Will Nuclear Energy Ever Work?

wneeThis year marks two decades since the Arizona Public Service Company placed its order for Palo Verde, the last nuclear reactor to be ordered and put into operation in the United States. The nuclear industry’s epitaph should have been written by expensive construction problems, safety mishaps, unreliable operations, reluctant regulators and investors, public opposition and the unsolved radioactive waste problem.

But with virtually unequaled economic and political power the nuclear industry is forging a comeback. “Today, the nuclear power industry, well-schooled by [its] experience, with a realistic sense of its strengths and weaknesses, stands at the threshold of maturity, ready for a new generation of plants,” asserts Richard Myers, a vice-president of the nuclear industry trade association, the U.S. Council on Energy Awareness (USCEA), in a recent issue of the association’s magazine.

In large part, Myers owes his optimism to the federal largess that has coddled the nuclear industry since its infancy four decades ago and continues today. “The nuclear industry would absolutely not have gotten off the ground without federal support,” says Steve Cohn, an economics professor at Knox College in Illinois who has researched the industry extensively. “The government has bent over backwards to do everything it could whenever there was a problem.”

Besides costing taxpayers huge sums for a wide array of government subsidies, this process has made nuclear energy appear more competitive compared with cleaner energy sources like conservation and renewables and has diverted research and development funding away from alternative energy sources. “Without all this federal money going to nuclear power, we would have had much greater implementation of efficiency and renewable energy technologies,” says Peter Grinspoon, director of Greenpeace’s nuclear energy program. “I believe we would have a much cleaner environment.”

The federal government’s ideological commitment to and promotion of nuclear power remains one of the most valuable subsidies to business. “The ideological promotion of the technology allowed it to capture [many] benefits, and by extension denied those benefits to solar power and other alternatives,” says Cohn. “That ideological support really is responsible for lower costs.” Lower credit costs, a faster learning curve and lack of attention to nuclear hazards and safety requirements “are all indirect advantages nuclear technology had because it was a promoted technology,” he says.

The nuclear industry’s quantifiable drain on the public treasury is also enormous. Fiscal Fission: The Economic Failure of Nuclear Power,” a report released by Greenpeace last December, conservatively estimates that federal outlays from 1950 to 1990 for nuclear power totaled $97 billion (in 1990 dollars). Not until 1973 did private industry actually pay more for nuclear power than the federal government, the report says.

Both the ideological and more visible federal appropriations originated in the early 1950s, when Congress passed a law allowing private ownership of nuclear materials for the first time. But companies wanting to enter the nuclear energy business were unable to obtain commercial insurance, due to the high risks to the public of a major accident. In 1957 Congress eliminated this first major financial roadblock to the adoption of nuclear power. Responding to the demands of companies like General Electric, Congress passed the Price-Anderson Indemnity Act, which limited the liability of the nuclear industry to the public in the event of a major nuclear accident.

Under the most recent amendments to Price-Anderson, nuclear utilities are required to maintain jointly only $200 million worth of insurance to cover public liability for a nuclear accident; for claims over that amount, each nuclear utility can be required to contribute up to $63 million per reactor. This leaves a maximum of approximately $8 billion of insurance that would be available for public compensation; damages higher than $8 billion would not be covered unless Congress intervened, obligating taxpayers to make up the difference.

The funds made available by nuclear utilities for public damages fall far short of the human health and property damages such an accident would bring. Estimates of the costs of a major nuclear accident vary from the General Accounting Office’s (GAO) estimate in 1987 that under average weather conditions losses from a major nuclear accident could be as high as $15 billion to a 1982 analysis by Sandia National Laboratory for the Nuclear Regulatory Commission (NRC), which found that under a worst-case scenario financial losses (not including on-site damages) could range from $56 billion to $314 billion, with 100,000 early deaths. The NRC estimates the chance of a major “core melt” nuclear accident within the next 20 years is 45 percent.

“Without Price-Anderson the nuclear industry would have gotten nowhere,” says Cora Roelofs of Komanoff Energy Associates, a consulting firm that authored the Greenpeace report. “There was an essential barrier to the marketplace because nuclear power was too risky for any person to want to invest.”

