Friday, August 21, 2009

Thinkers Thinking Thoughts About Nuclear Energy

the-demos-think-tank We get a lot of email with suggestions on what we might want to spotlight on the blog. A fair amount of it comes from think tanks, those bubbling cauldrons of policy wonks, who often go at issues with a partisan zeal that leaves us breathless. (Some think tanks are non-partisan, at least nominally, but it doesn’t take too long to sort out what’s what.)

So let’s put on our thinking caps and visit with the tankers.

First, here’s something utterly plausible from the Lexington Institute’s Rebecca Grant:

Yes, a politician running for office would be thrilled with the numbers routinely posted by Americans polled on whether they support nuclear power. Gallup pollsters started asking the question back in 1994. Since then, nuclear power never dipped below a 50% approval rating except for one slip to 46% in 2001. This year’s Gallup poll finds 59% of Americans favor use of nuclear power as a domestic energy source.

The numbers on nuclear power generation also show only 52% of Democrats in favor, vs. 71% of Republicans. Only 47% of women are in favor. Household income fractures the data even more, with high earners in favor and lower-wage earners opposed.

No wonder the politics are tough when key voting blocks hold different views. Meanwhile, Department of Energy forecasts are counting on a big increase in nuclear generating plants over the next decade. Increasing electricity usage and concerns about the climate impact of coal plants make nuclear power an important part of the equation.

That’s nearly the whole piece. We agree with just about all of it, though we’d probably note that the raw numbers are good enough to protect even the most Democratic members of Congress from a problematic primary. We tend to the argument that lingering Democratic issues with nuclear energy are historical rather than practical (considering how long some members have been around) and are dropping away with every passing month. But that’s the thing with think tanks: you get to think too!

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Here’s a description of the Lexington Institute:

The Lexington Institute believes in limiting the role of the federal government to those functions explicitly stated or implicitly defined by the Constitution. The Institute therefore actively opposes the unnecessary intrusion of the federal government into the commerce and culture of the nation, and strives to find nongovernmental, market-based solutions to public-policy challenges. We believe a dynamic private sector is the greatest engine for social progress and economic prosperity.

Sounds like our friends over at Heritage, perhaps a bit more amped. Makes us appreciate Dr. Grant’s non-partisan review of the facts all the more, an angle from which Heritage (which has some terrific researchers on-board) would benefit.

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Since we make fun of Heritage, let’s be fair and point out a very interesting piece by Jack Spencer on Rep. Joe Pitts’ (R-Penn.) Streamline America's Future Energy Nuclear Act, which seems a pretty sensible approach to clearing away some bureaucratic roadblocks to speedily getting new nuclear energy projects going. We want to look at this bill a little more closely ourselves, but for right now, check out Spencer’s analysis of it and we’ll return to the subject later.

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All right, what else? How about:

Instead of $1.5 trillion wasteful Obama spending, we need $1.5 trillion for 100 nuclear power plants of 2,500 MW name plate capacities to achieve long term energy and economic security.  … But no country can today afford to destroy its economy by following idealistic and in some cases even undemocratic agendas.

This is Hans Linhardt over at the Gerson Lehrman Group. A bit intense, we’d say. We want to avoid destroying our economy by following, well, any course of action that would have that result. What does Lindhardt suggest?

  • cancel the present pending Obama energy legislation
  • concentrate all funds on Natural Gas and Nuclear Energy [Linhardt thinks too much money is being spent on renewables.]
  • reinstate the Atomic Energy Commission
  • reduce the bureaucracy at DOE and EPA

Well, anybody can say anything, of course, and this qualifies as anything. We just don’t know how Linhardt would go about any of this without considerable dictatorial powers.

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Here’s how Gerson Lehrman describes itself:

Gerson Lehrman Group (GLG) is the global marketplace for expertise. Since 1998, its technology-enabled platform for collaboration and consultation has helped the world’s leading institutions find, engage, and manage experts across a broad range of industries and disciplines.

Broad range seems right to us. Not strictly a think tank, but its experts discuss policy a fair amount.

