Is Nuclear Too Innovative?

Third Way
Third Way
Feb 23, 2017 · 7 min read

By Josh Freed, Todd Allen, Ted Nordhaus, and Jessica Lovering

In his Feb 13th web article on Toshiba’s heavy losses in its nuclear division, our colleague Michael Shellenberger argues that nuclear energy is in crisis due to a toxic combination of anti-nuclear zealotry, Kafkaesque regulatory excess, and engineers gone wild. There is nothing wrong with 70’s era light-water reactors, he claims, that rolling back regulations at the NRC and standardizing nuclear designs and deployment wouldn’t solve. Indeed, he goes further and argues that efforts to commercialize reactor designs that are easier and cheaper to build and operate are counter-productive, standing in the way of the tried and true path to nuclear deployment, namely standardized deployment of large light-water reactors.

Shellenberger has done some good reporting on the challenges that have bedeviled efforts to build new reactors in the US and Europe, albeit much of it based upon interviews with unnamed sources. And he rightly calls our attention to the crisis that the nuclear industry is presently facing in developed countries and the consequences of that crisis for the effort to transition the global economy toward clean energy sources. But he draws the wrong lessons from Toshiba’s recent losses and from the longer-term struggles that nuclear energy in developed economies has faced in recent decades. Too little innovation, not too much, is the reason that the industry is on life support in the United States and other developed economies.

In this post, we address Shellenberger’s analysis of why Toshiba’s two AP1000 plants in the US have proven so costly and what lessons might be gleaned from that experience. In a subsequent post, we will address Shellenberger’s proposal for how to save the nuclear industry.

Drivers of Nuclear Costs

1. The AP1000 represents a fairly straightforward evolution in light-water reactor design, not a radical departure, as Shellenberger claims.

These innovations hold some potential for construction and operational savings and improved safety. But they meet no definition of radical innovation of which we are aware. Rather, they represent just the sort of incremental innovation in design and operation that Shellenberger argues elsewhere holds the key to reducing nuclear costs.

2. Standardization is important but is not a panacea.

3. Most of the proximate causes of rising cost and construction delays associated with new nuclear builds in the United States are attributable to the thirty-year hiatus in US nuclear construction, not the novelty of the AP1000 design.

4. Reasonable regulatory reform will probably not dramatically reduce the cost of new light-water reactors, as Shellenberger suggests.

Learning the Right Lessons

Liberalized electricity markets only further exacerbate the risk associated with these investments. Conventional light-water reactors are capital intensive, long-lived infrastructure that require central planning, cheap capital, and long operating lifetimes to pay off, none of which exist in liberalized markets. Neither standardized conventional light-water designs nor regulatory reform address any of these challenges, which are in fact the central challenges that investment in new nuclear capacity faces.

The centralized build out of large standardized fleets of light-water reactors has been state led and in response to major geo-political priorities.

Indeed, there is virtually no history of nuclear construction under the economic and institutional circumstances that prevail throughout much of Europe and the United States. Virtually every commercial nuclear plant that has ever been built has been built either by state owned utilities or by private utilities regulated under the cost of service model, with guaranteed return on investment and access to cheap capital.

In every case, the centralized build out of large standardized fleets of light-water reactors has been state led and in response to major geo-political priorities — 70’s era oil shocks and fossil fuel scarcity in France, Sweden, and Japan, rapid energy demand growth, limited domestic fossil resources, and air quality concerns in China and Korea, and the imperatives of the Cold War in the United States and the former Soviet Union.

Absent these circumstances, there is little reason to think that large light-water reactors represent a particularly feasible option for utilities or investors, much less large fleets. Standardization and learning by doing are key requirements for sustainable nuclear economics. But those criteria alone will be insufficient to make new nuclear an economically rational option so long as they are coupled to large light-water technology. Whether Gen II or Gen III, learning by doing and economies of multiples require sufficient replication to bring declining costs. That replication is unlikely so long as the reactor in question is a 1GW, multi-billion dollar proposition, at least in the United States and Western Europe.

The current light-water technological regime, which emerged from military applications in the US Navy, was commercialized at a time when fossil fuels were believed to be scarce, electricity demand was expected to grow for many decades, and virtually all utilities were either publicly owned or regulated under the cost of service model. None of those conditions are any longer present.

The path dependent nature of nuclear technology has meant that what innovation the sector has seen has been incremental innovation in light-water designs that are poorly suited to present circumstances. As we will discuss in a follow up post, a radical break from the present light-water regime is in fact precisely what will be necessary to revive the nuclear industry and assure that we will have the cheap and scalable nuclear technologies available that will be necessary to deeply decarbonize the global economy in the coming decades.

[i] Lovering, J. R., Yip, A. & Nordhaus, T. Historical construction costs of global nuclear power reactors. Energy Policy 91, 371–382 (2016).

[ii] Ganda, F., Hansenb, J., Kima, T. K., Taiwoa, T. A. & Wigeland, R. Reactor Capital Costs Breakdown. in ICAPP 2016 (2016).

Josh Freed is the Vice President for Clean Energy at Third Way. Todd Allen, Ph.D., is a Professor at the University of Wisconsin College of Engineering and Senior Visiting Fellow at Third Way. Ted Nordhaus is the Co-founder and Executive Director and Jessica Lovering is the Director of Energy at The Breakthrough Institute.

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Our work championing modern center-left ideas is grounded in the mainstream American values of opportunity, freedom, and security.