Brave New Nuclear World
The review of plant economics and subsidies (and therefore the references to Earth Track's work on nuclear subsidies) was included in the first part of this article. Part 1 is accessible here; the second part, addressing reliability and energy security issues can be found here.
Excerpt from Part 1 below:
..."Although nuclear power currently provides about 20 percent of U.S. electricity (and about 16 percent of the world’s), between 1950 and 1993 the U.S. nuclear power industry received nearly 50 percent of the total federal spending on energy research and development—some US$51 billion—according to energy economist Doug Koplow. Substantial government assistance appears to be the status quo for the nuclear industry around the world, he adds, though specific data from many countries is unavailable. Nuclear power continues to get favored treatment, with government assistance covering virtually all segments of the nuclear fuel chain to one degree or another.
Uranium mining companies operating in the United States, for example, get a “percentage depletion allowance” of 22 percent (the highest rate of all depletion allowances for minerals), which gives them a tax write-off for the market value of what they have extracted—a significant subsidy since the write-off is typically much greater than their actual investment. The manufacture of the reactor fuel has also been heavily subsidized. Until 1998, the government owned the country’s two uranium enrichment plants. When they were privatized
into the U.S. Enrichment Corporation, the government retained liability for the waste clean-up associated with the operation of the facilities, an ongoing endeavor with a price tag in the billions.
During construction of the reactors, utilities were able to pass on the interest costs of the loans to their electricity customers, utilizing the “Allowance for Funds Used During Construction.” While this was available to all types of power plants, Koplow says it mainly benefited owners of nuclear plants, because costs on the already expensive plants ran out of control with construction delays. Nuclear plant owners also took advantage of highly accelerated depreciation and investment tax credits in the early 1980s. Koplow says these three accounting mechanisms significantly reduced the capital costs of the reactors. Even so, after states began deregulating electricity markets in the 1990s, utilities with nuclear plants found they needed to charge much more than the going rate for electricity to pay off their remaining
debt, or “stranded costs,” and stay competitive with other electricity sources. State after state changed the rules to allow utilities to pass on these stranded costs to ratepayers as a surcharge on their electric bills, a gift to the nuclear industry that by 1997 was worth some US$98 billion.
The ratepaying public also bears the cost of dealing with the spent fuel—estimated at US$60–100 billion for the existing fleet of reactors—as well as for decommissioning the plants. And if there is another serious accident, the 1957 Price-Anderson Act shields nuclear plant owners from the lion’s share of the cost by capping their liability. According to Koplow, the utility responsible for the accident would pay
US$300 million in primary liability plus US$95.8 million that it and the nation’s other nuclear utilities would contribute per reactor (paid in US$15-million annual installments over six years) to an insurance pool. With 103 operating U.S. reactors, the size of the insurance pool is approximately US$10 billion. By comparison, some estimates put the cost of the Chornobyl accident at over US$350 billion, and the Union of Concerned Scientists estimates that a serious accident at New York’s Indian Point plant 56 kilometers north of New York City would be in the trillions—costs mainly left to individuals because of the standard nuclear exclusion clause in home insurance policies. Without this particular liability mitigator in the United States and similar instruments in other countries, commercial nuclear power probably would not exist.