Up until about a week ago, nuclear energy had been broadly embraced as our great radioactive hope for a clean energy future. In the face of a scary and uncertain situation in Japan, the president and some Congressional Republicans have urged us to stay the course on nuclear energy despite renewed safety concerns. The truth is that even without the safety concerns we should forgo new nuclear reactors because they are fundamentally uneconomic. Nuclear reactors are a bad deal for the private sector and they are a bad deal for American taxpayers.
Nuclear construction has been stagnant since the 1970s. According to conventional wisdom this construction freeze was the result of public fears about nuclear safety following the crises in Chernobyl and Three Mile Island. This is only part of the story. What really happened is that the private sector was unwilling to finance nuclear reactors because they were too expensive and too risky. New nuclear plants cost $10 billion at a minimum and have a history of chronic cost overruns. Without a carbon tax or carbon cap and trade system in place, nuclear energy prices are at least 8.4 cents per kilowatt hour and cannot possibly compete with coal at 6.2 cents or natural gas at 6.5 cents. In addition, advances in solar technology are constantly improving the efficiency of solar panels that will very likely be competitive with other forms of power generation when considered over the future lifetime of a nuclear plant. Wind energy, even the relatively more expensive offshore type, has also been shown to be cheaper than nuclear.
In fact, despite France's often reported reliance on nuclear energy, Europe has also found nuclear energy to be costly compared to other renewable and is investing in wind and solar instead. Of all available technologies, nuclear is the least likely to survive in a market that priced risk and costs properly, which is why the market will not finance new plants. Politicians are attempting to artificially change these dynamics now by offering federal loan guarantees, a program that started under the Bush Administration and has continued under the Obama Administration. These loan guarantees mean that taxpayers shoulder the burden of loan defaults and cost overruns. Taxpayers underwrite the risks that investment firms are unwilling to gamble on.
So once we have taxpayers absorb the construction risks of these plants, we should be ready to break ground on new reactors, right? Not quite. The other problem with nuclear power is that the private insurance market which regularly insures against everything from flood damage to Tom Jones' chest hair, was not willing to insure nuclear reactors against catastrophe in even close to sufficient amounts.
Enter the Price-Anderson Nuclear Industries Indemnity Act, which originally passed in 1957 as a temporary measure to get nuclear energy off the ground. The idea was that the taxpayer could underwrite the risks associated with a potential nuclear crisis just until nuclear energy had a proven track record of safety and private insurers were willing to step up to the table. The problem is that it's more than half a century later and there are STILL no private insurers willing to take on the risk of a nuclear crisis. In fact, Price-Anderson was just extended another 20 years in 2005. Currently the entire nuclear industry would pay just $12.6 billion in a crisis. I've been unable to find a reliable estimate of the cost to cleanup Japan's nuclear crisis but the cost to clean up the Gulf Oil Spill was initially estimated at $40 billion which appears to have been a gross underestimation. Even with Federal Loan Guarantees and Price-Anderson Indemnity, only two new nuclear reactors are actually moving forward with construction.
Add to these issues the very real safety concerns and a complete lack of a solution regarding nuclear waste disposal and I think we should be quite content to let market forces kill the nuclear industry. The real way to move towards a clean energy future is to stop the nuclear subsidies and institute a market-based system which recognizes all the costs to society of the energy we use which includes the costs of pollution and potentially also risks to our national security. Under a solution that properly priced these factors, bio-fuels, solar and wind would become increasingly attractive and fossil fuel solutions would be less attractive. If nuclear energy were to win out in such a marketplace that would be fine with me although judging from the costs and risks it seems unlikely. Unfortunately, Republicans would rather rely on taxpayer-funded nuclear welfare than a market-based cap and trade system. I just hate when these left-wing socialists have government bureaucrats pick winners and losers rather than leaving it up to the invisible hand of competition.