Think tank. We imagine the term comes from the idea of a gas tank. Instead of powering cars, it powers ideas.

10 comments:

Robert Synnott said...

Ah, yes, reduce the bureaucracy. When has any politician wanted to increase bureaucracy, or succeeded in reducing it without destroying the services it was providing in the first place? Bureaucracies just are. Messing with them will get you nowhere.

Rod Adams said...

The disparity in support for nuclear energy based on income is interesting, and probably quite curable.

In the first Atomic Age, every time a new nuclear power plant came on line, one of the first actions by the owning utility was to apply for a rate increase, justified by the increase in the capital cost of the rate base. That may have been logical for the utility accountants, but it cemented the notion that nuclear electricity was expensive electricity.

Most consumers would prefer the Intel model, where the company makes enormous investments in its production capacity so that it can provide CHEAPER microprocessors that others can use as tools to make really cool products. (Chip fabrication facilities can require investments rivaling a large nuclear power plant.)

Shouldn't it be possible for nuclear plant owners to follow a similar business model since the production costs are so low and the plant production capacity is so durable?

Brian Mays said...

Rod - Be careful with mixing your models. The Intel model is based on planned obsolescence. Not only does this maintain a constant demand for their products, but it also means that newer products can fetch higher prices than older products.

Thus, when Intel builds a new chip fabrication facility to roll out a new product, the initial purchasers of that new chip pay a premium for having the latest, greatest state-of-the-art gizmo. As the technology ages, the chip becomes cheaper -- since as software improves (or bloats) to keep up with hardware technology, the chip becomes less useful. Nevertheless, Intel gets a per-unit revenue boost from each new product, which helps to pay off the capital investments that went into developing it.

Energy transferred by moving electrons is just as useful if it comes from a 50-year-old coal plant as it is coming from a brand-new nuclear plant. Therefore, as you mention, it is difficult to justify a rate increase to pay for the same product, and utilities have a much more difficult time than Intel investing in new capital. Aside from a few scams ... er ... programs that charge a premium for electricity from "special" sources (e.g., the so-called "green energy" programs offered by some utilities), the Intel model doesn't really apply.

Robert Synnott said...

"Thus, when Intel builds a new chip fabrication facility to roll out a new product, the initial purchasers of that new chip pay a premium for having the latest, greatest state-of-the-art gizmo. As the technology ages, the chip becomes cheaper"

This is, to an extent, true for the lunatic-fringe-gamer market (that is, people who will spend an extra thousand dollars for a 5% speed improvement) but is not true for the far larger consumer, commercial and server markets, in general. Their recent release is something of an exception, but in general they will ease an old technology out all at once.

David Walters said...

People should read the link provided to the Jack Spencer piece. *Brilliant* that such a piece could come out of the Heritage Foundation!!! (Joking).

I've been bandying about how to cut down the 40+ months it takes to get full on approval for shovel-in-the-dirt/first concrete down to about 24 months as well and Spencer sums it up. I like the idea of using his proposal as a *complimentary* way of shortening the time to lay concrete as well, in other words, have this two-track method...the current method if the builder wants, or the new expedited method.

this along with gross revisions on model design to shorten and lower the cost for the new, smaller designs being offered, will help kick start nuclear globally.

David

Brian Mays said...

Robert - While I agree that much (probably most) of the innovation today in the computer chip world is driven by the highly lucrative gaming industry, I'm not sure that I agree with what you are saying about other markets.

Have you purchased server hardware lately? I have.

I've just pulled up the website of the vendor that I normally use, and looking at their online purchasing form, I see that the range of CPU's that they offer (all Intel chips for this particular model, which is not top of the line) span a range of over $1400 per quad-core chip, or an increase of about 75% of the cost of the basic server model. Somebody is paying a significant premium for this extra computing power.

Intel doesn't have to sell too many (relatively speaking) of these chips at the premiums mentioned above to pull in a substantial amount of money on the front-end of this product's life cycle, which typically lasts only a few years anyway.

Robert Synnott said...

