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If we don’t make decisions based on science…….what else is there?

I have written much about the strength of our beliefs and how they influence important decisions.  A case in point is the decision to close nuclear stations early in Germany.  As we in the rest of the western world try and understand the German approach to eliminating nuclear power on the road to their Energiewende (energy transition), we must remember that this plan started in 2010, a year before the Fukushima accident.  This energy transformation is a monumental task and a source of pride to most Germans.  It has a very aggressive target of reducing emissions by 80 per cent and providing for 80 per cent of the country’s electricity consumption from renewable sources by 2050 all while “aiming for a market-oriented energy policy that is free of ideology and open to all technologies, embracing all paths of use for power, heat and transport.

Much has already been said about the challenges along the way.  We now know that raising renewables quickly to as high a level as Germany has done has an impact on the stability of the system; is severely affecting the electricity markets at times when high levels of subsidized wind and solar drive down prices for all other forms of generation risking putting conventional generators out of business; all while increasing fossil generation in the short term at least to make up for lost nuclear with a resultant increase in carbon emissions.

It wasn’t supposed to be this way.  As stated in the 2010 policy paper, the purpose of the policy is to secure a reliable, economically viable and environmentally sound energy supply for the 21st century.  While targeting renewable energy to account for the biggest share in this future energy mix; in 2010 it was also accepted that nuclear energy would be a bridging technology on this road.  In fact, the plan made maximum use of the existing nuclear fleet during the transition.  Look at the following excerpt of the policy on the continued use of nuclear energy.

A limited extension of the operating lives of existing nuclear power plants makes a key contribution to achieving the three energy policy goals of climate protection, economic efficiency and supply security in Germany within a transitional period. It paves the way for the age of renewable energy, particularly through price-curbing impacts and a reduction in energy related greenhouse gas emissions.

The operating lives of the 17 nuclear power plants in Germany will be extended by an average of 12 years. In the case of nuclear power plants commissioned up to and including 1980 there will be an extension of 8 years. For plants commissioned after 1980 there will be an extension of 14 years.

Additionally, the regulations on safety requirements for German nuclear power plants will be expanded, with requirements remaining at the highest technical level, in the framework of a 12th amendment to the Atomic Energy Act.

The extension of operating lives also creates the opportunity to increase financing in the fields of renewable energies and energy efficiency. To this end – in addition to the tax on nuclear fuel limited to the end of 2016 – a contractual agreement will be concluded with the operators of Germany’s nuclear power plants on absorbing additional profits resulting from the extended operating lives.”

In summary they want to get rid of their nuclear plants while also acknowledging they are currently both very economic and safe. Therefore nuclear plant operating lives would be extended to make more money generating more taxes to pay for the energy transformation to enable nuclear to ultimately be eliminated.

And then it happened, the accident at Fukushima.  The result; this plan was abandoned and 8 nuclear units were shut down immediately while the remaining 9 will no longer get life extensions.  This makes for a much harder transformation with coal use having increased from 2011 to 2012 with most electricity continuing to be generated from fossil fuels followed by nuclear (at about 16% now about half of its pre-Fukushima peak of around 30%).  Acknowledging that Fukushima increased the fear of nuclear, is it rational to accelerate the removal of nuclear from the system when a plan was already in place to eliminate it; to the short term detriment of emissions and costs?  But what is rational?  If it means exhibiting behaviour consistent with your beliefs, then this decision may indeed be rational.  But is it reasonable to not challenge one’s beliefs to determine if they are valid at times like this?

And hence, the film Pandora’s Promise.  I was able to attend a showing where Robert Stone was also there to take questions from the audience.  It made for a lively discussion and an overall fun evening.

First and foremost, I found it absolutely riveting to see the transformation of these five environmentalists as they came to understand the facts about nuclear energy.    They talk about being a member of the environmental movement and how it went without saying that one would also be strongly opposed to nuclear power.  After all, it was an evil technology and radiation kills.  Frankly nuclear power can destroy the planet.

For some reason, these folks took the time to listen and see that much of what they believed in the past about nuclear power was simply wrong.  I am sure that most of you in the nuclear industry have been providing these facts consistently to all that would listen over the last 30 plus years.  So why are they listening now?  Why listen when you haven’t in the past?  The facts are the same.  But in this case the driver is different.  This group is overwhelming alarmed by the threat of climate change.  And as such (and different to many others), they decided to explore ALL the options; even the ones that would have seemed ludicrous to them in the not too distant past.  Or in other words, they chose to challenge their strongly held beliefs.

The film was not so much about advocating nuclear power (although it does) but rather of documenting the journey of these five individuals.  They visit plants. They visit Chernobyl and Fukushima and they explore the realities about the technology.  What I found the most compelling was the hand held dosimeter they carried as they traveled that showed radiation levels no higher at Chernobyl or Fukushima than most of the rest of the world.  This kind of evidence is hard to argue with.

But as interesting as this all is, this post is not about a group of environmentalists who have decided to put their faith in science as search for the truth.  Rather it is about why so many others don’t do the same.  It seems as science is always appreciated when it supports your side of an issue.  i.e. science is proving climate change which is pro-environment so science is right.  Science shows that nuclear power is good but that disagrees with environmental dogma so sweep it aside.  It’s good news when those who use science to make their climate case are realizing they should do the same when they evaluate nuclear power.  We should applaud anyone who takes the time to challenge a long held belief.

So, while Germany is aiming for a market-oriented energy policy that is free of ideology, why are they so dogmatic that nuclear needs to go and the quicker the better?   I recently was provided with a copy of a very interesting presentation made by Dr. Thomas Petersen at the  Jahrestagung Kerntechnik 2013 in Berlin this past spring that explores “Nuclear energy and the perception of risk in Germany”.  While presented at a conference the presentation has not been available on line to date.  I want to thank Dr. Petersen for giving me permission to post it so you can see what I think is a remarkable set of data.

Most of us outside of Germany probably believe that Germany is  a world leading innovator when it comes to technology.  Yet in this presentation it would appear that most Germans do not have faith (or trust) in experts when it comes to science.  They overestimate risk and consequences and are extremely averse to taking any risk they perceive can cause harm.  The slides note that a majority believe life is becoming more dangerous with time; are concerned that technological progress is risky and that research into certain technologies should be stopped; and that in politics, decisions are too often made on the basis of facts rather than how people feel.

When it comes to nuclear power, it is  high on the list of technologies that carry too much risk.  Consider the following slide:

PetersenPresentationSlide

Pulling all of these thoughts together is saying something along the lines of “I believe what I believe – I know that nuclear power is dangerous so please don’t try and deter me with facts or truth”.  The really scary part is that in today’s western democracies this is indeed how we make decisions.  And while we may want to laugh, or cry; it is always important to remember these decisions have very real consequences.  Less nuclear, more carbon.  Fact.  Less nuclear, more fossil fuels. Fact.  Less nuclear, more coal – and more illness and fatalities from pollution. Fact.

So what is happening in Germany?  The great transformation.  Yes, they are doing great things with renewables.  There is no doubt.  But at what cost in the short term?  The subsidies are destroying European energy markets, new coal plants are being built and carbon emissions are going up.  All to replace perfectly safe well run nuclear plants before they reach their end of life.  Nuclear plants have never hurt a single individual in Germany and likely never will.  So what exactly are these people being protected from?

