Jerome a Paris has published the same post at several locations making a case that nuclear plants should be financed and owned by the government:
As we see news of the possible (and increasingly likely) bailout of Freddie Mac and Fannie Mae by the US Treasury, I am reminded of something that I have been writing about nuclear energy, ie that it should be financed by the State, and I'd like to extend on why I think there are fascinating similarities between the two topics, however distinct they may seem.Be sure to check out the rest. What are my thoughts? I think governments should have as little a role as possible in the markets. Some of my reasoning for this includes the fact that: governments are inefficient, competition is gone (which helps reduce prices) and politics are always changing (which does not provide consistency if we want to have some sort of long-term energy policy). Critics to my reasonings point out that private companies "screw the customers and enrich the greedy." So what do you think? Can the government do a better job with nuclear energy than private companies?
My point about nuclear is that it is a capital intensive form of power generation, ie that the main component of the cost of the electricity produced is the long term amortisation (or financing) of the upfront investment. That means that the single most important driver of the cost of nuclear energy is the interest rate applied. In turn, that suggests that the easiest way to lower the cost of nuclear energy is to give it access to State funding, given how the State will always be the entity that has access to the lowest borrowing.
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We need to make government able to do its job, which means using both the stick and the carrot. If you want cheap mortgages (a worthy goal of public policy), regulate the hell out of banks, and nationalize Freddie and Fannie; if you want cheap electricity, allow public funding of power plants (which, btw, will also heavily favor wind and other renewable energies) and make sure that all forms of generation are fully regulated for their externalities. ...
Comments
It is, however, a success story few would argue with.
This has broken down over the yeas, as Jerome noted in some of his comments, as all the leading *state* executives in companies like Aveva and EDF have been caught up with the "market" religion.
Markets really have no place in certain commodities areas, like electricity, which simply doesn't need them. But that's MY opinion :)
David Walters
I didn't see that point at all from Jerome. What I read from him was that governments can get a lower interest rate to finance and build a nuclear project. Therefore, the price of power from a nuclear plant will be lower than it would be under a private entity. This is why he argues nuclear plants should be state owned (or at least what I interpret it to be).
That quasi-independent arrangement won't always succeed either (and I believe that any mechanism will inevitably screw up at some point), with WPPSS as the classic case.
I tend to believe that things would move faster initially with close government support or even direction... but long term the private sector with suitable regulation will probably do best at the day-to-day process of delivering power, provided it maintains the community-responsibility approach that the nuclear industry currently appears to have in many areas.
I would argue no because the Feds probably wouldn't be able to get the talent that the private industry could with higher wages.
Jerome has a point in that government can certainly provide some powerful incentives to get investment going, but after that, one has to ask and consider whether the point has been reached at which the government is doing more harm than good.
Having seen the system first-hand in both countries, I would argue that what works in France will not necessarily work in the US. The two systems of education, employment, politics, planning, oversight, and so on and so on, are far too different to make a meaningful comparison beyond the trivial.
Joffan makes a good point that TVA is a pretty good example of what can be done in a situation that is between the completely private and completely public extremes, but even then, TVA is hardly perfect. So like anything in real life, there is a fairly narrow range of scenarios that are "optimal." We'll just have to feel our way around until we find it or come close to it. It won't depend wholly on the "free" markets, nor will it depend wholly on the government. It will require the two working together, in whatever fashion, to make the system work.
I lived through electricity deregulation (around the year 2000) while working in a professional position at a nuclear power plant. This was a miserable time to be there. My former colleagues remain miserable to this day.
I remain in the nuclear industry, but not at a utility/plant. I seriously doubt I would ever again work for a deregulated utility. Life's too short.
No need to point to Davis Besse as an example. The United States has a much better one: Three Mile Island Unit II. Speak to people who are intimately aware of the 1979 plant and organization - those who testified during the hearings - and you will come to understand the downside of market pressures on nuclear power. There is agreement that TMI-II had no adverse environmental or health impacts. TMI-II was the ultimate economic catastrophe (the ultimate market burn).
I want to be absolutely clear: I am VERY pro-nuclear and worry that even with significant deployment, the world may not meet required emissions cuts and/or security of supply. However, I also acknowledge that each plant within this industry is uniquely held hostage by the performance of its peers throughout their entire lifecycle (isn't everyone looking to Finland and France as a gauge of modern construction cost and schedule compliance?...).
We can not afford to relearn the lessons of the past.
Since we want to expand nuclear power and not merely preserve it, private ownership looks like a better bet.
There is a strong advantage to private ownership of nuclear energy. It will attract environmentalist hysterics and keep them away from other projects.
Imagine a nuclear plant that is being maintained soooo well.
There are litteraly millions of Americans and their children who give thank to the US gov't building the TVA.
I think that you have to have a broad look at this, including the Stalinist state in Russia that was responsible for the Chernobyl events.
David
Generally speaking the American Public Power Association states that public power entities provide power about 16% cheaper than privately held utilities.
As I stated, the worlds power grid was build as part of a gov't program because there simply was not "profit" in the last 100 years for private companies to do it themselves. It's not unlike public transit.
But David B is right, Jerome's POV on this is clear: it has to do with equity markets, interest rates and general financing. But Jerome *whole* basis of writing this is his experience in Europe which as an electric power grid that is completely state owned.
I don't think state ownership of plants would necessarily be a good thing, but effective regulation and possibly loans mightn't be a bad idea. The TVA would be an example of a highly successful US state-aided project. Private companies also tend to have a bad record when it comes to very long-view projects with massive initial capital investment; the shareholders want to see profit in their lifetimes.
"I don't know, are there lots of "private" water utilities out there?" - There are a few. Generally in developing nations, and they generally don't work out so well...
"I think that you have to have a broad look at this, including the Stalinist state in Russia that was responsible for the Chernobyl events." - It could, though, be argued that that accident was driven partly be an analogue of market pressures; in a command economy, there was great pressure on energy producers to supply demand at any cost.
Also, let us not forget WUPPS.
EdF or Vattenfall or Fortum inefficient? I don't think so. They are run by businessmen and elite experts, not by politicians.
EdF is the most valuable company (mesaured by market cap) in Europe for crissakes! Does that sound like inefficiency to you?
And lack of competition? Every single place in the world where power markets have been deregulated prices have shot up. The Frenchhave the cheapest power in Europe and the least deregulated market. Process industry executives here in Sweden are constantly screaming for a reregulation of our power market.
Check your facts mister.
Still, I don't think the state should own all nukes. I have no problems if they do, but I also think private companies have a role to play.
But state ownership or not, heavy regulation is needed so state funding or loan guarantees can be justified, and they have to be for nuclear and or wind projects to make sense financially.
In the US, nuclear companies arguably only gets the carrot (loan guarantees) but not the stick.