When Should Nuclear Power Pay for Risk? Is Never Good For You?

, , Senior energy analyst | April 25, 2014, 9:15 am EDT
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In a secret negotiation result reported by Hannah Northey, E&E News, the nuclear industry passed along another risk to the U.S. public. An expected $300 million loan fee for building the new Vogtle nuclear plant, was negotiated down to zero by the plant owners. This was one of two nuclear power issues that came out of the shadows of secrecy and unaccounted costs this week.


Sour subsidies do not a happy taxpayer make. Source: Duck Island Ale House

Nuclear power plants concentrate so much energy and expense in one place that they create unique risks. Unique risks for the owners, and for the public.

First, the cost to build a new nuclear plant is several billion dollars, with even the owners unable to predict the cost to the nearest billion. This means the owners borrowing the money have billions of reasons to want to shift the financial risks to the public.

The owners of the Vogtle nuclear plant under construction in Georgia are seeking $8 billion in loans from the U.S. for a pair of 1,100 MW nuclear plants with owners projecting the total capital cost of $14 B. We learned this week that the credit subsidy fee for them to borrow billions is zero.

When the Bush Administration expanded Federal loan programs to include nuclear power plants in 2005, the key determinants for the credit subsidy fee for these loans were set. Or so we thought.

The law enabling these loans protected the public from shifting the risks and costs of these loans. Yet so far, two owners of the Vogtle plant (out of a total of three utility groups in Georgia) have succeeded in their wrangling to avoid their obligation to pay for the risks that go along with these loans.

Is this a surprise?

Maybe that shouldn’t be such a surprise, though. There is a long list of unmet obligations and unenforced government requirements in the nuclear industry. UCS provides an annual report on the unfinished safety needs at commercial nuclear plants. The backlog over the years has grown to include security, fire protection, radiation releases, earthquake protection, flood protection, …etc.

From the very beginning of the industry, the private owners of nuclear plants have passed the risks of major accidents and long-term waste disposal to the American people. The loan subsidy fee was supposed to be different.

Another risk subsidized

Public risks for nuclear power take many shapes. Another risk carried by the public is the cost for maintaining electric generation reserves for the unpredictable sudden disconnection — “trips” — of a nuclear plant. When a nuclear plant trips off-line, the entire region suffers a sudden imbalance of supply and demand for electricity. With nuclear plants of 1,000 MW dropping off in an instant, the grid suffers immediately.

The costs to combat these events are just becoming clear. The Federal Energy Regulatory Commission, noting that Eastern U.S. ability to recover from nuclear unit trips has declined since the mid-1990’s, is beginning to ask who can provide the back-up for the largest power plants, and how should they be paid for this service. I participated in FERC’s technical conference on this very issue this week.

For decades, the risk from a nuclear plant’s sudden dropoff was met by all the other generators, by holding a few percent of their capability in reserve. As this was unpaid, and power plants faced increasing competition, that lost revenue became important to the plant owners. Now many plant owners have withdrawn this free service. Other decisions that modernized industrial equipment, or shifted manufacturing offshore, also reduced the grid’s resilience to these sudden losses caused by the largest generators.

And so…

Be sure that when someone says we need to give nuclear power a break that you ask them if we should also continue forgiving all the unpaid subsidies and uncorrected designs. We need to recognize all risks imposed by energy sources. When all the real risks are included, we just might find that we will want to be using efficiency and renewable energy at much higher levels than we are today.

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  • Jens Stubbe

    Nuclear power is simply not a clever way to produce electricity.

    The offshore windpark Hornsrev 3 is expected to operate with a 60% capacity factor, which is very close to the global average for all commercial Nuclear reactors. The only real reason why it does not match exactly the average of all Nuclear power plants is that several Nuclear power plants exceed their permitted rated power on a routine basis. And if you stopped cherry picking Nuclear statistics and included Nuclear plants that has been scrapped or just the long period of construction before any nuclear plant can yield any power production – then wind power on good sites definitively will deliver a more constant energy with higher annual capacity factor and much higher predictability.

    Better wind sites and future larger and especially higher wind turbines will ensure that there will be wind turbines with better capacity factor then that of the average Nuclear power plant in operation today (even with the fraudulent static approach to nuclear statistics).

    As there are many wind turbines and as they are distributed over a large area and because whether forecasting has improved you can forecast the power production from wind turbines accurately and send notice to sources of power generation well in advance.