The answer is clear as I close with this final quote from a pro-transition blog that disputes the negative impact on coal use of the policy by arguing it is a short term blip.  When talking about the reduction in nuclear generation over the last two years, the author concludes, “This reduction is a long-hoped for goal and the inspiration for the nation’s energy transition. Germans don’t want nuclear reactors. They haven’t since the 1970’s and they really don’t want them after Fukushima.

We can see that five environmentalists have taken on their beliefs due to a larger concern – climate change.  I wonder what issue it will take, if anything, for Germans to do the same?

Note:

In addition to the film, Pandora’s Promise, Mark Lynas has released a short book called Nuclear 2.0 available on Amazon in electronic format only.  I have read it and frankly it is extremely well done. It meticulously addresses the concerns with nuclear one by one by one with clear and effective information to make the reader see the facts.  I recommend it if you haven’t had a chance to read it.

 

Whatever happened to searching for the truth?

Finally this week, we are feeling the heat of summer.  I am off next week to teach for the WNU in Korea and China.  I always enjoy these summer courses and find the interest of those attending to be inspiring.

That being said I thought I would be a bit more philosophical this month.  For the past two months I have been also posting my blog on www.theenergycollective.com.  Thanks to that site for allowing me to share my thoughts with a broader audience.  My last post seemed to stir up a litany of comments (well over 100) with some very extreme points of view (to be fair both negative and positive).  I was called a “patently gross liar” as well as “not the brightest person to talk to on the subject”.    Nuclear power is a topic that invokes quite a bit of passion.

The nature of the comments supports many of the things I have been talking about for the last year or so; confirmation bias being one of the most critical concepts.  As I see it, in that post I pointed out three relevant studies that were carried out with good scientific rigour, all subject to peer review and authored by three very different groups of experts.

The first was by a Canadian regulator who is responsible for ensuring public safety which is why they did a study to determine if people living near nuclear plants are getting sick.  Their strongly supported conclusion was that this is not the case.  You would think this is would be good news.  Even If I was against nuclear power I would still be pleased to find out that children who live near these plants are not getting sick.

The second was by an American environmentalist who has demonstrated that operating nuclear plants instead of fossil plants over the past 40 years or so has benefited society by reducing real deaths due to pollution.  Again, good news as this study claims about 1.8 million lives saved.

And finally the third a study by a small army of United Nations experts from around the globe who have determined that radiation has not and is not likely to kill anyone as a result of the Fukushima accident in Japan.  Once again, good news that even after a horrible accident, human life has been protected.

So why are these things so hard for so many to accept?  As I have just read in Daniel Kahneman’s “Thinking Fast and Slow” – “when people believe a conclusion is true, they are also very likely to believe arguments that appear to support it, even when these arguments are unsound” – once again confirming what I have said many times before, beliefs come first and anything that disputes our beliefs is immediately suspect.

It is easy to become cynical in a world where there is little desire to believe in science and the search for truth.  It has become a case of my scientists versus your scientists.   Everyone can find someone to support his or her point of view. The press feeds this model as the more alarming side of the story gets the most coverage. They then try to demonstrate fairness by soliciting input from both sides of the issue.  However, when showing both sides of a debate it is often not in the context of where the science is; they just pull out “experts” on the other side giving the illusion of broad based disagreement even though there may be significant scientific consensus.

For example, as was stated by President Obama this week in his speech on climate change; “The overwhelming judgment of science — of chemistry and physics and millions of measurements — has put all that to rest. Ninety-seven percent of scientists, including, by the way, some who originally disputed the data, have now put that to rest. They’ve acknowledged the planet is warming and human activity is contributing to it.” He continues “but I don’t have much patience for anyone who denies that this challenge is real. We don’t have time for a meeting of the Flat Earth Society.”   It is nice to see a leader that says we have scientific consensus so we need to act.

Does that mean that the consensus is right?  Of course not.  Science is far from perfect but in a rationale society we must be guided by the science of the day – for that is what science is all about.  It is indeed healthy to continue to question and study and one day we may all be proven wrong.  But until then we should be guided by the consensus of scientifically produced studies and act accordingly.  That is the right thing to do. Instead, in many cases today we have unending debate resulting in the inability to act.  And of course this is the strategy of many who oppose various things.  These anti whatever folks know the process and in essence are the winners because they know how to keep the debate going and ensure inaction.

Here is another negative comment from my last post.  “My jaw drops when I hear some of the comments made by pro-nuclear folks.  I try to stay away from using terms such as idiotic, half-witted, ignorant or that might inflame the discussion.  Sometimes, however, the comments are so asinine, so moronic, it’s hard to resist.”  I am sure this individual is certain he is right and we are wrong and there is no amount of discussion or evidence that will change his mind.

This takes me back to a quote I used in my blog last summer from Dan Gardner’s book “Future Babble” which is actually a quote from Leon Festinger.  “Suppose an individual believes something with his whole heart.  Suppose further that he has a commitment to this belief that he has taken irrevocable actions because of it; finally, suppose that he is presented with evidence, unequivocal and undeniable evidence, that his belief is wrong; what will happen?  The individual will frequently emerge, not only unshaken, but even more convinced of the truth of his beliefs than ever before.”

This is what makes the movie Pandora’s Promise so interesting.  It is about recognized environmentalists who have studied the issue and changed their mind.  I still haven’t seen it as it is not yet showing in Canada but the reviews are very interesting.  Everything from well done to one sided propaganda.  Will it change any minds at all?  I do hope so but the evidence is that it is really quite difficult.

So I leave you with one last negative comment from my last blog.

You are a pro-nuclear guy trying to make believe that nuclear is as safe as mother’s milk and that it is the environmentally sensitive way to generate power.  Let’s see, we aren’t even two years this side of the Fukushima disaster that is still ongoing but, hey, I’m on the fool’s side of history.  There is no safe disposal for nuclear waste.  The gazillions of dollars it would take to build your little fantasy of a nuclear power plant on every block are non-existent and no one will invest unless the government is there to protect their underwear from cost overruns, economic collapse, default, and, oh yeah, any kind of nuclear disaster.  The real problem is that pro-nuclear folks are more concerned about their jobs than what is good for humanity.  Keep living in your little bubble world. “

I would argue as to which one of us in is the bubble world, but as an industry our task is definitely a difficult one.  However given the facts we must persevere.

The only thing more powerful than the truth is fear

As I was thinking about what to write this month, I was invited by my dry cleaner to attend a protest in a nearby park against genetically modified food.  This somewhat infuriated me as I know without doubt that GMO has helped millions around the world and had never killed anyone (although denial of these foods has), yet, as with nuclear power, opposition remains strong, especially in Europe.

My dry cleaner argued trying to tell me that 500,000 were killed in India due to GMO and, as you can imagine, there was no winning the argument.  Mark Lynas, who I have quoted in previous posts has recently taken a hard stand against those who oppose GMO. Mark makes his position clear in his talk at Cornell University this past April where he opens with the following: “I think the controversy over GMOs represents one of the greatest science communications failures of the past half-century. Millions, possibly billions, of people have come to believe what is essentially a conspiracy theory, generating fear and misunderstanding about a whole class of technologies on an unprecedentedly global scale.

