Posted by Jane Clark

Subject: Wash Post: Cato Institute on Nuclear Power

"In the final analysis, the nuclear industry is purely a creature of
government. The administration needs to practice the free-market rhetoric
that it preaches and put away its nuclear pompoms."

Washington Post
Nuclear Power Play
By Jerry Taylor and Peter VanDoren
Friday, May 18, 2001; Page A31

The political drive to revive nuclear power is in full swing. Unveiling his
energy plan yesterday, President Bush said, "America should also expand a
clean and unlimited source of energy, nuclear power." Vice President Cheney
says "we must seriously question the wisdom of backing away from what is, as
a matter of record, a safe, clean and very plentiful energy source." But why
conservatives are so in love with nuclear power is a mystery.

Aren't conservatives supposed to be skeptical about having the federal
government pick winners and losers in the marketplace? Isn't it best to
leave such decisions to investors, not politicians?  If nuclear power is a
better investment than gas or coal-fired power, then no amount of government
help is necessary. If it's not, then no amount of government help will make
it so.

The Bush administration maintains that the only reason investors haven't
been jumping at nuclear power is because the government has effectively shut
down the industry.  Cheney, for instance, laments that "the government has
not granted a single new nuclear power permit in more than 20 years."  But
there's a reason for that; no utility company has submitted an application
for a nuclear power permit in more than 20 years.

Investors have stayed away from nuclear power because nuclear-fired
electricity is about twice as expensive as coal- or gas-fired electricity.
The marginal costs of nuclear are indeed lower, but the capital costs are
much higher. For instance, electricity costs skyrocketed by 60 percent
between 1978 and 1982 largely because of a wave of nuclear power plants that
came online in the late 1970s.

Another reason investors have stayed away is because of the shift to
competitive generation markets. In the old regulatory world, public utility
commissions guaranteed quick returns on capital investments through the rate
base.  The more capital you spent, the more you made, and a $1 billion
nuclear power plant offered a far better return than a $200 million
coal-fired plant, regardless of total costs. In a deregulated market,
investors think long and hard about investing in plants that might take
decades to pay off under ideal conditions.

Proponents counter that nuclear power would be far less expensive were it
not for needlessly burdensome safety and maintenance regulations. While you
can certainly make a strong case for that, it's unclear whether government
has really harmed nuclear power more than it has helped.

The administration should recall that the Atomic Energy Commission,
beginning in 1957, directly subsidized the construction of reactors by
private utilities. A year later, the "Euroatom" program was adopted, which
gave federal subsidies to NATO allies to purchase American light-water
reactor technology.

Here at home, the federal government took responsibility for the supply and
enrichment of uranium but failed to charge nuclear power plants anything for
the capital or inventory costs of the program. And just since the
establishment of the Department of Energy in 1978, more than $20 billion of
taxpayer money has been spent on nuclear power research and development.

Then there's the granddaddy of all subsidies, the federal assumption of
high-level radioactive waste-disposal responsibilities. If the feds had
stayed out of this and simply required the industry to secure its own waste
disposal through private arrangements, who doubts that the construction
costs for such facilities and, more important, the liability costs would
greatly exceed the fees the industry currently pays the federal government?
In fact, it's extremely doubtful that the industry could insure itself
against the possibility of accidents in waste disposal facilities, which
could remain highly radioactive for thousands of years.

Perhaps new advances in technology will remedy the environmental and
economic problems that plague the industry.  If so, fine. Investors will
respond with orders for new nukes and we'll have no complaint. But in the
meantime, the feds shouldn't try to ram this technology down the market's
throat.

In the final analysis, the nuclear industry is purely a creature of
government. The administration needs to practice the free-market rhetoric
that it preaches and put away its nuclear pompoms.

Jerry Taylor is director of natural resource studies at the Cato Institute.
Peter VanDoren is editor of the Cato journal Regulation.

© 2001 The Washington Post Company

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