Without Price-Anderson, the cost of commercial insurance to nuclear utilities – if they could find willing insurers – would substantially raise the cost of nuclear energy. A 1987 report by Public Citizen “conservatively” estimated that in the absence of Price-Anderson utilities would pay annually at least $1 billion and possibly over $5 billion for commercial insurance.

Price-Anderson also indemnifies suppliers and venders of commercial nuclear facilities, which substantially boosts its total value as a government subsidy to big business. The law excuses companies like General Electric, Westinghouse, Rockwell, and General Atomics from responsibility for public compensation even if their negligence or willful misconduct cause a nuclear accident.

Although the government doesn’t transfer taxpayer dollars directly into the nuclear industry’s coffers, “Price-Anderson is an important benefit because all of a sudden the industry has a predictable price put on something that it previously didn’t know how to handle,” says Doug Koplow, an energy consultant and the author of an upcoming report on energy subsidies for the Alliance to Save Energy.

“Alternative forms of energy don’t have those uncertain risks. A free-market would place a premium on avoiding these types of risks, which would make fission power certainly more difficult to compete.”

Another incentive that boosts nuclear power’s competitiveness is a subsidy for enriched uranium, the fuel that powers every nuclear reactor in the United States. While companies supplying other forms of energy have to worry about getting their own fuel, the federal government took on that chore for the nuclear industry beginning in the early 1950s. The federal government’s uranium enrichment operation, which operates as a program of the Department of Energy (DOE), sells its uranium at a taxpayer-subsidized cost. According to a 1989 GAO study, DOE has failed to collect over $11 billion in past costs accumulated largely by underselling its enriched uranium – despite a law requiring DOE to set the price of enriched uranium “on the basis of recovery of the government’s costs.” Since DOE sells approximately one-third of its uranium to foreign companies, taxpayer dollars also subsidize foreign nuclear programs.

“Taxpayer losses are real and mounting daily,” concluded a 1990 study on the enrichment program by the National Taxpayers Union, Stopping a Budget Meltdown. Charles Montange, the author of the study, says taxpayer losses from the program increased dramatically after 1984 when Reagan’s DOE overhauled the program, guaranteeing a subsidized price for enriched uranium. “Reagan cut prices nuclear utilities were paying with no cost recovery,” says Montange.

Taxpayers assumed additional burdens as a result of Reagan’s changes in the enrichment program. As part of the program overhaul, DOE permanently closed its enrichment facility in Oak Ridge, Tennessee and curtailed operations at its two other plants in Paducah, Kentucky and Portsmouth, Ohio (both are operated by Martin Marietta). But, according to Jim Bird, a DOE official at Oak Ridge, last year taxpayers paid $160 million to the Tennessee Valley Authority for electricity the enrichment program never used. The payment was part of a $1.8 billion settlement with TVA to fulfill electricity contracts developed after nuclear utilities lobbied for greater enrichment capacity, based on elusive hopes of having 1,000 reactors in operation by the year 2000. (There are now 109 reactors in operation.) DOE also began selling uranium services out of its inventory and booking the sales as “savings,” which it passes to its customers, the nuclear utilities.

DOE has also failed to charge utilities for the future costs of decommissioning, or dismantling, the three enrichment facilities – costs DOE contractor estimated at $16 to $36 billion. “It’s the worst environmental disaster in Kentucky,” says Coreen Whitehead of the Coalition for Health Concerns, a grassroots organization fighting to hold the government accountable for public health problems. “There are drums of radioactive waste covering acres around the plant.”

Congress eliminated the possibility that taxpayers might recover the enrichment plants’ future decommissioning costs in last fall’s energy bill. “The net effect of the uranium enrichment provisions in the energy bill was similar to Chapter 11 bankruptcy,” says Montange. “Taxpayers will bear essentially all unrecovered, decommissioning and cleanup costs.” (The new law requires utilities to pay only $2.25 billion of the total decommissioning costs.) Montange attributes the taxpayer “bail-out” of the industry’s uranium enrichment costs to the influence of nuclear utilities over key legislators.