It is no mistake that environmentalists like Mark have also changed their views on nuclear power and are now vigorously supporting it.  The simple reason is that Mark and others like Stewart Brand and George Monbiot, are taking positions that are founded in science rather than a set of beliefs that may feel right, but cannot be supported by scientific evidence.

Most of the opposition to nuclear power is founded in fear – primarily the fear of radiation.  However, scientific evidence continues to grow demonstrating the benefits of nuclear power while disproving widely held beliefs of many who oppose it.

For example, this past week (on May 23), a new study was reported on by the Canadian regulator (CNSC) looking at cancer rates near Canadian nuclear plants.  Not surprisingly, once again the results were clear.  No indication of any increases in cancer near nuclear stations relative to the rest of the province.  “The most important finding of this study is no evidence of childhood leukemia clusters in the communities within 25 km of the Pickering, Darlington and Bruce NPPs.”

Next I return to the study I wrote about last month published in the Journal of Environmental Science and Technology by Pushker A. Kharecha and James E. Hansen of the NASA Goddard Institute for Space Studies and Columbia University Earth Institute.  They found that nuclear power has saved an estimated 80,000 lives annually – 1.84 million in all – since widely introduced in the 1970s and could save another 5 million if construction continues at a decent pace due to a reduction in air pollution.  Nuclear power has also reduced carbon emissions by 64 Gt over the same period.

And finally UNSCEAR has now released the results of its latest study on the Fukushima accident.  It clearly concluded “Radiation exposure following the nuclear accident at Fukushima-Daiichi did not cause any immediate health effects. It is unlikely to be able to attribute any health effects in the future among the general public and the vast majority of workers“.  But of even more importance this study also concluded that there are health effects from the Fukushima accident stemming from the stresses of evacuation and unwarranted fear of radiation.

So what does all this tell us?  Looking at these three studies we can confirm that

i) operating nuclear power plants do not cause cancer to the residents of nearby communities from normal operations;

ii) over the past 40 years nuclear power has in fact saved almost 2 million lives through a real reduction in pollution by not burning fossil fuels and its resultant health impacts; and finally

iii) that after the biggest nuclear accident in the last 25 years, radiation has not harmed any of the people of Japan and is unlikely to do so in the future.

Considering these kinds of results, why aren’t we seeing this reported in the main stream media?  With this kind of story there should be universal praise of nuclear power and strong support for its expansion.   Frankly, if it were any technology other than nuclear that was reported to have saved millions of lives we likely would have seen it in the headlines at CNN, BBC  and other mainstream media.  So why are we primarily seeing these nuclear studies reported in trade magazines and blogs?  Why is the world not blown away by this fantastic evidence of the benefits to our lives of nuclear power?  As I was pondering these developments I came upon a chapter title in the book I am currently reading by Ben Goldacre called “Bad Science” (Good book by the way).  The chapter title is “Why Clever People Believe Stupid Things”.  The chapter then goes on to discuss many of the things we have discussed in this blog before such as confirmation bias, seeing patterns where there are none and a host of other standard reasons why people tend stick to their beliefs in light of strong evidence that they should consider alternatives.

The reality is that some people will never change their view of nuclear power and will oppose it no matter what evidence is brought before them.  But for those of us who are frustrated, there is hope.  We are starting to see positive change.  We have well known environmentalists seeing the benefits of nuclear power.  This is now captured in the new documentary “Pandora’s Promise” coming in June.  Film maker Robert Stone is quoted as saying “It’s no easy thing for me to have come to the conclusion that the rapid deployment of nuclear power is now the greatest hope we have for saving us from an environmental catastrophe,”   Entertainment Weekly says “the film is built around looking at an issue not with orthodoxy, but with open eyes”.  (I know some of you have already seen it.  I haven’t seen it yet but I am looking forward to it).

Our story is strong.  The message is positive and one of hope for the future.  But overcoming fear is no easy task.  Fear is a powerful emotion.  It will take hard work, commitment – and most of all –  time.  But if we all persevere, the future is bright. The time has come to get the message out and show how much nuclear power contributes to society, and how necessary it is in a high energy and resource intensive world.

Learning the right lessons – a new paradigm to build a brighter future

Last month we talked about Fukushima two years on and focused our discussion on making sure we remember the real people whose lives continue to be severely impacted by this accident.  This month, as we also remember Chernobyl on its 27th anniversary, I wanted to talk about the legacy of these events and focus on learning the lessons that are necessary to make the industry stronger and, most of all, improving its support amongst the public.

There have been a number of important positive reports recently that can lead to a better understanding of the consequences to the public of nuclear power.

The first being a study by Japanese researchers who found that internal radiation levels in the population around Fukushima are very low.  “Some 99% of residents of Fukushima prefecture and neighbouring Ibaraki have barely detectable levels of internal exposure to cesium 137, a group of Japanese researchers has found. Of the remaining 1%, all showed levels well below the government-set limit.”  Of interest, the levels are much lower than following the Chernobyl accident and indicate low levels of contamination in the food.  This builds on the recent WHO study I reported on last month that says the risk of adverse health impacts from radiation to the Japanese population is very low.

Second, a study was published in the Journal of Environmental Science and Technology by Pushker A. Kharecha and James E. Hansen of the NASA Goddard Institute for Space Studies and Columbia University Earth Institute.  They found that nuclear power has saved an estimated 80,000 lives annually – 1.84 million in all – since widely introduced in the 1970s and could save another 5 million if construction continues at a decent pace due to a reduction in air pollution.  Nuclear power has also reduced carbon emissions by 64 Gt over the same period.  This study is important because it quantifies the benefits of nuclear power being clean compared to burning fossil fuels.  Its author, James Hansen is considered an environmental activist who has taken hard positions on a number of environmental issues.

And finally a new draft document by the US Environmental Protection Agency that “would change its long-standing advice to state and local governments about how to limit long-term exposure to radiation after a reactor accident or a “dirty bomb” attack. By reducing the projections for how much radiation exposure is likely in the years after such an episode, the proposal could also reduce the amount of contaminated land that would have to be abandoned.”  This is critically important because finally there is starting to be a discussion on how to best respond in the event of an accident in addition to how to prevent accidents in the first place.

So why talk about reports such as these?  Because I think they are a critical step to ensuring we learn the right lessons following Fukushima.  This will lead to improving the response following accidents, and then ultimately starting a meaningful dialogue to reduce the public fear of nuclear power.

In the industry we often see the focus continuing to be on how to both reduce the risk of accidents in the first place and then ensure that even when there is an event there are no releases of radiation to the environment.  These post-Fukushima lessons learned fall into three broad categories:

  • Reducing the risk of an accident by building better protection against such hazards as earthquakes and tsunamis
  • Ensuring continued cooling of the reactors following an event through the use of portable accessible temporary power to replace safety systems that may have been damaged or destroyed on site; and
  • Better Severe Accident Management Guidance (SAMG) so that even after a severe accident there would be no releases. This includes such protections as hardened vents and recombiners to lower the risk of hydrogen explosions and various sorts of strategies for in-containment retention of any melted core.

