The Future of Nuclear Power

Published January 1, 2001

Certain article titles appear, reappear, and re-reappear. After each Presidential election, the question asked is, “What will the new President do?” After a contentious sports event, the headline often is, “Coaches criticize referees.”

In the energy arena, the title that has appeared more often than those in the nuclear industry would like to admit is, “The future of nuclear power.” Observers must get the impression the industry behaves like a yo-yo: sometimes it’s up, and sometimes it’s down. And there would be some truth to that impression, as public opinion about nuclear power has varied over the decades.

But through all of the industry’s ups and downs, one truth remains: No new energy source has made a greater contribution to the world’s needs for electricity since World War II, over half a century ago.

What is more, there is nothing on the horizon—not renewables, not fusion, nor anything else—that is likely to supplant nuclear power as the most important new electricity source for decades, if ever.

People in the Third World are not likely to be satisfied forever with one light bulb hanging in the living room. And here in the First World, our electric bills continue to climb because we find ever more things to plug into the wall. As the world demands more electricity, it will have to use more fossil fuels or nuclear. Hydro-electric may help meet the demand in some parts of the Third World, since there are many undeveloped hydro sites there. But all the others are also-rans, finishing so far down the track they can’t be seen.

Public opinion and nuclear power

There have been three periods when the future of nuclear power looked brilliant.

In the beginning, right after World War II, all was light. Newspapers were filled with articles on how nuclear power would transform life. Dirty coal, the main fossil fuel generating electricity at the time, would be eliminated. We might even drive around in nuclear-fueled cars.

Then reality set in. A reactor that was both safe and cost-effective compared to its competitors would have to be designed. Dozens of models were proposed; most were abandoned. Government and industry sponsored vast armies of engineers. By the 1960s, the first designs were ready to be built.

It was unclear at the time how much market share nuclear would take from fossil fuels and hydro. The first reactors were one-of-a-kind. The first of anything always costs more than later editions.

It was around this time that Lewis Strauss, one of the members of the Atomic Energy Commission, hosted a dinner meeting for reporters that would haunt the industry. Strauss shared his dreams of what the world would be like hundreds of years into the future, when he said disease and war would be eliminated and nuclear power would be too cheap to meter. Anti-nuclear groups conveniently dropped the fact that Strauss was dreaming of future centuries, not predicting the next decade, and they have hounded the industry since then for not fulfilling the “too cheap to meter” promise.

Since that time, members of the Atomic Energy Commission and its successor, the Nuclear Regulatory Commission, have kept their dreams to themselves.

Oil shock a nuclear boost

The nuclear industry grew slowly but steadily, building on the success of the first reactors. The industry’s main competition came from oil-fired plants, which benefitted from historically low prices.

The first oil shock occurred in 1973, when foreign oil producers quadrupled the price of petroleum. The public assumed oil was about to run out, sparking enormous interest in nuclear power. Reactor orders multiplied, sparking the second era of nuclear optimism. The Nixon administration, in its Project Independence report, envisioned perhaps a thousand reactors. (There are slightly more than 100 in the United States today.)

The euphoria lasted a few years. Unfortunately for the nuclear power industry, its price per reactor rose rapidly, due partly to higher interest rates attributable to the oil shock. Nuclear power would always be cheaper than oil-fired electricity, but it was difficult to beat coal, the price of which rose less rapidly than oil.

Then came Three Mile Island. The risk to human health was small, but the extra costs tacked on to existing and future reactors by new regulations were massive. Scores of reactor orders were cancelled.

A new century, renewed promise

Since Three Mile Island, the nuclear power industry gradually has become more efficient, in cost per unit of electricity produced, than it had been in the past. Today, some observers suggest a third era of optimism is at hand.

Several factors have lifted the gloom that enveloped the industry during much of the 1980s and 1990s.

Deregulation. Deregulation of the electricity-generating industry has boosted nuclear’s chances, although many thought it would sink nuclear once and for all. Until deregulation, nuclear power plants had little incentive to improve their operations, other than Nuclear Regulatory Commission orders handed down from on high. With deregulation—and the industry is by no means fully deregulated—every electricity-generating plant has been put on notice that it is in competition against others, and could be shut down if operated inefficiently.

The impact of deregulation is evident in the prices paid for nuclear plants in the last few years.

Until deregulation, the idea that a nuclear reactor could be bought and sold like a slab of beef was unheard of. The first few sales were disappointing to the industry. Reactors were sold for not much more than the cost of their carpeting, indicating investors had little faith in their value.

But in the last year or two, that has changed. Reactors are being sold for hundreds of millions of dollars. Investors think they can make money in a deregulated market.

For a fossil fuel plant, most of the cost per kilowatt-hour lies in the fuel itself. But for a nuclear reactor, most of the cost lies in its capital investment. Since many reactors are already paid for, the rest is gravy for investors.

So the market, which did not play much of a role in the nuclear industry in the past, has determined, at least for now, that nuclear reactors are gold mines.

Natural gas. The second factor boosting nuclear power is the cost of natural gas, which in recent decades has been the nuclear industry’s main competitor. (There was also what I call a “ghost” competitor, renewables, about which more later.)

For years, natural gas prices remained fairly constant. Electricity produced from natural gas was cheaper than nuclear in almost every part of the country.

