By Joshua Pearce
Energy policy in the U.S.A. has become politicized beyond any coherent reason. For example, during periods of republican governmental control fuel cell technology, research and development enjoy incredible support at the expense of battery-based technology. When a democratic control entered Washington, woe be it to the fuel cell researchers as battery companies rejoice. As an engineering professor that has the technical proficiency to judge the merits and drawbacks of both technologies, it is not clear to me in the least why batteries are more of a ‘democra-tech’ or why fuel cells appear more ‘republica-tech’. What is clear is that periods of feast of famine in research related to energy technology hamstrings the development of both technologies.
The case of politicized energy technology becomes even more perverse when we look at electricity generation technologies. Ignoring for a moment Jimmy Carter’s enthusiasm for nuclear energy (as he was a Navy nuclear engineer) there is incredible support in republican quarters compared to democrats for nuclear energy programs, which have been used recently to allot billions of dollars in loan guarantees to the U.S.A. nuclear industry. This support for nuclear technology appears anathema to modern Republican values--generally seen as conservative pro-business policies for less government regulation and lower taxes. Wherever nuclear energy is used in the world, it demands a large, centralized governmental control to both fund, insure and ensure its safety at the expense of the individual’s control of their own energy systems at the local or regional level. Here in Canada in the extreme--the government itself even owns the corporation that runs the nuclear plants.
In the energy field it is well known that free markets have simply rejected nuclear technology as uneconomic, which is why we have not seen a lot of new nuclear power plants being built in the U.S.A. and such loan guarantees are so desperately needed to fuel the ‘nuclear renaissance’. Similarly, like all energy technologies, it is well established that nuclear power is a heavily subsidized industry, and has been so since the end of World War II. One aspect of nuclear subsidization is rarely included in analysis because it is difficult to quantify: the indirect insurance liability subsidy. Essentially this indirect subsidy is an artificial cap on insurance liability, which reduces the costs of nuclear energy to something that can be managed by the free market.
Generally speaking in Economics, a subsidy is a payment made by the government which forms a wedge between the price consumers pay and the real costs incurred by producers. In the case of nuclear insurance liability, because there is no payment unless a catastrophe occurs, there is no direct subsidy or actual money exchanging hands, but there is an indirect subsidy because it is nearly impossible to finance a nuclear power plant without a government guarantee to cover its full accident liability. In other words, it is highly unlikely that a nuclear power plant could be built in the U.S.A. if the owner had to pay for the full cost of liability insurance.
While low-probability risks are familiar to many disciplines such as structural and safety engineering, insurance, financial and electricity markets, and climatology, this kind of statistical analysis has unfortunately seldom been applied to economics of nuclear liability. Understandably it can be difficult to estimate the full effects of a nuclear accident given the difficulty of placing value on human lives, health, a contaminated environment and loss of productivity. On the other hand, it is exactly for these reasons that such calculations must be attempted and more research on potential damages be developed with risks included in assessing nuclear energy viability. And if the nuclear industry is to be placed in competition with alternative sources of energy, then it is essential to understand the full weight and cost of its operational risks.
In Canada (and specifically in Ontario), nuclear power and solar energy are competing for policy support, which governs their economic viability. My research group recently completed a study (published in the peer-reviewed journal Energy Policy ), in which we compared the effects of indirect subsidies in the nuclear and solar technologies in the U.S.A. market. We looked at the U.S.A. because the data is available and relatively transparent, whereas the Canadian data remains behind a government-guarded iron curtain.
We calculated the potential power, energy and financial returns for the indirect subsidy that is currently provided to the U.S.A. nuclear industry in the form of liability caps and free government insurance, with providing the same level of indirect subsidy to the solar photovoltaic manufacturing industry in the form of loan guarantees. The startling results show that even if just this one relatively minor and often-ignored subsidy was diverted from nuclear power generation into large-scale solar manufacturing, it would result in both more installed power and more energy produced by mid-century. Such a policy would increase the cumulative solar industry over 500 TWh mark in just ten years and by the end of the study the cumulative electricity output of solar amounts to an additional 48,600 TWh over the nuclear case. At the current U.S.A. national average cost of electricity this amounts to $5.3 trillion. This means that if the U.S.A. nuclear insurance subsidy were removed and given to the solar photovoltaic industry you would end up with over US$5 trillion in extra electricity. That is a lot of money and a lot of electricity by any country’s standards.
There are many other potential uses for exposing the American public to financial risk. Many renewable energy technologies would clearly benefit given similar favored treatment to the nuclear industry and some may perform even better than the solar industry. Something that should be pointed out about this study is that it is not a recommendation. It is a call to attention. The U.S.A. has allowed some form of twisted politics to govern energy policy for the last several decades and it is clearly at the expense of the U.S.A. economy. When I first moved to Canada, I followed U.S.A. energy policy with a bewildered amusement. It is not funny anymore. It is long past time that the fate of the U.S. energy sector (and for that matter Canada) was based on the merits and drawbacks of the technologies themselves and not on the political flavor of the month.
Professor Joshua Pearce is currently cross-appointed in Mechanical and Materials Engineering and Environmental Studies at Queen’s University, Ontario. He runs the Queen’s Applied Sustainability Research Group. Applied sustainability focuses on the application of science and innovation to ensure a better quality of life for all, now and into the future, in a just and equitable manner, while living within the limits of supporting ecosystems.
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