The Economic Argument Against Nuclear Energy

Back on the Democratic debate stage in January, candidates debated the usage of natural gas for energy production (1). Senator Amy Klobuchar supported natural gas as a transitionary energy source, which is reasonable from an environmental perspective given that the use of natural gas results in lower emissions than the use of alternative fossil fuels (2). Others ask why nuclear energy does not gain the same kind of traction in American politics, as many believe nuclear energy is a vital component of our transition away from fossil fuels. Joe Biden’s campaign supports the development of small modular nuclear reactors and continued nuclear energy research (3), and Donald Trump’s administration has supported subsidies to keep existing nuclear plants running as well as investments in research to improve nuclear technologies (4,5,6). In the interest of transitioning towards a green future, is nuclear energy a worthwhile allocation of U.S. resources, or should investors instead skip straight to renewables?

Science of Nuclear Energy

From a broad perspective, a nuclear power plant is similar to other power plants in that heat is produced through controlled chemical reactions, the heat turns water to steam, and the steam creates pressure to turn generators and produce electricity (7). Nuclear plants’ chemical reaction, however, is the nuclear fission of uranium atoms. Uranium-235 atoms are blasted with neutrons in order to undergo nuclear fission, which releases energy in the form of heat as well as splits off additional neutrons that then collide with other Uranium-235 atoms and, thus, sustain a chain reaction (8). Plants control the power level by using retractable rods capable of absorbing neutrons and lowering the number of reactions (8). Further, fuel elements like water and graphite are used to slow the speed of loose neutrons by regulating the surrounding temperature. When reactors suffer a meltdown, it is because the fuel source malfunctions, causing the reactor to overheat (9).

Advantages and Disadvantages

Nuclear energy is often regarded as a low-carbon alternative to fossil fuels. In fact, nuclear power plants do not directly produce carbon dioxide (10), though the processes of mining and refining uranium ore, making reactor fuel, and producing the concrete and metal used to construct nuclear power plants require a lot of energy (11). Further, among competing energy sources, nuclear power has the highest capacity factor – the ratio between a power plant’s maximum output and its average output over time. Nuclear’s capacity factor is 92.6% compared with that of natural gas, the second-best energy source by capacity factor, at 57.6% (12). Lastly, controlled nuclear fission releases a lot of energy relative to the volume of resources used, so nuclear power plants use little fuel and produce little waste (10).

However, a small portion of that waste is radioactive. The waste that people tend to be concerned with is high-level waste, which makes up 3% of nuclear waste’s volume yet 95% of nuclear waste’s radioactivity (13). High-level waste consists of fuel elements designed as waste as well as separated waste from the reprocessing of used fuel, and these waste products can take 40-50 years before being disposable (13). Nuclear fuel can also be reprocessed and recycled, as is the case in countries like France; unfortunately, the U.S. currently does not have facilities capable of recycling nuclear fuels (14). While most nuclear waste is stored on-site, organizations such as the Department of Energy take care of the disposal of some nuclear waste in remote, permanent disposal sites in the U.S. (14). Nuclear’s new and perhaps biggest problem, however, is that it is not economical.

Costs of Nuclear Energy

Comparing energy sources by their costs of production can be difficult, as costs can easily be skewed based on underlying assumptions or the timeline on which they are measured. Therefore, it is best to separately analyze nuclear costs in terms of the cost of new power plant development and the cost of continued operation of current plants.

Power plants’ economic efficiencies are often compared using their levelized cost of electricity (LCOE). LCOE measures the total cost to build and operate a power plant divided by its total electricity output over its lifetime (15). According to the Nuclear Energy Agency in 2010, when applying a real interest rate of 5% or 10%, nuclear electricity generation, as measured by LCOE, is more cost-efficient than electricity generation using coal, gas, or onshore wind (16). The 2019 World Nuclear Status Report, however, claims this finding is unrealistic, as nuclear investments are riskier and, thus, would be financed at a higher rate than alternative energy plants (17). This report further shows that, between 2005 and 2015, nuclear’s LCOE has increased 75% in the US whereas solar and wind’s respective LCOEs have fallen (and are expected to keep falling) (17). A 2019 Lazard report identified the same trends between 2009 and 2019 as a result of falling capital costs and improved technologies (18). Due to these trends, the Lazard report estimated lower LCOEs for utility-scale solar and wind plants than nuclear plants when ignoring subsidies - even in both low and high financing environments (5% and 10% costs of debt) (18). Generally, nuclear energy is cost-competitive in environments with low financing, high carbon prices, and stable electricity prices (16), and while it is true that underlying assumptions skew results, decreasing renewable costs make nuclear plant development uneconomical even in low financing environments.

If new nuclear facility development is not cost-competitive in the U.S. energy market, is the continued operations of nuclear facilities cost-effective? Even operating costs have fallen faster for renewables than nuclear – making 2018 nuclear operations cost uncompetitive with even unsubsidized renewable operations (17, 19). In fact, the 2019 Lazard report shows that, when factoring in subsidies for onshore wind and solar utility builds and assuming 8% interest rates, the LCOEs for wind and solar are below and slightly above the marginal cost of continuing nuclear operations, respectively (18). This indicates that continued nuclear operations are less expensive than renewable plant builds only when nuclear is subsidized. Further, wind and especially solar continuously beat their previous projected capacities, for projections by organizations such as the International Energy Agency often lag the market in cost reduction forecasts (17). In fact, installed solar capacity is 50 times greater than its 2002 forecast (17). These inaccurate projections and rapid advancements in renewables explain why nuclear energy has only recently become uneconomical relative to clean alternatives. Without subsidies, many believe the nuclear industry would not sustain itself – leading companies in the nuclear industry to lobby in favor of nuclear as a zero-emissions energy source (20). Nuclear advocates claim that nuclear’s unpopularity in the U.S. is the result of a market failure whereas renewables advocates claim it would be a market failure to artificially bolster the nuclear industry through subsidies (21).

If cost was no issue, nuclear energy would make a great alternative fuel source compared with fossil fuels; however, cost reductions in renewable energies over the past decade have undermined the cost efficiency of even continuing the operation of existing nuclear power plants. Whether building wind and solar plants is more cost-efficient than continuing nuclear operations depends on the given financing environment, although renewable operation costs have been falling whereas nuclear’s have been rising (18). Therefore, it is likely that, even in favorable financing environments, nuclear operations will not be economical in the near future. That is not to say that both energy sources cannot be invested in; pro-nuclear environmentalists would argue carbon-reductions are more important than cost-reductions and, therefore, nuclear and renewables can work in tandem. Regardless, current cost realities suggest we should instead focus our investments on renewables.

Sources

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13. World Nuclear Association. (2020, Feb). Radioactive Waste Management | Nuclear Waste Disposal. World-nuclear.org. Retrieved 15 April 2020, from https://www.world-nuclear.org/information-library/nuclear-fuel-cycle/nuclear-wastes/radioactive-waste-management.aspx

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20. Hullinger, L. (2019, Apr 2). Exelon spent millions in lobbying after announcing TMI closure. York Dispatch. Retrieved 17 April 2020, from https://www.yorkdispatch.com/story/news/local/2019/04/02/exelon-corp-nearly-tripled-its-lobbying-expenditures-between-2016-and-2018-and-soon-see-if-paid-off/3325424002/

21. Millsap, A. (2020). State Nuclear Subsidies Not Needed. Forbes. Retrieved 16 April 2020, from https://www.forbes.com/sites/adammillsap/2019/04/19/state-nuclear-subsidies-not-needed/#594f75f111dc