dkoplow’s Recent Comments

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  EIA and NEI on subsidies

  Couple of points on this thread.  First, Grist readers may be interested in a discussion I had with some of the NEI bloggers (in response to a David Bradish post) back in 2005.  See the comments following this article.  Note as well the claims about the costs of the new plants, versus the massive escalation that has occurred in the intervening years:

  http://neinuclearnotes.blogspot.com/2005/11/taking-second ...

  Also, EIA studies alway come out amongst the lowest of all subsidy estimates done.  This is partly due to their narrow research mandate, partly due to the use of inconsistent baselines where similar programs are sometimes included and sometimes excluded, and other factors.  See more here (note that this page was created for the prior two EIA subsidy studies, but most of the same issues remain in the third):

  http://earthtrack.net/earthtrack/index.asp?page_id=201&am ...

  Especially for subsidies to nuclear, the key element on the EIA study is that they looked at current subsidy uptake.  Thus, the massive subsidies to new reactors, though acknowledged to exist in the report, are not reflected in final numbers at all.  They matter a huge amount going forward though.  While per kWh subsidies to wind will not rise in future years, but those to nuclear will rise sharply.  

  For more on nuclear subsidies to new-build plants, see the link below.  Note also on page 3 that the nuclear new build subsidies per mt/CO2e -- even displacing coal (which is the industry's best case) -- is still at least above $80.  The subsidy cost is 20 to 30 times the value of these offsets on the Chicago Climate Exchange.

  http://npec-web.org/Frameset.asp?PageType=Single&PDFF ...On Subsidies for wind power pale beside subsidies for nuclear posted 1 year, 5 months ago 23 Responses

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  Leveling the playing field

  Bill,

  At the time AT&T was broken up, could you have predicted the transformations that have occurred with communications technology?  Why then do you think it is incumbent on us to predict the ultimate winners of the next two generations of energy technological development?  My view is that the role of government should be to fix problems in market structure so the advantages and disadvantages of the various energy solutions can be seen much more clearly than they are seen now.  

  Is large scale generation the solution most appropriate to the future as you suggest, or something with a larger number of smaller scale options for load management -- on both the supply and the demand side?  France built so many nuclear plants that they had to export power very inexpensively.  To promote domestic demand, they encouraged and subsidized the use of electric heat.  Yet, according to work by Mycle Schneider, the result was to exacerbate peak loads, which could not be well serviced by their baseload nuclear.  So they are exporting baseload, importing peak.  Not a great value proposition. (See slides 14-17):

  http://www.npec-web.org/Frameset.asp?PageType=Single& ...

  If you do nodal pricing in grids, you might also find that some of the centralized plants aren't quite so attractive as you thought, because they need to ship through high congestion points.  

  I think your R&D example is quite far off-base.  You have unquestionably linked government spending to research success, which in my view is far from a given.  The core strength of our system of venture capital and private equity in this country is its ability to align incentives for success better than governments can do; and to pull funds from unpromising projects when needed.  I'm interested in how you'd plan to work out the incentive problems in your big happy socialized energy sector so that it become an effective plan rather than just a massive pork barrel project.

  Glad to hear you favor eliminating Price Anderson. Your posting indicates you think the nuclear industry shouldn't have to insure against a worst case scenario.  What value do you think they should be responsible for?  

  No argument from me that coal should pay its way in terms of damages to the environment and human health.  That would certainly help the relative economics of nuclear to coal, but probably still wouldn't make it economic.  You've got some pretty high numbers attributed to the coal industry, though not much documentation.  I also can't tell if you are talking national or global values here.  Perhaps you can post more of the details behind the numbers at some point.

  I'm also interested in your views on the link between nuclear power and weapons proliferation.  There's interesting testimony on this topic by Sharon Squassoni of the Carnegie Endowment for International Peace (and formerly with the Congressional Research Service) here:

  http://www.carnegieendowment.org/publications/index.cfm?f ...On No more subsidies for nuclear power, McCain et al posted 1 year, 5 months ago 34 Responses

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  Nuclear subsidies, cost of GHG abatement

  Interesting thread here; glad people have found some  of my past work on subsidies to nuclear power.  I wanted to weigh in on a couple of areas.

  Nuclear power has the benefit of being relatively low carbon.  It is also large scale, which has pros and cons.  Thus far, however, it has been mostly given a pass in terms of economics.  Is it the right choice for dealing with climate change and energy security as the industry claims, or not?   Based on my own work, I doubt nuclear would be competitive.  Under any circumstance, nuclear should be forced to compete as one of many solutions to these problems, rather than simply being granted subsidy after subsidy by political interests.  We will save money, and they (the industry) frankly will be forced to deliver a better product than that we are now seeing with the TVO plant in Finland, where not even the concrete has been done correctly.