But while this is all good, it is not going to get us to the solutions we need as it only goes part of the way there.  We also need to demonstrate that we have clear and effective strategies so that even if there are releases we can protect people and keep them safe.  This means a better understanding of the real health risks of radiation exposure so there can be clear guidelines on when to evacuate and of even more importance when to allow people to return.  And there also needs to be clear guidelines for remediation of land following any amount of contamination and how to go about it.

The latter is absolutely necessary because when it comes to public safety and hence public support, the real issue with nuclear power continues to be fear.  While most people would probably accept that nuclear power provides safe and clean electricity under normal operating conditions; the real fear comes from the belief that even if the risk is small, the consequences of a nuclear accident are too severe to be tolerated by society.  And as long as this belief holds, no matter what the industry does to reduce the risk of an accident, the fear will never change.  The more emphasis we put on trying to make it almost impossible for there to be an accident with releases, the stronger the belief that we must do this because the consequences of releases are just too severe to even contemplate.

This makes nuclear a hard sell to the public because the consequence is seen as real while the risk is less relevant.  People evaluate risk by focusing on the severity of consequences and considering their perceived control over them.  Some people are afraid of flying and not driving even though we all know the risk of dying in an auto accident is significantly higher than in a plane crash.  Why?  In part because we all believe that we are good drivers (control) and even if we have an accident we can survive because not all individual car accidents kill people (severity).  Therefore we can convince ourselves that we likely won’t have an accident and even if we do, it won’t be a bad one.  On the other hand, we may fear flying even though we know the risk is small because we also know that if we are the unlucky ones to be on the one plane that does go down, then we will surely die.  And so it goes for nuclear.  While safe most of the time, the public believes that IF there is an accident our communities will be destroyed by contamination and we will either die or even worse our children and grandchildren may also die from cancer in the future.

This is why need a change of paradigm.  What studies such as the ones above actually show is that:

  • Safely operated nuclear plants save lives every day by not polluting our environment as does burning fossil fuels.  These are real lives saved and the numbers are big.
  • Radiation is not as dangerous as most people think especially at low levels of exposure.  While it is a carcinogen, it is a far less potent carcinogen that many others we see in our everyday lives from many forms of pollution.  In fact we use radiation in medicine to save lives by both diagnosing illness and treating diseases such as cancer.
  • Following really bad accidents such as Fukushima; where the entire area was devastated by a huge natural disaster that made it increasingly difficult to manage the nuclear accident at three reactors at the same site; we have still been able to protect people from radiation.  The result being that to date not even one person has died from it; and studies show the risk of dying in the future to be too low to measure.

But we also know that through extreme fear people have died being evacuated in haste; that people have had their lives disrupted with extreme fear of not knowing if they will have health impacts or not; and that governments do not have clear and effective guidelines for how to remediate following such an event leading to fear causing irrational decisions that actually further fuel the fear. And that is why we need more effort on managing consequences and improving accident response.

So let’s learn the right lessons and start the hard work of changing the paradigm.  Let’s demonstrate to the public that they don’t need to be afraid; that nuclear accidents are very rare; that even when the next accident happens (and it will) that we can effectively keep the public safe from health impacts and protect their homes and their families.

Let’s explain to the public that while the risk of a nuclear accident is much lower than being in a plane crash (and air travel is very safe), so are the consequences.  Because we also know that if we are in a plane accident we will most likely die.  What we need to know is that even after the worst possible nuclear accident we will likely not die – and that our families and children will not suffer serious health impacts.

This is the big change.  Understanding that the risk of a nuclear accident is low and the consequences are indeed manageable is essential to reducing the fear that is so strong amongst the public.  And only without fear can nuclear power fully achieve its potential as the way forward to producing clean abundant energy for a better society.  Now this would be a great lesson learned from Fukushima.

Pricing carbon in North America

It was with great interest that most of us listened to President Obama put climate change back on the US agenda in his state of the union address this month.

After years of talking about it, we are finally poised to control our own energy future. We produce more oil at home than we have in 15 years. We have doubled the distance our cars will go on a gallon of gas, and the amount of renewable energy we generate from sources like wind and solar – with tens of thousands of good, American jobs to show for it. We produce more natural gas than ever before – and nearly everyone’s energy bill is lower because of it. And over the last four years, our emissions of the dangerous carbon pollution that threatens our planet have actually fallen.

But for the sake of our children and our future, we must do more to combat climate change. Yes, it’s true that no single event makes a trend. But the fact is, the 12 hottest years on record have all come in the last 15. Heat waves, droughts, wildfires, and floods – all are now more frequent and intense. We can choose to believe that Superstorm Sandy, and the most severe drought in decades, and the worst wildfires some states have ever seen were all just a freak coincidence. Or we can choose to believe in the overwhelming judgment of science – and act before it’s too late.”

The real question is will there be policy to support acting before it’s too late?

I think most would agree that any strategy that would change behaviour requires an economic impact – because we all respond to prices.  This means we need a price on carbon; either a carbon tax or a cap and trade program.  In the past most jurisdictions in North America have favoured consideration of the cap and trade approach as new taxes (to nobody’s surprise) are very difficult to implement.  In North America (in contrast to Europe) we generally believe we have a right to low cost energy and there is genuine concern that higher energy prices further weaken the economy and negatively impact jobs.  And with jobs being a huge priority, many have said that there will not be any price on carbon in the foreseeable future.

But for all of those who have said there will never be a price on carbon in America, I am sorry to say – YOU ARE WRONG.  Today there is a price on carbon – the only problem is that it is negative.  That’s right – its negative.  In other words, we have significant subsidies on oil and gas that encourage more production and consumption; whereas pricing carbon positively would encourage reduced oil demand and use of lower carbon alternatives.

The 2012 World Energy Outlook (WEO) shows ever-growing subsidies to fossil fuels.  It only considers consumer and consumption subsidies, commonly applied in the developing world and in oil producing countries.  In 2011, this subsidy amounted to almost $300 billion, far greater than any other form of energy.

In North America we do not provide consumer subsidies for oil but rather producer subsidies in the form of tax relief through various exemptions and special provisions in the tax code.  Most talks by President Obama have quoted the cost of these subsidies at about $4 billion per annum federally (some estimates show that state subsidies are many times greater than the federal subsidy).  In Canada, subsidies to the oil industry are estimated at about $2.8 billion per annum (both federally and provincially).

The argument in support of these subsidies is that they are generally intended to encourage drilling, agreeably a very risky endeavour.  The arguments against fall into two categories:  first there are many subsidies that have outlived their usefulness but somehow are never removed from the books; and second, that at a price of over $100/bbl, oil companies are making record profits (the three largest oil companies made profits of $80 billion or $200 Million/day in 2011) so they shouldn’t need subsidies to encourage them to find more oil, i.e. the current price of oil is incentive enough.

