Monday, March 26, 2012

Nuclear Insurance and Safety Checks

The two major valid economic criticisms against the expansion of nuclear power have been the large initial capital cost investment and uncertainty regarding the cost of cleanup for any meltdown or similar type event. Any fears surrounding the possibility of a meltdown event itself are rather unfounded. Opponents of nuclear power would immediately take offense to that previous statement citing the two events: Chernobyl and Fukushima Daiichi. While true these citations are not relevant to the current environment. Chernobyl occurred due to an improperly designed experiment on the fourth reactor, an illogical residence time on back-up power generation and a shelved and generally bad plant design. Using Chernobyl as a boogieman for nuclear power is akin to using the Hindenburg as a boogieman for air travel.

Fukushima Daiichi was a 40+ year old plant, based on a 50+ year old design, that was built and maintained in such a way that Japanese authorities were basically betting on a disaster. The plant was constructed in the worst possible place due to its high probability of tsunami and seismic activity (if the plant operator TEPCO did not change the original location of the plant for trivial economic reasons the meltdown NEVER would have happened); also the Japanese government allowed TEPCO to evade legitimate and genuine safety inspections and upgrades for decades along with TEPCO falsifying numerous ‘safety’ checks.

The meltdown was caused by a lack of power available to cool the water immersing the nuclear rods. The reason for this lack of power is that the backup power for the plant was not constructed in a manner that would isolate it from any event which would knock out the main power generator. In its entirety the meltdown at Fukushima Daiichi occurred due to human error, greed and stupidity not any technical failure associated with nuclear power. Note that one of the main common themes here between both meltdowns is poor backup power planning and execution.

Therefore, if one eliminates these human faults nuclear power should not foster any reasonable fear of detrimental consequence. However, if there is no detrimental consequence when behaving responsibly why is the uncertainty regarding cost cleanup an influencing factor in the cost to construct a nuclear power plant? The rationality behind this concern is the uncertainty itself. Despite all of the bold statements about risk and reward in capitalism the simple fact is that private companies are reluctant to make any significant move when risk is involved (unless someone else is paying for it) and uncertainty embodies significant risk. Therefore, even though the certainty of the event is non-existent when appropriate safety steps are taken, the uncertainty is what is scary. Oddly enough individuals are so afraid of the size of x they do not realize that it is being multiplied by 0. Unfortunately logic will not work in this situation so a strategy must be developed to assuage these concerns.

One particular strategy that does not appear to have been tapped, which could provide useful for problems of human neglect/malfeasance and uncertainty is suppose the controlling government within the boarders of any new nuclear construction guarantees to cover all costs associated with any nuclear reactor event which is not attributable to human error for the company running the plant. In exchange the company MUST comply with a yearly safety audit of the plant conducted by both the government as well as the International Atomic Energy Agency. Under such an agreement the cost uncertainty associated with any catastrophic meltdown, however unrealistic, will no longer be a concern for the company and the country housing the plant will eliminate the only real factor which could lead to a meltdown, human greed and incompetence, by initiating safety compliance. One additional element to this strategy could be a condition where the government seizes the power plant if the operating company fails to comply with the necessary safety recommendations from the previous year.

The elimination of the uncertainty element should speed the overall attractiveness of constructing nuclear power plants not only from the company perspective, but also for the public. A significant obstacle for nuclear power construction is blind resistance by the public to nuclear power brought about by fear largely born from this uncertainty. While capital costs are typically high for the most part these costs associated with plant construction are not nearly as crippling as most nuclear opponents would like others to believe. Relative to other methods of electricity generation over the average lifespan of the plant nuclear power actually becomes more cost effective than all other forms of electricity generation when external factors are considered.1 Initial capital costs can also be reduced through plant design standardization.

Overall although the cost uncertainty associated with nuclear power accidents should be reduced to basically zero with logic, responsible planning and maintenance, and properly trained staff it does not appear that these elements are enough when actually trying to construct power plants. The above strategy of combining funds with the meeting safety inspections is one way to eliminate this uncertainty problem. Despite the belief of those in the anti-nuclear camp it is highly improbable to anticipate that solar and wind resources will be able to steam the deleterious affects of global warming alone, thus addressing the uncertainty problem is critically important.


1. The Economics of Nuclear Power. World Nuclear Association Dec. 2011;

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