Veering off topic, but the thing is that while those chips vary in price considerably, they are generally all of the same generation; they came out at the same time, it is just that they are priced differently based on cost of production and sometimes to artificially create market segmentation. They are, though, usually all products of the same investment.

I wouldn't actually agree that the gamer market drives innovation; it simply isn't very big. It's a nice almost pure-profit sector for the Intel, as the pricing does not reflect extra cost of production, but it doesn't account for a significant fraction of chips sold.

Rod Adams said...

@Brian

I will agree that there are some places where comparing electricity production to chip production is not an exact match, but there are more similarities than you might think.

First of all - I think the electricity business is FAR better at planned obsolescence than INTEL is. Each unit of electricity is obsolete within seconds of being produced.

Electricity producers also have industrial "partners" that are not much different from software producers in their push to build products that require more and more electricity - perhaps not for each of their units but certainly in aggregate as their big screens, larger refrigerators, electric cars, and higher power computers roll out.

There are even premium markets based on time and location where some units of electricity are FAR more valuable than others. Have you ever done any research on the disparity between the price of a unit of electricity at night in South Carolina versus the price for the exact same product at peak hours in Hawaii or Manhattan?

Besides, if you do not like comparing electricity to microprocessors, how about to flash memory or hard disks?

My point is that the rate base model is hazardous to new nuclear plant construction. People do not want to buy more expensive electricity; they want to believe that companies are investing in better machinery in order to reduce the cost and make a better (cleaner) product.

One more thing to consider - utilities in many jurisdictions do not have any incentive to care about the MOST expensive part of electricity production, the cost of fuel. For utilities like FPL and many others, fuel is simply a pass through to the consumer. The decision makers pay no penalty for dumb decisions like building a baseload combined cycle plant where the cost of gas can be 85-95% of the cost of power production and can change dramatically from day to day at the whim of the market.

One thing I like about the chip market - the vendors are responsible for considering ALL of their production costs, not just the capital cost of the plant and the salaries of the people who run it.

Anonymous said...

excellent work bringing to America the chance of a chernobyl-event - we just hope it's not in a populated area.

Brian Mays said...

Sigh ...

Robert - My whole point is that chip production today is largely evolutionary, rather than revolutionary. In the server market, most of the chips that are available today were the same basic models that I remember seeing on the market five years ago; however, today they have a higher clock speed, larger on-chip memory cache, etc.

If I were to return to the same vendor to buy a server six months from now, most of the "high end" (i.e., relatively expensive) chips that are for sale today will still be available for purchase; however, they will be sold at the lower prices. The difference between today and six months from now is that today they fetch a much higher cost. It is this price difference that funds innovation and improvements in the chip market.

Do you not agree?

Rod - Rather than "planned obsolescence," I would say that electricity has much more in common with goods that are perishable, such as agricultural goods. Given that there are costs associated with the transport or storage of such perishable goods, it is not surprising to find that certain markets (based on location) demand higher prices than other markets. This is exactly what we see with some farm produce.

Correct me if I'm wrong, but I don't think that there are too many markets that demand prices for chips, hard drives, or flash memory devices that are an order of magnitude or more higher than anywhere else in the world ... at least not in any countries that allow for relatively low restrictions on commerce (low protective tariffs, etc.).

I understand what you're saying with respect to the importance of capital costs versus marginal costs and the benefits of long-term planning to reduce overall costs to the consumer if the people making the decisions bother to care about that. I just think that your choice of analogy was not the best.

I could go further about how certain costs -- e.g., the costs of environmental impact -- have not been properly considered by the IT industry. Silicon Valley is literally surrounded by Superfund sites, which are predominately a legacy of the chip manufacturing industry. Sadly, however, I feel like I'm beating a dead horse here. The nuclear industry, whatever its faults, is vastly superior to the chip manufacturing industry by any measure, but the chip industry has cute items like iPods to hold up as their ultimate sellable products, whereas nuclear can only point to the same product that is supplied by ancient coal plants, expensive-to-run natural gas plants, or oh-so-fashionable wind "farms."