Energy Research and Development Agency study, the 1979 Nuclear Regulatory Commission environmental impact statement on the proposed Charlestown, Rhode Island, nuclear reactor, and the 1977-1979 Exxon internal study on nuclear energy; the Atomic Industrial Forum study group report summarized in Brandfon 1984; and the 1980 DOE assessment of nuclear power plant costs for 1979. 9. Utility cost categories are reported in the various sources cited in note 3 above. Since utilities are in the business of selling electricity, revenue collected from that operation must pay for almost all utility costs. Small amounts of revenue are received from transmission and distribution investments included in the rate base, hookup fees, rents, and other corporate services. 10. This number is widely quoted in popular and academic sources (cited in several sources in note 3), and arises from the Federal Power Commission’s 1970 National Power Survey and President Nixon’s 1974 Project Independence proposal, which was cited in several sources in note 3; United States.Federal Power Commission, National Power Survey. (Washington, DC: U.S. Government Printing Office, 1970). 11. There is little debate among pro-nuclear and anti-nuclear researchers on the factors that led to the stagnation of the nuclear option. These factors are listed by almost every source consulted. However, the degree to which each contributed to the high capital cost of nuclear energy are open to debate because the available data is insufficient for adequate analysis. Using the available data and various economic models, researchers have attempted to specify the contributions of different events, policies and practices: Richard Hellman, “Competitive Economics: Nuclear and Coal Power,” In Nuclear Power in the Midwest, Proceedings of the Twelfth Annual Illinois Energy Conference, Energy Resources Center, (The University of Illinois at Chicago, 1984); Richard Hellman, and Caroline J.C. Hellman, The Competitive Economics of Nuclear and Coal Power. (Lexington, MA: Lexington Books, 1983); Charles Komanoff, “The (MAL)Practice of Nuclear Power Economics,” in Nuclear Power in the Midwest, Proceedings of the Twelfth Annual Illinois Energy Conference, Energy Resources Center, (The University of Illinois at Chicago, 1984); United States Department of Energy, Energy Information Administration, An Analysis of Nuclear Power Plant Operating Costs: A 1991 Update, DOIYEIA-0.547 (Washington, DC: U.S. Government Printing Office, 1991); United

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12. 13. 14.

15. 16. 17. 18. 19.

20. 21. 22. 23.

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States Department of Energy, Energy Information Administration, An Analysis of Nuclear Power Plant Operating Costs, DOEYEIA-0511 (Washington, DC: U.S. Govemment Printing Office, 1988); United States Department of Energy, Energy Information Administration, An Analysis of Nuclear Power Plant Construction Costs, DOEYEIA-0485 (Washington, DC: U.S. Government Printing Office, 1986). Capital expenditures and construction reporting is discussed in appendix A. This data derives from Moody’s Utility Manual 1993, DOE Energy Annual 1992, and EEI yearbook figures. These issues are brought up, and sometimes discussed in great detail, by the sources used in this study (see notes 3 and 4). However, it is impossible to quantify-or even provide ball-park estimates for-these values without considerably more research. Such further research, while relevant to the question of nuclear economics, was beyond the calling of this study. Reported in Electrical World magazine’s annual reports and Moody’s Utility Manual 1993. Derived from DOE Energy Annual 1992 data and Moody’s Utility Manual 1993. Determined by independently averaging the five-year operational cost for each station as reported in note 3, then summing for the total. Byus 1993 and others cited in notes 4 and 6 discuss the underlying motivations for investment in nuclear projects. See any number of publications and advertisements published by the U.S. Council for Energy Awareness since its founding in the 1970s. For example: U.S. Council on Energy Awareness, Electricity From the Atom-Are We Moving in the Right Direction? Undated two-page flyer. (Washington, DC: Author); U.S. Council on Energy Awareness. Nuclear Electricity and Energy Independence. Undated booklet. (Washington, DC: Author): United States Department of Commerce, Bureau of the Census. Statistical Abstract of the United States, Annual (Washington DC: U.S. Government Printing Office, 1994). U.S. Department of Energy, Energy Information Administration Uranium Industry Annual-1991, Annual (U.S. Government Printing Office, 1992). Carl J. Weinberg, and Robert H. Williams, “Energy from the Sun,” Scientific American (special issue, “Energy for Planet Earth”), (September 1990). Phil Williams, and Paul N. Woessner, “The Real Threat of Nuclear Smuggling,” Scientific American, (January 1996).