Examining the subsidies a bit further, we can calculate the cost (if you see any errors in my calculations, please let me know).  Using production data from the WEO 2012, we can take $4 billion and divide it by 8.1 mb/d in the US and take $2.8 billion and divide by 3.5 mb/d in Canada.  The result is about $1.35/b in the US and $2.20/b in Canada.  Assuming a carbon content of about .43 t/bbl would result in a subsidy cost per tonne of carbon of just over $3 in the US and about $5 in Canada.  The US number is smaller because it is limited to federal subsidies while the Canadian number is for both federal and provincial subsidies.  What this shows is that carbon indeed has a price and it is negative, i.e. it incents more fossil, rather than less or alternatives.

So let’s take this one step further.  Again going back to the WEO, they assume a carbon price reaching $45/t in the New Policies Scenario (base case – continue down the current path) rising to $120/t in the low carbon 450 ppm scenario.  Or to put it more simply, a large positive price on carbon (equivalent to $20-50/b) rather than the current subsidy (i.e. negative price) is required to move the world to a low carbon scenario that will actually have an impact on climate change.

In summary, if a price on carbon is a key tool to help reduce fossil fuel use and combat climate change, then we are clearly going in the wrong direction.  Because yes, today we do have a price on carbon in Canada and the United States – and it is negative.

Note to readers – I did not comment on the benefits of nuclear in this blog as I was focused on making a point about the impact of subsidizing oil and gas prices.  There have been a number of other blogs that have done a good job on this point.  See Steve Alpin’s blog showing how Ontario in Canada has drastically reduced its carbon emissions through increasing production from its nuclear fleet while reducing coal use.  There is also the point to be made about how large a subsidy is required to implement renewables even with large carbon prices.  And there is the pressure that most are expecting to come to Canada from the US in exchange for approval of the Keystone pipeline.  But we will leave that for another day……

With 2012 behind us, what’s next for 2013?

2012 was a challenging year.

The industry continued to see the impact of the Fukushima accident. While the Japanese were working towards a policy of complete nuclear phase out by the 2040s; and other markets were looking at reducing reliance on nuclear power; and significantly France, the most nuclear country in the world, announced it will not extend the life of its oldest plant at Fessenheim as a start towards an “energy transition” for the future.  And finally, the low price of gas in North America fueled by a huge increase in unconventional gas and oil resources continued to stress the economic competitiveness of all cleaner generation alternatives, including nuclear, in North America.

But it was not a year of all negatives. Of tremendous importance was the issuance of the UNSCEAR report that has once and for all addressed the linear low dose theory stating that there is no evidence of measurable health impacts to people below 100 mSv/a.  However; while the data from Fukushima continues to support that there will be no radiation health effects, Japanese people continue to suffer as many remain removed from their homes with their lives on hold.

There were a number of other high points – the first COLs allowing the first new construction to begin in three decades in the United States; the restart of Chinese approvals for new plants, albeit at a reduced level; significant movement towards new build in the UK; and importantly after a tremendously difficult year, the election of a new government in Japan that is starting to put their program back on track.

With all of that behind us, what is next for 2013?  I believe most of us expect a strong year ahead for the industry although I am hesitant to forecast given my previous blog post.

So I will come to it in a different way. Here are some of the events we would like to see happen in the industry in 2013 to keep things moving forward. This is not an exhaustive list as there is just so much going on in the industry around the world; but the highlights of my own personal wish list focused on milestones for the nuclear industry.

  1. A number of plants restart in Japan and, most of all, we would like to see as many people as possible able to return to their homes in the evacuation area and resume their lives.
  2. A strong commitment to the in-service date for the delayed Oikiluoto project in Finland.
  3. China to continue to approve new plants
  4. EDF Energy to reach agreement with the UK government and commit to Hinkley Point C
  5. The Czech Republic to conclude their tendering process and sign a contract for their new project
  6. South Africa to formally start their process for new build
  7. At least one new country move forward with new nuclear plans. (It could be Saudi Arabia, a South East Asian country like Malaysia or Vietnam, or an eastern European country like Poland).
  8. Cameco to start first production from its Cigar Lake Mine
  9. A higher uranium price enabling new mine financing to be arranged (such as the for the Wiluna mine in Western Australia)

But most of all, what we would really like to see is a real shift in the industry to work together on a globally integrated plan to improve public support for nuclear power. There are so many good things happening that now is the time to really work together to address the big issues on people’s minds – these being: re-enforcing the benefits, explaining the risks and mostly reducing the fear. We all know that radiation should not be feared nearly as much as it is and we need to be using the UNSEAR report as a first step to moving the needle. Climate change is here now and we need to move off fossil fuels to save our planet. Nuclear power is a key element of any strategy to reduce carbon and we need to push now and push as hard for a new vision as the oil, coal and gas industries do to maintain the status quo.

So here is my list. What I will ask you to do is first, use the poll below to vote on which of this list you agree is likely to happen this year. And then please add your own comments to add your own expectations to the list. I will then compile the top items in a future post.

 

It’s a new year and the world needs us more than ever.  Let’s roll up our sleeves and get started!

The changing face of global energy – Is nuclear power being left behind?

I have just done my first pass of the Word Energy Outlook 2012 issued by the IEA this November.  Many of you will have seen some of the headlines – one of the most intriguing is that the US is expected to become the world’s largest oil producer by 2017 exceeding the output of Saudi Arabia.  With headlines like that how can you not want to read this report?

The trouble with trying to read and write about this report is that, as was the case with the Energy Technology Perspectives (which I talked about earlier this year), there is just so much in it to make you think that, agree or disagree, the report is full of interesting information that is worth discussing.

I have been a bit stuck on what perspective to take in this post.  Ultimately I decided to focus on some general points this month (of course with the outlook on nuclear as the key talking point) and then I will undoubtedly use the report for future discussions on more focused topics.

Reading the Executive Summary the report starts off with “The global energy map is changing, with potentially far-reaching consequences for energy markets and trade. It is being redrawn by the resurgence in oil and gas production in the United States and could be further reshaped by a retreat from nuclear power in some countries, continued rapid growth in the use of wind and solar technologies and by the global spread of unconventional gas production.”

When it comes to global energy production, this short phrase pretty much sums it up.  Strong North American oil production, more coal, less nuclear, more renewables and much more gas.  And not surprisingly, this  translates into more difficulty meeting climate change objectives.  It continues, “Taking all new developments and policies into account, the world is still failing to put the global energy system onto a more sustainable pathSuccessive editions of this report have shown that the climate goal of limiting warming to 2 °C is becoming more difficult and more costly with each year that passes. Our 450 Scenario examines the actions necessary to achieve this goal and finds that almost four-fifths of the CO2 emissions allowable by 2035 are already locked-in by existing power plants, factories, buildings, etc. If action to reduce CO2 emissions is not taken before 2017, all the allowable CO2 emissions would be locked-in by energy infrastructure existing at that time.”  Another testament to the continuing lack of progress on meeting the world’s climate change challenges.

And finally when it comes to the future of nuclear power it recognizes the changes in some countries to cut back while others continue to move forward.

“The anticipated role of nuclear power has been scaled back as countries have reviewed policies in the wake of the 2011 accident at the Fukushima Daiichi nuclear power station. Japan and France have recently joined the countries with intentions to reduce their use of nuclear power, while its competitiveness in the United States and Canada is being challenged by relatively cheap natural gas. Our projections for growth in installed nuclear capacity are lower than in last year’s Outlook and, while nuclear output still grows in absolute terms (driven by expanded generation in China, Korea, India and Russia), its share in the global electricity mix falls slightly over time.

