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The Hidden Costs of Nuclear Energy

Updated on September 29, 2018
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The Hidden Costs of Nuclear Energy | Nuclear Power Plants

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The Hidden Costs of Nuclear Energy is one of the lesser known aspects of nuclear energy that skews the debate in favor of nuclear energy, while ignoring the reality of how heavily nuclear energy is subsidized. The nuclear power industry has done a masterful public relations job that keeps the hidden costs associated with nuclear energy out of public discussions regarding the cost of nuclear energy. To understand the true cost of nuclear energy, you need to understand how extensive the subsidies to the nuclear industry are.

In the early 1950s, President Dwight D. Eisenhower initiated the “Atoms for Peace Program”, an effort to turn military developments in the field of nuclear science into commercial nuclear power reactors that could be used to generate electricity for the civilian population. Lewis Strauss, the U.S. Atomic Energy Commission Chairman that served under President Eisenhower, famously predicted that nuclear derived electricity would be so inexpensive that it would be “too cheap to meter.” Sixty years later, the reality regarding the cost of nuclear power has proven to be quite the opposite when the hidden costs of nuclear energy are taken into consideration .

An Accounting Of The The Hidden Costs of Nuclear Energy

Nuclear powered electricity generating stations (nuclear power plants) have been extremely expensive to build and maintain, and many of the costs associated with nuclear energy have been hidden from public view, which include lavish federal subsidies that are buried in decades old federal law. Persistent utility industry claims regarding the low kilowatt-hour (kWh) cost for electricity produced by nuclear power plants do not take into account these hidden federal subsides. The actual cost of electricity produced by nuclear power is much more expensive per kWh than industry claims when federal subsidies that support the nuclear power industry are taken into account.

After a three decade lull following the Three Mile Island partial nuclear meltdown in Pennsylvania in 1979, utilities in the United States are once again proposing to build new nuclear power plants. Until the 2011 Fukushima Daiichi nuclear disaster in Japan started to unfold, United States utility’s biggest obstacle to building new nuclear power plants has been obtaining loans at reasonable interest rates from banks and the financial sector. This is due to the fact that the building of nuclear power plants has historically been extremely expensive and time consuming, with huge cost overruns and long construction delays. Additionally, bank loans are usually secured with valuable hard assets, such as real estate, that can be repossessed by the lender in the event of a loan default. However, lenders have no interest in securing loans with real estate that has a nuclear power plant sitting on it, since the value of that land could become worthless or even become a huge financial liability if there was a nuclear accident.

After an intense lobbying effort by the utility industry, President Obama proposed $36 billion in new federal loan guarantees for nuclear power. This allows the utility industry to obtain loans to build new nuclear power plants, because the loans are guaranteed against default by the federal government; meaning if the loans are defaulted upon due to financial problems or a nuclear accident, the United States taxpayers would pick up the cost of paying off the loan and protecting the lender from loss. Without this federal loan guarantee subsidy, the utility industry would be unable to obtain financing at interest rates low enough to make their new nuclear plant plans economically viable.

The nuclear power industry also benefits from a federal nuclear energy production tax credit (PTC) that applies to newly build nuclear power plants. Per section 1306 of the Energy Policy Act of 2005, the PTC allows the first 6,000 megawatts of new nuclear capacity to earn a $18 per megawatt-hour tax credit during the initial eight years of new nuclear power plant operation. A single new nuclear power plant can earn a maximum tax credit of $125 million per year.

The largest and most critical public subsidies that the nuclear power industry receives from the federal government are various insurance subsidies that date to the beginning of the nuclear power industry in the late 1950s. Since a catastrophic accident at a nuclear power plant could have an extraordinary financial impact on the owner or insurer of a nuclear power plant, companies were unwilling to expose their assets to nuclear power and private insurance companies will not underwrite insurance policies for nuclear power plants. To resolve this impasse, the United States Congress acted by passing The Price-Anderson Act in 1957 (which has since been extended numerous times). Once President Eisenhower made the Price-Anderson Act law with his signature, it shielded the nuclear power industry and insurers from the financial consequences of nuclear accidents. The Price-Anderson Act also exempts the designers, manufacturers, and component suppliers for nuclear power plants from accident liability claims.

Under the Price-Anderson Act, the United States requires commercial nuclear reactor operators to obtain private insurance coverage sufficient to cover approximately $300 million per reactor for initial third party off-site damages that any nuclear accident at their facility might cause. Damages above $300 million per reactor are covered by the federal government, which means the United States taxpayers. If the $300 million damage threshold per reactor is exceeded, the owner of a nuclear power plant must pay a fine of $96 million per reactor to the government, but otherwise they and their insurer have no further liability for the nuclear accident. Without these accident liability limits codified in federal law for catastrophic nuclear accidents, the nuclear power industry could not afford to business in the United States.

To assist the nuclear power industry in their efforts to build new nuclear power plants, the United States Congress created another public subsidy in the form of a federally backed risk insurance program called standby support (created by section 638 of the Energy Policy Act of 2005). Standby support insurance covers licensing and litigation risk for the first six new nuclear power plants that are built in the United States. Standby support only covers delays caused by situations that a company cannot control. Each of the first two new nuclear power plants constructed are eligible for up to $500 million of standby support coverage. Each of the subsequent four new plants can receive up to $250 million of standby support coverage.

The nuclear power industry is arguably the most heavily subsidized industry in the United States. Without federal support and taxpayer backing, there would be no United States nuclear power industry, as obtaining the necessary insurance for a catastrophic nuclear accident, such as what occurred at the Fukushima Daiichi nuclear plant in Japan, is not possible. Once the public subsidies are taken into consideration, the actual cost of electricity produced by nuclear power plants is much more expensive per kWh than the industry claims. If a catastrophic nuclear accident were to occur in the United States, the cost to the surrounding population, land areas, and economy would be incredibly large.

Perhaps it is time to reassess whether the federal government should continue to support the nuclear power industry or put our best minds to work finding safer means of producing the energy we need to function. Even if we decide to continue to pursue nuclear power, there are far safer modern nuclear reactor designs that can and should be pursued, such as the pebble bed reactor (PBR), which have passive safety systems that would prevent nuclear reactor core meltdowns. Using a new nuclear power plant design, such as a pebble bed reactor, may allow the United States to reduce some of the hidden costs of nuclear energy.

See More About The Pebble Bed Reactor (PBR): http://en.wikipedia.org/wiki/Pebble_bed_reactor

© 2011 John Coviello

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    • Rock_nj profile imageAUTHOR

      John Coviello 

      12 months ago from New Jersey

      Thanks. I'm glad this article opened your eyes to the hidden cost of nuclear energy. It is a heavily subsidized form of energy when you peel away the layers of subsidies.

    • SgtCecil profile image

      Cecil Kenmill 

      12 months ago from Osaka, Japan

      This is an eye-opener! I live in Japan and people here are still rattled by the 2011 Fukushima tragedy. For everyone else, it seems like business as usual. Let's hope pebble bed has a chance to make things safer for us all.

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