Friday, December 22, 2006

More on Energy Incentives

A Musing Environment follows up on David Bradish's analysis from earlier this week.

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1 comment:

Jim Hopf said...

This analysis is an extremely important reference for nuclear professionals to have on hand when the issue of subsidies comes up. The best I've seen.

What's amazing is that fossil fuel subsidies are higher even though the analysis only considers monetary subsidies, and ignores the largest fossil fuel subsidy of all. That is, the priveledge of polluting the air and water for free, and not paying for any of the (huge) public health and environmental effects that result. Most studies, such as the European Commission's ExternE project (, show these costs (i.e., this subsidy) to be huge, on the order of 4-8 cents/kW-hr, enough to double fossil fuels' price.

It is not correct to equate Price Anderson with economic subsidies like those calculated in this study. It is correct to equate it with an external (i.e., unpaid health/environmental) cost, such as the huge unpaid costs enjoyed by fossil fuels. In either case, it's about inflicting (or potentially inflicting) health and environmental damage w/o paying for it. It's the same animal. Its just several orders of magnitude smaller for nuclear.

The whole idea behind PA is that nuclear should have to pay complete compensation for any health or environmental costs if it ever were to pollute the environment. The question is whether or not they are paying sufficient premiums to pay for full insurance that would cover even the worst accident. If nuclear's current premiums are only a fraction of what would be necessary, then the remainder could be considered a subsidy.

Sure, perhaps it is. But to give you an idea of the magnitude of this "subsidy", you have to consider the long term average public health and economic damage caused by such potential events. Well, it's been over 40 years and nothing even approaching such an event has happened. Furthermore, studies show that the ANNUAL pollution from fossil plants causes roughly the same magnitude of economic damage and far larger public health impact than would a very severe meltdown!! They do this every year and never pay one dime in compensation! As the expected frequency of a severe meltdown is roughly one per 1000 years, then the PA "subsidy" is ~1000 times smaller than the subsidy enjoyed by fossil fuels, even if you assumed the premiums paid by the industry are negligile/zero.

Studies bear this out. Even studies by anti-nuclear organizations that attempted to quantify the PA subsidy came up with values ranging from 0.03 to 0.3 cents/kW-hr. This, compared to the ~4-8 cent/kW-hr subsidy enjoyed by fossil fuels. I'd be happy to have nuclear pay an additional ~0.1 cent/kW-hr to cover any potential PA subsidy, or to pay for unlimited insurance itself, as long as fossil plants have to pay their (4-8 cent/kW-hr) external costs as well. Until that happens, forget it!