I am showing all of the above quotes because in a few words from the Executive Summary, the report says so much.  The figure below shows the key changes in projected energy use from the 2011 WEO.  In summary, as I read this report we can conclude that:

  • Fossil fuel use is thriving.  Clearly North American policies to increase both oil and gas production are very effective.  Coal use is up again globally from the last WEO even with a larger increase in (mostly unconventional) gas use.  Fossil fuel subsidies continue to be the largest of any energy source estimated at $523 billion, more than 6 times that for renewables and a 30% increase from 2010.
  • Renewables use continues to grow without any real demonstration that increasing renewables to that extent is feasible.  Subsidies are at $88 billion and rise to $240 billion in 2035
  • Nuclear is being left behind as the 6% reduction in nuclear compared to 2011 is the largest single change in the new WEO New Policies Scenario.

And this path is taking us down the road to being unable to meet the 2 degree climate change scenario.  After trying everything else in past reports, this year they try to demonstrate that increased efficiency is a potential path to delaying the inevitable and make time for more policy change to support the environment.  This has the potential to extend the 2017 date for lock-in to 2022.  However we can also ask, without a real and substantive global commitment to reducing carbon emissions, what will these extra few years actually achieve?  Most likely – nothing!

So let’s look at the nuclear case in a bit more detail.  Compared to the 2011 scenario, nuclear use is decreasing in those countries with the most to lose, Japan, Germany, Switzerland and even France, while being economically challenged in North America; and rising in the more rapidly growing economies of the east led by China.  This leads to an important question.  Is nuclear power becoming a transient technology that helps countries develop and then once there, can be phased out over time by a policy shift to renewables?  This seems to be a possible theme going forward but in practice nothing can be further from the truth.  It is interesting to note that this past week was the 70th anniversary of the first sustained criticality at CP-1 by Enrico Fermi.  And here we are today with the countries named above all having substantial nuclear programs providing a large and important part of their electricity generation (Japan 30%, Germany 30%, Switzerland 40% and France 75%).  Clearly, with this much nuclear, replacing it is not trivial and will have significant impacts.   Even the WEO acknowledges that “shifting away from nuclear power can have significant implications for a country’s spending on imports of fossil fuels, for electricity prices and for the level of effort needed to meet climate targets.”

And that is what we are seeing today as Germany and Japan wrestle with these impacts as they try to reduce the use of nuclear very quickly.  Based on hysteria following the Fukushima accident, the politicians in these countries (even France) seem to have forgotten what they have achieved since that famous date 70 years ago and why they built such large nuclear fleets in the first place.  Building a successful nuclear program is a major undertaking requiring investment in regulation, infrastructure and industry.  Germany, Japan and France have all benefited from this investment as they developed significant technology, know-how and industrial capability with the result being, in all cases, a very large portion of their electricity generation being economical, clean and reliable.  Reducing its use as a result of a misguided view on nuclear safety will result in a large negative impact to industry and their economies.  In Germany, utilities are suffering financially and in Japan, there is the risk of losing capability and business to the new nuclear powers of Korea and China while having staggering increases in imported fossil fuels and a devastating impact to the local economy.

In fact, looking at the following figure from the WEO shows the bigger story.  Just compare the capacity bar with the energy bar in each case and one thing is clear.  Nuclear power is a key workhorse of the global energy system.  It is by far the most efficient investment as every GW of capacity produces more GWh of energy than every other type of electricity generation.  As I stated in my earlier post on the ETP, one of the reasons for the enormous investment in renewables is that you have to build about three times as much capacity as nuclear to get anywhere near the same energy output – and of course even then this energy is not dispatchable.  But even looking at the use of more tradition fossil fuels, because nuclear fuel costs are very small, they are dispatched before more expensive coal and gas plants and, as the figure shows, 3 times as much coal capacity and almost 4 times as much gas is projected to each only generate twice the energy as nuclear.

It is important to remember that the WEO is not a forecast per se; rather it is a projection of how government policies would look once implemented.  And what we see is a world investing heavily in fossil fuels to protect the status quo while also investing in renewables as a token path to the future.  The fall in nuclear power use in developed countries is an important testament to the ongoing impact of the Fukushima accident on government policies in the west.

While the 2012 projection is less than 2011, nuclear power does continue to grow and in 2035 it is projected to supply 12% of world electricity (13% in 2011 projection).  Yes, it is being left behind relatively but, as I see it, this report clearly demonstrates the importance of nuclear power as a clean, efficient and reliable source of non carbon electricity going forward.  Implementing policies that reduce its use is folly as it definitely will result in expanded fossil use, higher costs, trade imbalances  and higher carbon emissions; all leading us down an unsustainable path.

Therefore the policy answer is not to limit and reduce the use of nuclear energy, but to expand its use because even a small expansion in capacity results in a relatively large increase in energy generated.  And that means that we need to work harder to address the issues resulting from the Fukushima accident in the developed world and remind those governments who are reacting to short term pressures why they went nuclear in the first place; and of the consequences of reducing its use to their societies so they can rethink potential policies that may move them away from this very important part of our global energy mix.

We need vocal public support for nuclear – this is the industry’s most pressing challenge.

I participated in the WNA Annual Symposium in London earlier this month.  During the event I had ample opportunity to discuss my last post on developing a better understanding of the beliefs behind the public’s view of nuclear power and what we as an industry need to do going forward.

But in the meanwhile, we have had quite a bit of unsettling news.  The push towards reducing the use of nuclear energy in the established nuclear countries has been accelerating.  Most of all we see that Japan is moving towards a policy of no nuclear post 2030s.  During the symposium the common thought was that the 15% option may win the day but when the 0% option seemed to be the one moving forward, most of the industry were somewhat stunned.  To date this policy has not been implemented as Japan’s business and industrial sector has finally spoken up.  But this is far from a win.  The reality is that in Japan 70% of the public are opposed to nuclear and would like to see it phased out over time.

Other countries have seen similar outcomes.  Belgium has decided to close its Doel 1&2 units in 2015 rather than have their lives extended for 10 more years.  In Canada the new government of Quebec has announced it will not refurbish and life extend the Gentilly-2 station and even in France, the most nuclear country in the world, government has announced that Fessenheim will be closed in 2016 and a long term goal of reducing the reliance on nuclear from its current 75% to about 50%.

We have become somewhat battle weary in the industry so we tend to rationalize the bad news and look to the good news – and there is considerable good news.  The UK is supporting new nuclear and moving forward, new build is underway in the US, Canada is committed to refurbishing its Darlington station and new build continues  to move forward, albeit slowly.  The middle east is embracing nuclear with the UAE having its project well underway and Saudi Arabia committed to a new nuclear program. India and Russia are both growing their programs; and of course, China is going to be booming and building, leading the world in new nuclear.

So why am I so concerned with the recent trends in some countries?  It is not simply the act of shutting down plants or reducing the share of nuclear – it is the rationale behind these decisions.  The fundamental belief driving these policies is “less nuclear is better than more” – or in other words, if we can do without nuclear then we should.  Now why would anyone believe that less is better than more  – there is only one reason and that is the real underlying belief – that nuclear power is dangerous.  That’s it.  If we didn’t believe that nuclear is dangerous there is no reason to reduce reliance on what is actually a carbon free and environmentally benign energy source.   And this is not a belief that we should let stand.

