The Bottom Line on Nuclear Energy

Existing nuclear power plants are extremely valuable societal assets. Shutting them down in the absence of compelling economic or technical reasons is folly.

It sometimes feels like this statement is so obvious that it shouldn’t need to be made and yet you don’t have to look far to see governments which appear not to care.

In Europe, Germany and Belgium have implemented arbitrary caps on reactor lifespans as part of their phase-out policies. Green party pressure in Sweden may yet result in tax hikes which make the ongoing operation of nuclear plants there next to impossible. In Spain the Garoña plant closed due to the impact of a new tax law (the government is now in fact seeking to resurrect the plant). Even in France, that champion of nuclear technology, the Hollande government is introducing legislation that would cut the country’s reliance on nuclear energy to 50% of generation by 2025, down from 75% today. If enacted (and as of writing the senate has just rejected the 2025 time frame) this would surely result in early reactor closures.

In the USA, currently cheap natural gas is putting the squeeze on some plants with the retirement of at least two units in recent years being primarily due to ‘economic’ factors and with three others being negatively impacted by these. Ironically, this is happening just as the country has acknowledged the seriousness of climate change with the Environmental Protection Agency (EPA) in the process of finalising new rules for power plants to help the country meet carbon emissions targets. The USA, like many others, is heavily subsidising renewables while utilities are becoming increasingly concerned about the lack of diversification in dispatchable capacity. The idea then that reactor closures have taken place on economic grounds needs some qualifying.

Make no mistake. Closing well-performing nuclear plants before it is technically necessary costs society dearly. Anyone who has ever bought an expensive appliance will understand that you aim to squeeze every bit of useful work out of it before letting it go. You maximise the value of your investment. The economics of nuclear generation is dominated by construction and financing, with fuel and operating costs typically lower than fossil. As with renewables such as wind and solar, once you have gotten through the painful period of paying back the initial capital outlay you should have entered a golden period of low-cost power production.

Nuclear plants form the baseline of healthy power systems in countries lucky enough to have them. Their continuous reliable output helps to keep grids going largely irrespective of the weather and stable low production costs reduce consumer price volatility. Replacing them will almost certainly result in extra expense to consumers as adding new capacity incurs both a new capital and operating charge, while the existing nuclear plant need only cover any upgrades and ongoing production costs.

Many in the green movement like to characterise nuclear energy as ‘uneconomic’ but this is absurd when applied in relation to the vast majority of existing plants – not to mention overly-simplistic for new-build (to be the subject of another post). The existing nuclear fleets in Europe and the USA were built decades ago – and almost to a unit were built by the then regulated or state-controlled energy sectors which made this kind of public serving long-term investment possible. These plants are now in their prime, with the vast majority showing clear potential for decades of additional service.

Nuclear subsidies, a taxing question

‘But what about the subsidies to existing nuclear power plants’ – I hear some of you ask. It is true that all forms of electricity generation receive some form of support, or at least benefit from certain market structures, but not all subsidies can be considered equal. For instance, setting conservative annual charges on future liabilities is a far cry from technology-specific feed-in-tariffs, which result in direct and measurable increases to what consumers pay today. Similarly, a contract above the market price that assures grid stability can only be assessed in relation to the costs that would be incurred if the generating unit wasn’t there.

The idea that currently operating nuclear power plants survive on some kind of subsidy drip is a myth. Unfortunately it is a myth that pops up again and again, sometimes in rather official looking documents. Most recently it was reinforced by environmental consultancy Ecofys which produced an interim report for the European Commission on the Subsidies and Costs of EU Energy. In this work it was alleged that the European nuclear industry received (an admittedly comparatively modest) €7 billion in subsidy for the year 2012. At no point do the authors explain what the subsidy is actually composed of, but by referring to the appendices it is clear that a large part consists of funds directed towards the decommissioning of legacy nuclear sites.

The problems with including legacy sites (which consist of the now-closed first generation of nuclear facilities and dedicated clean-up sites owned by government bodies) is that there is no way to mitigate these costs through policy change. They are in effect sunk. Many legacy sites also contain significant liabilities from military programmes. In contrast, it must be noted that currently operating (and all future) power reactors are required to set aside funds for waste and decommissioning over their generating life. These are monitored and frequently updated. Closing plants prematurely in fact only increases the risk that the amounts collected will prove insufficient.

More disappointing is that the Ecofys report fails to mention any of the extraordinary financial benefits which nuclear facilities bring. One striking example is the nuclear-specific taxes that exist throughout EU countries such as Belgium, France, Germany, Sweden and the UK. The exact nature of how these taxes work tends to be complex (also some remain the focus of court disputes) but by our count these raked in some €3 billion in 2012. General taxation brings in even more.

Tax is just the tip of the iceberg when it comes to understanding the inherent value to society of nuclear power. Facilities form the economic backbone of the rural communities where they are sited. Each plant directly employs hundreds of well-paid skilled workers and supports thousand more jobs in related sectors. This in regions where such positions are not always so easy to come by.  A study conducted into Exelon’s nuclear power plants in Illinois describes how 11 reactors pump some $6 billion into the state’s economy every year.

What this all means is that when you add everything up, operating nuclear facilities pay out far more than they receive in terms government support. The net benefit for operating facilities is from the plant to the public – and especially local communities – rather than the other way round.

All this applies before you even consider the world’s approaching climate deadlines. The most recent IPCC synthesis report tells us that 80% of electricity should be decarbonised by 2050 to have even a chance of keeping the world within 2°C of warming. This is a formidably difficult, not to mention expensive, problem to solve. The logic that would force amortised and essentially zero-carbon nuclear plants to close as we continue to burn through our carbon budget at an ever-escalating rate is beyond dubious.

In case you were wondering just how well nuclear scores in terms of CO2 mitigation, the answer is brilliantly. As France (75% nuclear) and Ontario (60% nuclear) demonstrate, a primary reliance on nuclear energy allows you to eliminate coal from your power supply. Nuclear nixes coal. Period. There is no popular renewable energy option that does this. Some 64 gigatonnes of CO2 has been prevented from entering the Earth’s atmosphere due to influence of nuclear power over its history, not to mention some 1.84 million people have lived longer lives.

Forever young

While certain groups like to colourfully describe long-lived nuclear assets as ‘old’, they are deliberately ignoring the many innovations in nuclear equipment, components and fuel cycle technology which have resulted in improvements to efficiency, sustainability, power output and flexibility. There is most certainly a strong case to be made for ramping up the pace at which new nuclear technology is brought to market, but there is also a tradition of constant innovation that has seen the industry improve performance steadily over 50 years of operation.

It is possible to replace almost every conceivable component in the most common types of nuclear reactor, save for the pressure vessel and containment structure. Plants are renewed continuously and with components which are superior to the originals. It is due partly to this that the industry has been able to increase plant safety steadily over time. In the USA most reactors have been licensed to operate for 60 years and research is now underway to see if there are any showstoppers that would prevent 80.

If nuclear operators can prove the ongoing safety of their plants to the competent regulator, then why would anyone insist that they be closed down? Surely we should be seeking to preserve the clear socio-economic and environmental benefits which these plants provide for as long as possible. Governments need to be aware of these benefits and owe it to their people to value them fairly, based on accurate and unbiased expert information.

The longevity and extraordinary robustness of existing nuclear technology is something that deserves to be appreciated to the fullest. As we grapple with climate change and an uncertain economic outlook the question is – can we really afford to shut plants down?

Energy Collective