In addition to subsidizing the price of nuclear fuel, taxpayers are given responsibility for fission’s end product – radioactive waste. Under the Nuclear Waste Policy Act of 1982 nuclear utilities are required to pay only 0.1 cents per kilowatt-hour (kwh) of nuclear-generated electricity into a federal fund that will be used to find a permanent resting place for the highly radioactive waste. DOE proposes to store the waste for tens of thousands of years at Yucca Mountain in Nevada, despite numerous environmental problems and deep public opposition.

The U.S. General Accounting Office (GAO) repeatedly has urged DOE to raise its waste disposal assessment fee. The agency estimates that unless the fee is raised, DOE will spend $4.1 billion (1988 dollars) more than it collects to dispose of high-level waste. GAO also warns that the financial condition of 11 of the 17 utilities that owe one-time fees of $2 billion to the fund for waste generated prior to 1983 “cast serious doubt on their ability to pay.”

The waste-disposal subsidy could worsen if DOE and the nuclear industry fail in their aggressive fight to win approval of the proposed Yucca Mountain repository. “DOE continues to disagree with our recommendation that it estimate the cost of additional scenarios, such as program delays or a potential finding resulting from DOEs site investigation that Yucca Mountain, Nevada, would not be suitable for a repository,” a 1992 GAO report warns. Even if Yucca Mountain actually opens, it will only hold 70,000 metric tons of waste, although plants currently in operation are expected to generate 87,000 metric tons of waste.

For years the nuclear industry has lobbied Congress to provide fast relief from the waste disposal problem, a major obstacle to the development of new nuclear plants. “It is not reasonable to assume that responsible business people will risk billions of dollars of customers’ money to invest in new nuclear plants when there is no place to store spent fuel,” Hazel O’Leary, vice-president for Northern States Power Company, one of the nation’s major nuclear utilities, told Congress in March 1992. O’Leary, who is now the secretary of energy under President Clinton, added, “Together we must assure that a permanent facility or [a temporary facility] is developed.”

The nuclear industry’s efforts to overcome the waste problem culminated last fall in the energy bill. One of the chief obstacles to DOE’s Yucca Mountain plans was the jurisdiction of the Environmental Protection Agency over waste disposal standards. Congress usurped EPA’s authority to set radiation standards, giving that authority to the National Academy of Sciences, long seen as an ally to the nuclear industry.

In January this year, DOE and a consortium of 16 utilities selected General Electric Co. and Westinghouse Electric Corp. to develop the “next generation” of standardized nuclear power plants. DOE intends to pay the companies $100 million while utilities will contribute $50 million in services, equipment and cash. These taxpayer dollars appropriated to GE and Westinghouse follow four decades of continuous funding, in spite of nuclear energy’s poor financial history. As it was in the early 1950s, the current goal of the pact between GE/Westinghouse and DOE is to ensure a viable nuclear energy industry.

Companies like GE, Westinghouse, General Atomics and Rockwell are the direct beneficiaries of the DOE’s emphasis on nuclear research and development. These companies have seen huge profits from nuclear energy in the past, and now “they have a greater interest [than utilities] in nuclear energy,” says Michael Mariotte, director of the Nuclear Information and Resource Service (NIRS). The deal announced in January “shows how interested DOE and the contractors are in rebuilding the nuclear industry,” Mariotte says. “At this point, all the DOE is doing is keeping the [nuclear] divisions of those companies alive.” Interestingly, only 16 utilities are participating in the consortium mentioned above; most utilities have now recognized that nuclear power is a financial boondoggle.

As early 1953, Democrats and labor interests sounded warnings of subsidizing the development of nuclear power. “The people of the United States have already invested over $12 billion in the course of acquiring the technical and scientific knowledge concerning the production of atomic energy,” warned Benjamin Sigal of the Congress of Industrial Organizations (CIO). Speaking in opposition to pro-nuclear legislation, Sigal added, “If the proposed amendments are adopted, … the know-how will be placed at the disposal of a few fortunate companies.”

According to a 1991 analysis by Fred Sissine of the Congressional Research Service, nuclear energy absorbed 65 percent of energy research and development spending from fiscal years 1948 to 1990 – almost $33 billion in 1982 dollars.