Look at the recent decision in Canada.  The newly elected Premier of Quebec Mme Marois has stated “I want this gesture to become a symbol of Quebec’s commitment to the environment and the welfare of future generations”.  Or let’s look at the decision in France to close Fessenheim, France’s oldest station in 2016 when it reaches its 40 year life.  (This is even though the French regulator has already approved its suitability to operate for another 10 years).  These decisions are purely political – with the belief that this is what the public wants.  In the case of France, a national debate will be launched to discuss the impeding “energy transition”.

The issue was wonderfully set out by Mark Lynas in his presentation at the WNA Symposium.  In his talk, he told a story of a Japanese couple on a train somewhere in the north of England, who pointed out of the window and asked him if a power station in the distance was nuclear.  When Mark made it clear that no, it was not a nuclear plant but rather a coal station, the couple were clearly relieved. And this led Mark to ask himself if the world had gone mad. How could a power source that kills more people every day than nuclear has done in 50 years of operation be the preferred choice for anyone?

Well, looking at what is happening in Germany, in Belgium, in France and in Japan – the question becomes a valid one.  Has the world gone mad?  Is turning our backs on the world’s safest, cleanest and most efficient energy source the way to the future?

To some extent the answer is yes, the world has gone mad.  But I say yes, not for the reasons you would think, but because as the world works to turn away from nuclear for reasons that make no sense in science; as the public believes that nuclear power is inherently dangerous and the issue is whether or not we can safely manage these dangerous machines; and as these decisions have real negative impacts to environments, economies and the health and safety of people in these countries; where are the supporters?  Now I don’t mean the supporters from the industry, the scientists or the industrialists who all understand the benefits of nuclear; the so called “experts”, but are also all seen as biased and prejudiced in their support.  I mean those members of the public who should be leading the charge to fight to stop the nonsense.  After all, the public are ones to really suffer from a dirtier environment and more expensive electricity.

The industry needs an ever growing group of activists who represent the public, not the industry, to fight for more nuclear.  We need those who believe that the world is a better place with nuclear power in it than without it.  We do see in France, industry is speaking out.  In Japan industry is working hard to keep government from making a decision that will have profound impact on the economy of Japan.  And as I have said in earlier posts, we have some key environmentalists who have seen the benefits of nuclear power and how it can contribute to their cause.  Those like Mark Lynas, George Monbiot and Stewart Brand and others.  These guys are all working hard and speaking out on the side that is less popular with their peers – thus giving even more credibility to them and their arguments.  And there is progress.  NEI just reported that public support for nuclear is rising in the US, closing in on pre-Fukushima levels.

In his WNA talk, Mark Lynas notes that rebalancing public perceptions of risk more towards what science can tell us objectively is central to any nuclear renaissance and that unbalanced risk perceptions are behind nuclear’s major challenges.

This is true.  I agree.  We also need to note that the way forward is long and hard because decisions are made based on emotion, not scientific fact.  What we need are public protests in Germany demanding that nuclear not be shutdown.  We need public protests in Japan supporting nuclear restarts.  And to get to this point, most of all we need the public not to be afraid.  Fear is a powerful emotion that is very difficult to overcome.

The road is a long one.  We need to work with experts in public opinion and make the arguments available to opinion leaders in the communities.  For example, we know the benefits of nuclear medicine for our health, yet anecdotally, we also understand that doctors were just as afraid after Fukushima as anyone else.  There were cases where they were recommending and then performed abortions for fearful mothers.  Yet we also know that these same doctors would not hesitate to prescribe a CT scan or x-ray, even if the benefit is doubtful just to placate a patient who has health worries.  And the likelihood is that the dose from these medical tests would be greater than the exposure from Fukushima.

We also argue that we must educate people when they are young.  We must bring nuclear energy into the schools so that students understand it more and fear it less.  But we also know that teachers as a group tend towards being anti-nuclear.

Hence the problem.  Those that are trusted in society like our doctors and teachers are not necessarily on our side.  These are the groups that should be more open to scientific proof.  These are two groups that we need to work on to move our arguments forward.  This is just an example but I think it shows that the climb is a steep one and the work is hard.  But now is the time to move.  We must all work together to build public support – and that means combating the key issue – that nuclear is inherently dangerous.  We must work to help people understand the reality that nuclear power is less dangerous than most alternatives and that the positives are essential for a prosperous, healthy future for us all.

So coming back to Mark Lynas and his thesis.  We need to do much more to use science as the source of information to make arguments and formulate public policy.  But is that enough?  The real question we all need to ask ourselves is what do we need to do so that the Japanese couple Mark met on the train is no longer afraid?

Are gas prices too low – or nuclear costs too high? Or a bit of both??

“Nuclear is a business, not a religion
John Rowe, Chairman and CEO of Exelon (August 15, 2011)

In his speech to the American Nuclear Society Utility Working Conference in Hollywood, Fla. entitled “My Last Nuclear Speech”, Rowe, while accepting that nuclear is an important option to meet climate change and other policy objectives; states very matter of factly that nuclear is not competitive at this time in the US.  And given this statement is coming from the CEO of America’s largest nuclear utility, it is important to pay attention.

In his talk, he refers to four conditions he laid out twenty years ago for nuclear success:

  • the right reactor technology with passive designs;
  • a workable solution to the waste problem;
  • a need for new generation; and
  • a shortage of natural gas and stable high prices to make the economics right

It is this last condition that is the big issue today due to a huge increase of shale gas into the US market.   Shale gas is good for the country, but bad for new nuclear development as it has resulted in low gas prices thus having a significant impact on nuclear competitiveness.

And indeed they are low.  In the EIA’s Annual Energy Outlook (AEO 2011), the assumption is that gas prices stay below $5/million Btu until 2020, below $6/ million Btu until 2025 and then below $7/ million Btu until 2035.  Prices far below the peak of almost $10/ million Btu reached before 2009.

 Source: AEO 2011

While low gas prices present a major challenge, we cannot control gas prices, so we in the industry must focus on what we can control – and that is the cost of building new nuclear units.  In my blog of last December, I discussed the widening gap of nuclear capital costs between east and west noting that the cost of new nuclear plants is trending to less than $2,000 /kW in China while now higher than $5,000 /kW in the US.  Since that time the EIA’s Annual Energy Outlook (AEO 2011) was issued and the impact of higher cost assumptions on new nuclear is very evident.  The reference case only has five new nuclear units in the US.  Watts Bar will be completed at TVA and four new units will be built to take advantage of government incentives.

The reason for this base case is clear.  With its current assumptions on costs, nuclear cannot compete with gas.  And the issue is really a combination of two assumptions – first the ongoing low cost of gas and second, a relatively high capital cost for nuclear.  The following table has been published by the US government in its AEO 2011.  The results are stark with new advanced nuclear costing 80% more than new advanced combined cycle gas plants.  Now given the assumptions, these results are not too surprising but, none-the-less, they point to a very  real issue for nuclear in the US going forward.   And the nuclear assumptions do appear reasonable so while varying the assumptions can make improvements,  there is a large gap to close.

