The political drive to revive nuclear power is in full swing. Unveiling his energy plan yesterday, President Bush said, "America should also expand a clean and unlimited source of energy, nuclear power." Vice President Cheney says "we must seriously question the wisdom of backing away from what is, as a matter of record, a safe, clean and very plentiful energy source." But why conservatives are so in love with nuclear power is a mystery.
Aren't conservatives supposed to be skeptical about having the federal government pick winners and losers in the marketplace? Isn't it best to leave such decisions to investors, not politicians? If nuclear power is a better investment than gas or coal-fired power, then no amount of government help is necessary. If it's not, then no amount of government help will make it so.
The Bush administration maintains that the only reason investors haven't been jumping at nuclear power is because the government has effectively shut down the industry. Cheney, for instance, laments that "the government has not granted a single new nuclear power permit in more than 20 years." But there's a reason for that; no utility company has submitted an application for a nuclear power permit in more than 20 years.
Investors have stayed away from nuclear power because nuclear-fired electricity is about twice as expensive as coal- or gas-fired electricity. The marginal costs of nuclear are indeed lower, but the capital costs are much higher. For instance, electricity costs skyrocketed by 60 percent between 1978 and 1982 largely because of a wave of nuclear power plants that came online in the late 1970s.
Another reason investors have stayed away is because of the shift to competitive generation markets. In the old regulatory world, public utility commissions guaranteed quick returns on capital investments through the rate base. The more capital you spent, the more you made, and a $1 billion nuclear power plant offered a far better return than a $200 million coal-fired plant, regardless of total costs. In a deregulated market, investors think long and hard about investing in plants that might take decades to pay off under ideal conditions.
Proponents counter that nuclear power would be far less expensive were it not for needlessly burdensome safety and maintenance regulations. While you can certainly make a strong case for that, it's unclear whether government has really harmed nuclear power more than it has helped.
The administration should recall that the Atomic Energy Commission, beginning in 1957, directly subsidized the construction of reactors by private utilities. A year later, the "Euroatom" program was adopted, which gave federal subsidies to NATO allies to purchase American light-water reactor technology.
Here at home, the federal government took responsibility for the supply and enrichment of uranium but failed to charge nuclear power plants anything for the capital or inventory costs of the program. And just since the establishment of the Department of Energy in 1978, more than $20 billion of taxpayer money has been spent on nuclear power research and development.
Then there's the granddaddy of all subsidies, the federal assumption of high-level radioactive waste-disposal responsibilities. If the feds had stayed out of this and simply required the industry to secure its own waste disposal through private arrangements, who doubts that the construction costs for such facilities and, more important, the liability costs would greatly exceed the fees the industry currently pays the federal government? In fact, it's extremely doubtful that the industry could insure itself against the possibility of accidents in waste disposal facilities, which could remain highly radioactive for thousands of years.
Perhaps new advances in technology will remedy the environmental and economic problems that plague the industry. If so, fine. Investors will respond with orders for new nukes and we'll have no complaint. But in the meantime, the feds shouldn't try to ram this technology down the market's throat.
In the final analysis, the nuclear industry is purely a creature of government. The administration needs to practice the free-market rhetoric that it preaches and put away its nuclear pompoms.