Some of the research and development dollars for nuclear power have been wasted on debacles that were never completed. For example, about $1.5 billion was spent on the Clinch River Breeder Reactor, a reactor that proponents hoped would “breed’ more fuel than it would consume. DOE planned to build the reactor in Tennessee, but the nuclear industry’s hopes were dashed when the Senate canceled its funding in 1983 at the urging of a number of environmental groups, including Environmental Action.

Even today, despite years of problems, DOE’s R&D funds are skewed toward nuclear energy. A July 1992 internal DOE memorandum marked “not for attribution or distribution” clearly proves the GAO’s conclusion in 1987 that DOE’s support for nuclear energy has “insulated [nuclear technologies] from major reductions.” The memo was prepared by DOE’s policy office in an effort “to develop, on its merits, program planning priorities” for R&D, according to a cover letter to the memo by Bush administration energy undersecretary Linda Stuntz. [emphasis in original]. “Political sensitivities can be applied later, but you need to know, first, what seems to be right based on the merits,” the memo continues.

Not surprisingly, each of the policy office’s top recommendations are for programs within DOE’s Office of Conservation and Renewables; the memo also concludes that all of DOE’s nuclear power programs should be “deemphasized.” However, when Bush Energy Secretary James Watkins released his DOE budget request, the tables were turned and emphasis and appropriations overwhelmingly went to nuclear energy. “This internal analysis demonstrates that an energy R&D program’s funding level is inversely proportional to its ability to contribute to the nation’s energy needs,” says former Rep. Howard Wolpe (D-MI), a critic of Bush’s energy policy.

While the Greenpeace report conservatively documents $97 billion in federal subsidies from 1950 to 1990, it explains that this estimate excludes huge categories of federal support for nuclear power, which the report says could reasonably be estimated at $376 billion.” These difficult-to-quantify categories range from the government’s ideological support of nuclear power and Price-Anderson to uranium exploration programs and nuclear power’s environmental costs.

“Many of the subsidies for the nuclear industry are not in the tax code, making them hard to quantify despite their tremendous value,” says Dawn Ehrlenson, who directs a tax project for Friends of the Earth. Briefly, a few of the other subsidies and benefits bestowed on the nuclear industry by the government include:

NucIear plant decommissioning.
Nuclear utilities are required to set aside funds for dismantling reactors after ceasing operation. Public Citizen reported in 1990 that utilities on average had operated reactors about one-third of their expected life, but had only collected 14 percent of decommissioning funds.

Moreover, true decommissioning costs have been drastically underestimated. Last summer, for example, the owners of the Yankee Rowe nuclear reactor raised the estimated cost of dismantling the reactor to three times what had been placed in its decommissioning trust fund. Even Yankee Rowe’s new figure is a “dubious estimate because no one knows what it will cost in two or five years to get rid of high-level nuclear waste,” says NIRS’ Jeff Sosland. Skyrocketing decommissioning costs could be paid by ratepayers, shareholders, or taxpayers.

Regulatory Costs. Although it often blurs the line between regulation and promotion of nuclear power, the Nuclear Regulatory Commission is charged with protecting the public from nuclear technologies. But its regulatory costs have been borne by taxpayers. From 1950 to 1990, government regulation of commercial nuclear power facilities has cost taxpayers $9.2 billion in 1990 dollars, an estimate that excludes what the industry has paid through licensing and other fees, according to Greenpeace’s report. Recognizing regulatory costs as a major subsidy to nuclear utilities, Congress passed a law in 1990 requiring the NRC to recover 100 percent of its budget from its licensees.

State expenditures. Taxpayers also have paid for nuclear energy through their state taxes. For example, in New York and North Carolina state agencies have appropriated money to evaluate how to address public opposition to low-level nuclear waste disposal sites. The New York Low-Level Radioactive Waste Siting Commission budgeted $900,000 for a public-relations campaign “to convince New York State residents that low-level nuclear waste facilities are not harmful,” according to a PR industry trade newsletter.

Despite the billions of dollars in taxpayer subsidies of the last four decades, the nuclear industry is in trouble. “Nukes face a new crisis: competitive markets,” concludes a headline to a recent article in Public Utilities Fortnightly, a trade publication. According to Greenpeace’s report, ratepayers and shareholders spent $396 billion between 1950 and 1990 (outside of taxpayer expenditures) to develop and maintain nuclear power, a number that far exceeds the value of the energy supplied. In addition, regulatory changes resulting from last fall’s energy bill may dampen further the nuclear industry’s efforts. “Greater access to the transmission system for independent power producers, including renewables, will promote greater competition and deal another blow to the nuclear industry,” says EA Legislative Director Leon Lowery, who played a key role in winning the regulatory changes.

