In response to:
American Roulette from the March 29, 1984 issue
To the Editors:
Felix Rohatyn’s discussion of the problems of and possible remedies for the US nuclear power industry in his article, “American Roulette” [NYR, March 29], while well-meaning, is undermined by many misconceptions.
Rohatyn’s main conclusion concerning nuclear power is that the “appalling waste” in abandoning nuclear facilities in which “vast investments” have been made, justifies rescuing some unfinished reactors from possible abandonment. He is right about the waste, but wrong to suggest that finishing these projects will salvage the investments.
The problem is that new nuclear plants’ high construction costs and rising operating costs will cause the cost of their electricity to far exceed the market value of the power produced. Contrary to Rohatyn, there is little to be gained by finishing most of these plants.
A typical present-day nuclear plant will cost five billion dollars over its life—three billion to build and two billion to operate and decommission (these figures are adjusted to today’s dollars). By comparison, the total cost to build and operate a new coal plant is three billion dollars, a figure that includes equipment to reduce emissions of pollutants below the level of most oil-generated power, and higher mining costs to reduce safety and environmental risks.
When a completed reactor is junked, the added cost to the economy is not the three billion dollars spent building it, but the difference between the cost to operate the nuclear plant over its life and the cost to build and operate a new coal plant. That difference is only one billion dollars. The effective cost of abandonment is still less if the reactor is replaced with “efficiency” alternatives such as conservation or cogeneration.
Similarly, abandoning a partially-built reactor that requires a billion dollars to be completed costs nothing measured against the coal plant, since both plants have future costs of three billion dollars. Abandonment of a partially built nuclear plant may even save money if it evokes efficiency measures.
In short, most of the appalling waste in new nuclear power plants has already occurred, in having permitted their construction to get this far. The incremental waste in abandoning most new reactors is considerably less.
State utility commissioners will determine who bears the costs of abandonment, and one may hope that allocation reflects responsibility. Rohatyn is right to cite the failings of utilities and reactor builders, but he should have gone further. If government regulation was inconsistent, it was in part because regulators too long accepted nuclear industry notions of accident probabilities and acceptable risks. As events proved them untenable, regulation belatedly followed, driving up costs not through “judicial delays,” which for the most part had little effect on real costs (and which often provided time for utilities to bow out of unneeded projects), but through substantive safety measures. Similarly, low growth in energy usage surprised utility managers but not utility watchdogs who warned a decade ago that higher prices would spark energy savings.
Rohatyn claims better nuclear performance for France, Germany and Japan. But nuclear power abroad, while not the fiasco it has become here, has enough problems to make it of questionable value. The same standardized and centralized industrial structure that enables Electricité de France to build reactors quickly and, if official figures may be believed, relatively cheaply, also led to over-building in the early 1980s, when energy demand dropped. EdF borrowed heavily overseas, and with the fall of the franc against the dollar, EdF’s foreign debt has ballooned to between 10 and 15 billion dollars—a sum large enough to help crowd out vital industrial investment.
Electricité de France also enjoys virtually complete autonomy in setting nuclear safety standards and monitoring its reactors’ compliance. This makes unverifiable and probably doubtful Rohatyn’s statement that French standards are tougher than American. Conversely, stringent requirements have helped German reactor costs to rise sharply, at two-thirds the US rate (data from Japan are not available). Both Germany and Japan are wisely concentrating on cogeneration and conservation, and both are building only a handful of reactors.
Rohatyn has also stumbled into a logical trap shared by most energy planners since the 1973 oil shock: equating nuclear power with oil savings, and, hence, equating a diminution of nuclear power with increased oil dependence. The connection is tenuous at best. In the United States, where oil accounts for only six percent of electricity production; in France, where the percentage is even less; indeed in most of the industrial world, most new reactors will save coal, not oil. Dollars spent to finish nuclear plants increasingly are being taken from true oil-saving programs such as converting remaining oil generators to coal and improving efficiency in energy usage.
It is understandable that utility investors wish for policies to minimize their financial losses stemming from nuclear power. However, Mr. Rohatyn has failed to make a case that such policies would serve the national interest.
New York, New York
June 28, 1984