    Unlike Nuclear power plants wind turbines are not stop and go power plants – they actually produce most hours of the year and usually have availability figures between 95% and 98%.

    Unlike Nuclear power plants that takes hours to regulate power output wind turbines can within seconds control their output simply by altering the pitch.

    20% of all commercial Nuclear plants was either never used or was taken out of use due to insurmountable technical or economic difficulties.

    +1% of all commercial Nuclear plants ended their lifetime in technical catastrophe.

    Countless blackouts have been caused by Nuclear power plants shutting down operation unexpected.

    In conclusion Nuclear power plants has proven themselves to be very unpredictable and very expensive, so why is that anyone wants to give Nuclear power plants a chance today when both wind energy and solar energy has proven constant ability to innovate and to bring down LCOE.

    For wind power cost will only go down and capacity factor only go up.

    The intermittent nature of wind and solar means that you have to balance the grid, which can be done simply by connecting the grid nation wide with a HVDC backbone so all possible contributors to the grid can share a common market. The contributors that can pitch in with power when demand outrun supply such as hydro or gas peak power plants can benefit from elevated prices whereas power sources such as Nuclear, Geothermal, Solar and Wind that has almost all of the cost tied in capacity costs will deliver when able to.

    The sad state of affairs is that fossil and Nuclear receives the bulk of direct and indirect subsidies simply because they have established themselves with political influence.

    One might ask what 15.000 people employed in the US embassy of Iraq are doing ?

    Or why US wars this last two decades have focused all efforts on securing oil supply ?

    Or why US citizens has to accept death and poor health due to air pollution related to power production ?

    • Jens, Richard-

      Thank you for the added perspectives.
      The shifting of nuclear power risks and the imbalance of costs and benefits are topics that UCS has focused on since the origins of our organization. We currently provide a resource on our website called All Things Nuclear to try to make the trade-offs on safety and subsidies more transparent.

      We are particularly interested in the improvements in renewable energy and the increased adoption and integration of wind and solar. We use our own analyses of the costs and productivity of generation types to provide a counterbalance to the US government projections of energy supplies and their prices. My blog includes just one link to a report we have created that emphasize the superior economics for consumers with wind energy, but there are many on our website.

  • John- The electric power industry has taken a few small, basic steps to clarify responsibility for the very quick, short response to replacing power generated when a large generator drops off. This is known as “primary frequency response” and needs to be fully deployed in less than 10 seconds to avoid a widespread power grid outage. The general thinking is that the introduction of whole electricity competition, largely designed by economists, has been incompletely implemented. The decisions by many generators, and industrial facilities, that have decreased this reliability indicator are reversible if the governing bodies adopt suitable economic signals, and the market responds. What this could mean to “you” is that the grid would become more reliable and resilience, and the costs would be assigned to the generators that cause costs.

  • Peter- Thank you for this comment. The handling of nuclear plant waste, specifically the spent fuel, is a huge problem that has never been well addressed in the U.S. Our present practice is to pack the fuel rod assemblies into temporary storage pools filled with circulating water. This is not a sound approach. It was these spent fuel pools that exploded at Fukushima when the water pumping stopped. At the least, the fuel rods over five years old should be transferred to dry cask storage. For the long term, I like to illustrate the problem of keeping the waste isolated for 100,000 or 10,000 years by asking what LANGUAGE should we be using on the warning signs.

    • Richard


      Your reply about LANGUAGE is obtuse, at best. Seems to me that the issue is that the spent nuclear fuel needs to be safely contained for thousands of years….after it was useful for only 5-10? What kind of trade off is that for the consumer?

  • Dr. John Miller

    Jacobs doesn’t say exactly what will change now that other electricity generators don’t want to hold some capacity in reserve in order to help make up the sudden shortfall when a nuclear power plant goes offline. Exactly what will change, and how will it affect me?

    Dr. John Miller

    • Peter Sipp

      The only real product of n. power is the waste. It has the inherent ability to destroy ANY container. This is why the n. waste containers have a “lifetime” of 100 years. This means that for 100,000+ years the n. waste containers will need to be replaced. So at the end there will be more containers than at the beginning. The Midas Touch in REVERSE!!!!!.
      Even at a big national n. waste storage spot the n. waste containers will still need changing every 100 years for the next 100,000+ years.
      We can do better than this.