Further, the Clinton-Gore administration is likely to place much less emphasis on nuclear power. In their campaign book, Putting People First, Clinton and Gore declared their opposition to ‘increased reliance on nuclear power.” They write, “There is good reason to believe that we can meet future energy needs – with conservation and the use of alternative fuels – without having to face the staggering costs, delays and uncertainties of nuclear waste disposal.”

But the nuclear industry would like the new administration, policymakers and the public to forget the high costs and environmental problems of the last four decades. Through massive public relations campaigns, the USCEA is attempting to sway its most formidable foe – the public – by comparing itself to renewable energy sources. “Renewable energy and nuclear power have much in common,” the USCEA’s Myers contends. “[They] both have passed through similar developmental cycles.”

And while environmental and public interest groups have attempted to eliminate nuclear subsidies and divert government spending toward clean energy sources, their efforts have been hampered by the nuclear industry and its political action committees” (PACs) hold on Congress. The people who benefit from government support invest at least a portion of that support to ensure the support continues,” says Koplow, the author of the Alliance to Save Energy report..

npaAccording to “License to Spend,” a 1992 report by NIRS and U.S. Public Interest Research Group on nuclear industry campaign contributions, Rep. Dan Rostenkowski (D-IL), chair of the House Ways and Means Committee and a key player in the bill’s uranium enrichment title, received $104,000 from nuclear industry political action committees since 1985. “Rostenkowski did most of the dirty work,” says the National Taxpayer Union’s Montange, referring to the bill’s uranium enrichment provision. But Rostenkowski wasn’t even among the top recipients of nuke PACs. The report, based on Federal Election Commission figures, shows that only three members of the Senate and seven members of the House took no money from nuclear industry PACs.

Moreover, deep-rooted institutional forces like those that support nuclear energy are slow to change. Despite the down-playing of nukes in Putting People First, even Vice President Gore, a champion for many environmental causes, appears to advocate continued R&D funding for nuclear power in his book, Earth in the Balance. “The research and development of alternative approaches [to present nuclear technologies] should focus on discovering, first, how to build a passively safe design … that eliminates the many risks of current reactors…”

The imperative for advocates of the environment, public interest and taxpayer is to maintain the struggle for a sustainable energy policy that avoids another nuclear boondoggle. Just as important must be the effort to gain the necessary tools to hold government accountable both to taxpayers and the public interest. As Montange points out, “Taxpayers lack the legal standing to force the government to vindicate their interests. Ifs sort of like dealing with a robber who has the guns and who’s coopted the police. You have to cooperate – take the keys to my house and take what you want as many times as you want.”

Construction Tax Credits: A Bonanza for the Nuclear industry

Tax breaks for nuclear power plant construction weigh in as one of the most substantial subsidies to the nuclear industry – utimated by Greenpeace to be worth $26.1 billion from 1958-1990 in 1988 dollars. “Investment tax credits and accelerated depreciation were two subsidies in which the government actually paid the cost of a new power plant,” explains Rick Morgan, who headed EA’s research on energy issues for over a decade and now works in the Environmental Protection Agency’s Global Warming Division.

In 1984, Morgan, EA researcher and writer Scott Ridley and Richard Heede of the Rocky Mountain Institute helped document the construction write-offs of the nuclear industry in “The Hidden Costs of Energy: How Taxpayers Subsidize Energy Development.” The report says the “bulk of federal support for electricity, about $15 billion, is in the form of tax breaks for plant construction.” Morgan says these tax breaks have been especially beneficial to the nuclear industry, which is particularly capital intensive.

“The Hidden Costs of Energy” concluded that of $28 billion in federal subsidies to the electric industry in 1984, $15.56 billion benefitted the nuclear industry. Environmental Action lobbyied to eliminate some of these breaks in the early 1980s, helping pass the Tax Reform Act of 1986.

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