A free market view – glad with that?

Reposted by MasterResource

By Jane Shaw Stroup – September 9, 2021

Ed. Note: This interview with Robert L. Bradley Jr. by Jane Shaw Stroup appeared on the Goodman Institute for Public Policy Research’s Liberty and Ecology website earlier this week. Comments are welcome, including new questions to clarify the role of nuclear power in a free economy.

Q1. What role should nuclear power play in the coming years?

A. “Let the market decide” is the simple, classic, liberal, market economy answer. This means state neutrality in terms of subsidizing or punishing one energy technology over another in order to determine what, when and where.

The decision to build new capacity, or the decision to operate or retire, should be based on a stand-alone economy, with no government favor or penalty.

Q2. According to this standard, what does the future of nuclear energy in the energy mix look like in terms of new capacities?

A. Not good, at least here in the US. New nuclear capacities create performance at costs that are well above the market price for electricity. Significantly cheaper kilowatt hours are generated by natural gas combined cycle power plants, which can be built to scale quickly and with less risk. The revolution in the extraction of natural gas from shale has reinforced the already considerable competitive advantage of natural gas over nuclear energy.

Q3. Was nuclear power ever competitive?

A. No, and that is a point to remember. The “Atoms for Peace” program developed after the Second World War was a purely governmental initiative. The government has not only subsidized the development of nuclear power plants, but has created critical liability protection through the Price-Anderson Act. Private insurance would simply not be available for such a new, risky technology.

Nuclear power has also received a decisive boost as states regulate electricity producers as public utilities. The high cost of building nuclear power plants would help utilities maximize (“swell”) their interest base, resulting in higher profits.

Q4. How exactly did that work?

A. In the context of service cost regulation, a utility company passes on its “reasonable” costs to consumers and receives a “reasonable” return on the capital invested. The higher the cost of capital, the higher the potential return. Since nuclear capacity has always been much more expensive than coal or gas power plants, the returns are higher.

For example, if a nuclear power plant costs $ 100 million more to build than a gas-fired plant of similar size and the government-approved rate of return is 15 percent, then choosing nuclear power will result in an annual net profit of $ 15 million, adjusted for depreciation.

F5. Nuclear proponents say the high costs come from overregulating federal security.

A. That is partly true. No doubt regulators would be on the safe side. But to make a very complicated, dangerous technology foolproof, it takes a lot of infrastructure. For this reason, nuclear power is “the most expensive way to boil water”.

F6. So how much regulation is necessary?

A. This should be more of a question for the private insurance market than the current structure of state liability limits and bundled premium costs. The Price-Anderson Act would have to be repealed to find out from insurers what is reasonably safe or not.

F7. What about the existing nuclear capacity in the United States?

A. This capacity has been built resulting in high sunk costs and the operating (marginal) costs are low compared to most existing and certainly new capacity. And nuclear operations have become much more efficient, especially with “deregulated” commercial power plants (stand-alone power plants that are free from regulation by public utilities) that withhold all profits. Of course, this benefit changes when a facility is run down and difficult to repair.

Unfortunately, otherwise competitive nuclear power capacities were (prematurely) shut down because the government forced renewable energies into the grid, namely wind and solar power.

F8. Why was this nuclear capacity shut down?

A. Call it an unintended consequence of government interventions which, by the way, counteract the climate change agenda to reduce carbon dioxide (CO2) emissions.

Since wind and sun have no fuel costs after their infrastructure is built, they have the lowest additional costs. Hence, they are taken first to meet demand. This means that renewable energies will not only lower decommissioned gas and coal-fired power plants, but also lower margins for nuclear power, leading to early retirement.

Keep in mind that the average cost of wind and solar energy is much higher than the existing capacity of the so-called reliable due to the very high infrastructure and integration costs. Such a capacity would not have been built in the first place without a number of government mandates and favors.

F9. So wind and sun are subsidized by the state, and such subsidies have harmed nuclear power. Should the affected nuclear capacities receive government support to compensate for this distortion, to ensure network reliability or to reduce CO2 emissions?

A. Do two mistakes make one right? The answer is to remove the existing intervention instead of trying to fix it with a new intervention. It is ironic that renewables have distorted the carbon-free generation sector, but policy reform should be targeted at the markets, not against them. This suggests that the excessive preference for politically correct, economically incorrect renewable energies, wind and sun is ending.

Q10. Michael Shellenberger, a “realistic” environmentalist, advocates nuclear powerr as a middle ground in today’s controversial environmental debates. Do you agree?

A. No. I appreciate his work in mitigating climate alarmism and documenting renewable energy issues as an affordable, reliable, and scalable resource. But I do not prefer government “bailouts” for existing plants or subsidies to enable new capacities.

New nuclear power plants are simply not competitive or timely – nowhere near. Georgia Power’s Vogtle 3 and 4 plants, which are still under construction, were a nightmare of delays and cost overruns. Gas-fired capacity could have been built at a tenth the cost and put into operation years ago.

F11. What are new generation technologies for nuclear energy that we are hearing about?

A. A new design sponsored by Bill Gates’ TerraPower for Wyoming has already received $ 80 million in US Department of Energy funding – and for an ongoing project that is expected to take seven years to build. NuScale Power’s proposed project is approved and includes up to $ 1.4 billion in DOE funds.

F12. What are the chances of the US without nuclear that stated goals reduce carbon dioxide emissions by 50 percent by 2030 compared to 2005 levels?

A. First, this goal is impossible and harmful. Second, when nuclear capacity is decommissioned and new capacity is limited for political and economic reasons, Nuclear power won’t make much of a difference until 2030 or a decade from now.

F13. So what does the future energy mix look like in a free market? And how does that fit together with the goal of so many for a “carbon restricted” world?

A. Here in the US, natural gas-fired capacity is the consumer-friendly and tax-neutral choice for new power generation. Coal has its place in the most modern, low-pollutant plants. Wind and solar, on the other hand, are not competitive governments and have blackouted (“greenout”) in California and Texas. It is to be expected that other countries will also join this list.

Fossil fuel generation has plenty of room for growth in a true free market environment.

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