However, the news is not all bad.  A sensitivity case assuming that lower nuclear plant costs can be achieved does indeed show more nuclear in America’s future.  In the EIA Low Nuclear Cost Scenario, the assumption is that nuclear is 20% less cost today and continues to decline until its cost is 40% less in 2035. This translates into a drop from about $5,400 /kW as the base case assumption to about $3,200/kW, a very reasonable and sensible target.  In this scenario, new nuclear plants do get built with more units as the price declines in the outer years.

Source: AEO 2011

This brings nuclear into the range of gas costs and given a change of some other assumptions it has the potential to be very competitive.   First of all, if gas consumption does increase as projected and becomes the fuel of choice for America (as currently anticipated), and there are environmental difficulties adding cost to extracting shale gas, it is  very reasonable to project somewhat higher gas prices.  Keep in mind that even a short term price of $6 or $7/ million Btu will have a significant positive impact on the comparative economics.

And, from a policy perspective, a continuation of the loan guarantee program can be a very effective way to reduce the cost of nuclear.  As seen below, nuclear power is extremely sensitive to the assumption on discount rate while gas is very insensitive (due to the capital intensity of nuclear versus the fuel intensity of gas).  Therefore a loan guarantee that brings down the cost of capital will have a large beneficial impact to the competitiveness of nuclear.

Source: OECD/IEA Projected Cost of Electricity 2010 Edition

So what does this all mean?  Going back to my comments in December, since waiting for gas prices to increase is not a viable strategy, then we must focus our efforts on reducing the capital cost of new nuclear units (Let’s get back below $4,000/kW and the discussion will change very quickly!).

And that means developing CONFIDENCE!  And confidence comes from doing as we have seen  with the booming Chinese program  – major cost improvements due to learning by doing and series production of standardized designs.  In the US, we see the opposite as costs continue to rise in an environment where securing commitments for new projects is moving very slowly.

So what should we (the industry) be doing?  With US companies supplying technology and major components to projects in  China, they are gaining experience in building in the most dynamic market in the world.  The question then becomes, are we ready to really learn from this experience and take full advantage of it?  We need to make use of the proven supply chain and experts from wherever it makes most sense, to the maximum extent possible.  If a combination of Western (primarily American) and Chinese experts and equipment is what is succeeding in China, then we need to repeat this for projects in the west.  Of course, the share will change as there will be more western content in a North American plant than in a Chinese plant, but we should not be afraid to make use of high quality low cost global supply to keep costs under control.

If we do, the price of nuclear power in the west will start to drop quickly and continue to improve and many new plants will be built.  If we don’t, then we face the prospect of having to pay the price of relearning the lessons that have already been learned elsewhere and, as shown in the table above, we cannot afford this.   For example, building 20 or 30 new US designed units with a somewhat lower domestic content at a competitive price creates ongoing opportunity for the industry versus one or two new units maximizing domestic  content demonstrating poor economics.  It is obvious which option creates the most sustainable jobs in the US for the long term.

So my conclusion stays the same as it was in December.    Nuclear power can be an economic option for electricity generation.  Now it is up to the industry in the west to ensure that lessons learned in Asia are applied quickly enough to ensure the competitiveness of planned projects and get the nuclear renaissance in the west back on track.

After all, Nuclear is a business, not a religion……

Note: A new study in Japan shows that even considering the costs of the Fukushima accident, nuclear is likely to be the most economic option for generating electricity  relative to fossil fuels.  This demonstrates that nuclear competitiveness can vary significantly from location to location as local conditions are taken into account.

Has the future really changed or is this a momentary blip?

Although it has been more than two months since I last posted; Fukushima continues to dominate the discussion both within and outside of the industry.  So here I am, sitting on the balcony of my beautiful room in Brunei – overlooking the South China Sea – contemplating how this major event in Japan will  affect us going forward.  Predictions are near impossible with change being constant as events continue to unfold.  Of course, of most importance are the ongoing efforts in Japan to get the units under control and to bring the event to a close.  It is the impact on the people of Japan that is always our first concern.

 

However being in this contemplative mood, I am asking myself; in the medium to long term, is the impact of Fukushima dire or is it demonstrating that nuclear is in fact safe?  Will the future be bright or is it the beginning of the end?  We all have been talking about the events in Germany, although I am not quite sure why.  Germany has had a nuclear phase out policy originating in about 1998 with a clear policy in place from 2001.  Many conveniently forget this.  It was only in 2010 after years of debate that they decided that life extension for their existing units would be a possibility.  So why are we then surprised that following the accident at Fukushima they have reverted to their previous phase out position?  Of course one main difference is that 8 of the oldest plants are now closed with only 9 remaining in service until 2022. 

Given Fukushima as the event that initiated this return to a phase out policy, there has been a very significant amount of discussion around the globe on this issue.  Of course many say it is a demonstration that the industry is dead – but I would say that almost as many others are looking to this decision and asking about its implications; implications for carbon reduction in Germany and for the stability of the European electricity grid in general.  Will this be the beginning of a German led renewable revolution or will it just mean Germany will have to use more fossil power and buy more nuclear power from France?  Already it is clear that carbon emissions in Germany will go up as renewables displace nuclear and more fossil generation is built.   In fact this is one of the biggest issues in a nuclear phase out.  Efforts to reduce carbon may be valiant but it’s a losing proposition when first there is a large non carbon emitting nuclear component to replace instead of replacing fossil fuels.

Other than Germany only Switzerland has taken a very negative view, also committing to a nuclear phase out at the end of life for the current fleet, and dropping plans for new build.  And of course in Japan, there is much discussion on how to move forward with their program as they continue to deal with the aftermath of this ongoing event.  However most other countries including the US, Canada and the UK have reaffirmed their commitment to nuclear power as have China and many other Asian nations.

The potential impact on the world electricity supply is now being contemplated by the IEA as they prepare for their upcoming WEO 2011, showing a new low nuclear scenario directly resulting from the events at Fukushima. In this scenario, the share of nuclear will drop from 14% to about 10% by 2035; a significant drop.  They are suggesting that OECD countries will move to reduce nuclear use (with early retirements and less life extensions) while it continues to increase in China and other Non OECD countries.  I am not sure of the details of this assumption so far since it seems to me that only Germany and Switzerland have made major policy changes – and Germany had no plans for new units and Switzerland had modest plans at best.  So where is the big decline?  I am assuming that it comes from early closure of a number of units.  I guess that we will see the detail when the WEO comes out this November.

Howeveer, the conclusion of this potential scenario is clear.  According to the IEA, there will be higher CO2 emissions, higher energy prices and less overall energy security.  But we will have to wait until the 2012 WEO to see a more detailed analysis of nuclear. This is probably a good idea since we will have more knowledge of the impact of Fukushima by then.

So while we all wrestle in the aftermath of the events of March 11, there is an important healthy discussion starting.  One that really takes a hard look at how we generate electricity and the role of nuclear.  Let’s hope that it is a rational discussion and that we can then demonstrate clearly the role that nuclear power is to play to meet our energy needs going forward.