  If nuclear is a good solution to address greenhouse gas emissions, it should be able to deliver reductions quickly and at a reasonable cost.  I believe it fails in both of these areas.  For example, I estimate that subsidies to new nuclear reactors alone are at least $80 per mt of CO2e displaced.  And this is if the reactor displaces coal; the cost-efficiency of displacing other resources such as natural gas or efficiency is much worse.  Fully loaded costs -- public subsidies plus private money, are at least $120 mt/CO2e displaced.  Full cost rather than subsidies alone is the proper metric to evaluate when comparing societal investments in GHG abatement.

  This is not a particularly good deal.  It is well above a large range of abatement options developed by McKinsey & Company earlier this year, and well above the market value of carbon reductions on the Chicago Climate Exchange (roughly $4/mt CO2e) and the European Climate Exchange (roughly $28/mt CO2e).

  True, nuclear build costs could fall dramatically -- though this is unlikely, and the Keystone report actually suggested later build reactors could be even more expensive than the first wave.     The question here is whether cost of nuclear will fall more sharply than the cost of other technologies that could also be deployed to deal with climate change.  

  The industry may argue they are competitive because the cost of carbon could rise steeply as controls begin to bite, making $80 or $120/mt CO2e look cheaper.  But surging carbon prices would provide strong incentives for thousands of changes in how we run our societies, and many of these are likely to be quicker, cheaper, and less financially risky than large scale nuclear reactors.

  A couple of the comments on this post involved projections on subsidies associated with Yucca Mountain.  Often, the positive cash balance in the waste management account is pointed too as evidence that there are no subsidies on waste management.  Just as with pension liabilities in private firms, the waste repository is a large scale, long term commitment for which accruals may or may not be sufficient.  Pension fund accruals may seem adequate at one point in time; inadequate at another.  Low collections or high balances need to be evaluated in the context of whether they will compound to levels sufficient to cover the liability for which they were created.  Based on experts I've spoken to, many expect that current funding rates for funding Yucca will be insufficient to cover the full provision of the service.  

  There is a second, and perhaps more important issue as well.  That involves the shifting of fuel cycle risks from the private investors to the public.  In a normal market, the complex, long duration risks associated with managing production waste, such as those associated with nuclear waste, triggers research and innovation into alternative technologies that can deliver a similar product (energy services) without the same waste management complexities.  When the government absorbs this risk in return for a small variable payment, the incentive to seek out those alternative technologies is greatly reduced.  

  Price Anderson caps on nuclear accident liability create similar problems for the incentive structure of firms, and for the comparative economics of various energy choices by artificially reducing reactor operating costs.  The private sector already purchases far more insurance coverage at reactor sites for on-site damages and associated business interruption than it is mandated to buy for all offsite damage to people, property, and natural resources.  At the very least, ramping up required private coverages for these potential damages could address part of this distortion.

  Nucbuddy's comment correctly points out the financing subsidies to Constellation and other recipients of the federal loan guarantees last only as long as the debt.  However, the terms for this program allow the debt to go for up to 30 years.  The reduced interest rates are so beneficial that if I were a reactor builder, I would pay off this particular loan last.  

  There are challenges to building complex, large scale capital and these exist well beyond the energy sector.  However, introducing massive federal loan guarantees, and to do so in a politically motivated way, is not likely to end at all well for the taxpayer.  Nor is it likely to buy the best energy options for the country.  There are ways to spread risk without relying on the federal taxpayer as the investor stooge in these complex deals, and these should be pursued.

  The firms in both the nuclear and coal sectors are large, financially strong, and sophisticated.  If they believe technically that they have a great product, and that costs will really come down after they build 5 or 10 units, it is not too much to ask them to use that sophistication to syndicate the risks without massive taxpayer subsidy.

  Finally, the "Harding" referred to in my presentation is Jim Harding, who did much of the economics evaluation that went into the Keystone report and has done a number of presentations on nuclear sector economics since that time.  Nucbuddy says that the Harding or Keystone analyses of capacity factors are relevant only if they address solely the US EPR design.  I guess I admire Nucbuddy's optimism that new designs can so seamlessly be brought into production and trouble-free operation.  I doubt any of the reactor manufacturers are aiming for low capacity factors, but stuff happens and will undoubtedly happen with the US EPR as well.  More power to Areva if it can get the lifetime capacity factors above 95%, but I don't think we should rely on that goal as a core input on which to base national policy.
  On No more subsidies for nuclear power, McCain et al posted 1 year, 6 months ago 34 Responses