That dynamic changed in 1999. Along with the tripling of petroleum prices came the doubling of gas prices. Since most of the cost of gas-fired electricity is the gas itself, this implies an eventual near-doubling in the cost of this electricity source. Natural gas has become substantially more expensive than nuclear almost everywhere.

Trying to predict natural gas prices is like guessing the winner of the World Series 10 years from now. But the fact that prices could double within a few months has shaken the confidence of those who said natural gas could meet our electricity needs for decades, and therefore called for dismantling the country’s nuclear infrastructure. If the price of such a fuel could be tied to the decisions of petroleum dictators half a world away, how reliable a fuel is it?

Kyoto. The proposed Kyoto treaty on global warming will also dramatically affect the future of nuclear power.

Many articles in this newspaper have expressed skepticism that global warming, if it exists at all, is much affected by human activities. I share that skepticism. But the fact remains that Kyoto, if it ever is put into place, would be the most far-reaching energy treaty in the history of the world.

In one of Sherlock Holmes’ stories, the dog that did not bark played a vital role in solving the mystery. In all the voluminous United Nations documents dealing with climate change, the word “nuclear” is rarely, if ever, mentioned. Yet it is the only viable source of electricity that generates almost no carbon dioxide over its energy cycle. (A small amount of CO2 is produced when uranium is upgraded for use in reactors, and also in the production of other reactor materials.) Nuclear power is truly the dog that did not bark.

Some evidence of the impact Kyoto will have on nuclear power has been shown by the Clinton-Gore administration. In the first six or so years of Clinton’s reign, the word “nuclear” may never have passed his lips. In the Department of Energy, the N-word almost never appeared in official energy plans and documents. Industry representatives attribute this to a conspiracy of silence, but I prefer to be a bit more charitable, suggesting it might just be forgetfulness.

Since the Kyoto treaty was initialed (not ratified), some of this has changed. In the fall of 2000, more than a dozen anti-nuclear groups publicly criticized the Clinton-Gore administration for allowing nuclear power as an option to meet Kyoto goals. This does not mean the Department of Energy was advocating new U.S. reactors. Rather, if reactors are built in foreign countries under American auspices, the U.S. would get carbon dioxide credits under the Kyoto schemes. The anti-nuclear groups preferred to send renewables.

That the administration could even think out loud about reactors, after six years of silence, is positive news for the nuclear industry.

Renewables. The fourth factor improving the outlook for nuclear power is the failure of the ghost competitor I referred to above, renewables.

When petroleum prices soared in the fall of 2000, Vice President Al Gore persuaded President Clinton to loosen the tap on the Strategic Petroleum Reserve. Gore did not advocate sending emergency shipments of solar collectors around the country. Despite advocating renewables for almost seven-and-a-half years, the administration fell back on the tested and true, an energy source they had claimed to be on its way out.

What does a battle between fossil fuels and renewables have to do with nuclear power? Opinion polls for years have shown that most of the public expects renewables to be the energy of the future, not nuclear. But at the decisive moment, when an election hung in the balance, renewables could not deliver—despite the investment of billions of dollars, and no small amount of rhetoric, over the course of the Clinton-Gore administration.

If renewables cannot solve energy problems, and if fossil fuels dance to the tune of foreign potentates, what else is there? Nuclear power.

The industry readies itself

The two remaining factors contributing to nuclear power’s rosy outlook come from the industry itself.

Longer lifetimes. When the nuclear power industry was launched, U.S. regulators licensed reactors for 40 years. Basing that decision on their experience with other industrial facilities, regulators merely guessed that 40 years was a facility’s likely useful lifespan. Some nuclear builders thought the lifetime of reactors could be much longer, since reactors were much better maintained than other industrial facilities. But the regulators opted for caution, preferring to get more experience with the reactors before licensing them for longer periods of time.

Now the evidence is in. The Nuclear Regulatory Commission has extended the licenses of some reactors for another 20 years, giving them a lifetime of 60 years. This has great implications for the competitiveness of nuclear power, since most of its cost is tied up in the facility itself, not its fuel. By contrast, if a licensing body for a natural gas plant extended its lifetime by 20 years, the facility’s cost of electricity would not be affected much. Most of its cost is in the fuel, the cost of which can fluctuate greatly from year to year.

Lengthening the projected lifetime of nuclear power plants means the cost of nuclear electricity could be on the order of one-third less than originally calculated. The exact decrease will depend on a variety of factors, but the lesson is clear: Nuclear power, cheap to begin with, is even cheaper than originally thought.

New designs. The final reason for optimism in the nuclear industry is the appearance of new and simpler designs for reactors, such as the Westinghouse AP-600 and the South African pebble bed reactors. These hold out the possibility of greater safety and lower cost, something the industry has been aiming at for decades. While it is still too soon to say with precision how these new designs will affect cost, there is no question they will greatly outperform current reactors designed and built a generation ago. Much has been learned in the research laboratories and by those operating the plants since then.

The future is bright

None of these factors taken by itself could guarantee that the next order for a nuclear reactor in the U.S. will come soon. The last reactor built in this country was ordered about a quarter-century ago—the longest interval between orders of any high-technology facility in history.

Taken together, however, these six factors suggest a bright new era for nuclear power . . . one that should be long-lasting.

Herbert Inhaber, a risk analyst in Las Vegas, Nevada, is the author of Slaying the NIMBY Dragon and Why Energy Conservation Fails.