Thursday, February 18, 2010

Concerns From the Left and Right

In what we might call a bid for equal time, we roamed around looking for some stories that took a more critical view of the Vogtle loan guarantees.

It must have been irresistible to The New York Times to see how environmentalists reacted and turned up, among others, our favorite group for reliable nuclear trash talk:

Erich Pica, president of Friends of the Earth, whose political arm endorsed Mr. Obama’s candidacy for president, said that Mr. Obama’s recent policy emphasis amounted to “unilateral disarmament.”

“We were hopeful last year; he was saying all the right things,” Mr. Pica said. “But now he has become a full-blown nuclear power proponent, a startling change over the last few months.”

The Times’ John Broder points out that this really isn’t the case:

Mr. Obama has long supported nuclear power, as a senator and as a candidate for president.

That is the case. We would agree with Mr. Pica, though, that one might not have expected Obama to make quite such a high-profile announcement of the loan guarantee announcement.

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Broder also points out that Obama has not exactly ignored core environmentalist concerns:

Mr. Obama moved quickly in his first months in office, producing a landmark deal on automobile emissions, an Environmental Protection Agency finding that greenhouse gases endanger public health and welfare, a virtual moratorium on oil drilling on public lands and House passage of a cap-and-trade bill.

The climate change bill seems to have hit the back burner, but there’s a fair amount of movement elsewhere.

(Broder also ignores that environmentalists and nuclear energy advocates are not mutually exclusive groups. It’s getting downright silly to pretend they are. Bigger topic, though – we’ll look at that issue another time.)

But it can seem that some environmentalists quoted in the story really only wish that the President had pushed nuclear energy down the road a piece and led with renewables. It may be he’s simply approaching this the other way around than they’d prefer and will come back to favored approach.

But we can scarcely blame FOE and the others in the article for wanting what they want and wanting it now – though they must know the tide is mostly with them lately - and the Times certainly caught them on a bad day. So we’re sympathetic even if just a little condescending.

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We wondered how The National Review would welcome the news. The conservative magazine supports nuclear energy while tilting fairly strongly to Heritage Foundation-like absolutism on free market issues. We wondered which view would take precedence. Answer:

As a result, the nuclear industry is completely dependent on governmental approval, something that has turned it into yet another rent-seeking concern, latching on to the global warming bandwagon as its justification rather than the production of affordable, reliable, sustainable energy. In essence, the industry has happily become a ward of the state. This is not something conservatives should celebrate.

It’s not a terrible point and worth fuller debate, though we think the industry and nuclear advocates have used the “affordable, reliable, sustainable energy” argument plentifully. The fact that nuclear energy also answers to climate change issues seems a poor reason not to “latch onto” it.

No energy source in this country – which are, after all, not bounded by state lines – can be said to be free from government interaction. So the balance between private industry, public needs and safety considerations can always be tweaked one way or another. The editors see this:

The permitting process for getting a new nuclear plant built in this country is longer and more arduous than in most of the rest of the world. Litigation by environmental activists is a certainty. Construction also takes a long time (the new plants are predicted to be operational in 2016 and 2017, which is quite fast). Add these together and it can easily be 20 years from beginning the permitting process to turning the switch on, which makes it impossible to put together the requisite financing package without government loan guarantees.

This state of affairs has held sway through every conceivable partisan combination of President and Congress since the 80s without appreciable change. Obama and a Democratic Congress probably isn’t the combination most likely to look for change in this regard.

That’s also a little too much certainly in the editors’ formulation than we’re comfortable with, as we doubt they would want to exchange our approach with, say, that of China or France or Russia, where nuclear energy is state controlled. But as we say, debatable points. Engage away at the link.

6 comments:

Jack Spencer said...

While we are without question free-market and wear the badge of being absolutely free market with pride, I don't know that in this case we are worthy. We believe strongly that a free-market approach is the best way to bring about a nuclear renaissance. However, we also acknowledge that the federal government imposes significant risk and thus don't argue against the limited subsidy program established by EPACT 2005 and the $18.5 billion on loan guarantees. What we absolutely oppose is an expansive subsidy program that perpetuates bad policy, limits competition, and expands dependence on government. We have developed this position because we want nuclear to succeed. And so long as the industry is subject to the whims of Washington, we are just not sure how that can happen.

SteveK9 said...

I think we will do all right with our approach. But, it is hard to sneer at France with it's 'State Control'. They get 80% of their electricity from nuclear (most of the rest from hydro and almost none from fossil fuels). And, have the lowest power costs and the cleanest air in Europe.

Areva looks to be a very strong competitor and having the government behind them, doesn't seem to hurt. Especially as it makes it possible to build new designs in your own country first and demonstrate feasibility (Olkiluoto notwithstanding).

Joffan said...

I object strongly to the NR's term "rent-seeking" to characterize the nuclear industry. There is no way that this can be justified for a group that produces 20% of the nation's electricity, pays its taxes, puts funds aside for wastes and decommissioning and even pays fees to be regulated. Real production

As for loan guarantees, and the nonsense that they are subsidies: I'd like to see more emphasis on the fact that Vogtle's owners have been allowed to buy a loan guarantee, after presenting much evidence of their worthiness - they haven't been "given" anything.

crf said...

The loan guarantees are a kind of subsidy. But they are not a major disruption in market forces. They are in place to fix some identifiable flaws in the market: that the market has developed no good way to spread out the risk of new nuclear construction (which will be, essentially, first of kind construction). Secondly, there is a retreat from risk due to the credit crunch and recession. Thirdly, it is persuasive, from purely non-economic arguments, that a stronger, larger nuclear industry will be needed in the near future to provide near CO2-free energy (some renewable advocates might disagree: but I imagine many of them would say that the question is not closed: even Joe Romm believes in 4th gen Nuclear). When and if the market comes to appreciate that reality: that carbon free sources are needed, they are going to need some tools in the tool box. And either a nuclear or renewables industry robust enough to do the job will NOT be springing out from the forehead of Jupiter when "the market" wants it.

That is the biggest REAL problem of rent seeking in the history of the world, and it is the progeninator of the need for loan guarantees.

If we had carbon taxes or cap and trade, or even reductions in Carbon dioxide emissions by fiat, then many of the market problems with nuclear would be reduced.

When are the libertarians going to protest in the streets asking for a price to be put on carbon dioxide emissions?

Rod Adams said...

@Jack - I do not see an expanded loan guarantee ceiling as perpetuating dependence - it will simply ensure that the market gets big enough for some learning curve savings to bring the costs down. It will also provide sufficient data on default rates to help bankers recognize that the Shoreham and WPPS risks are ancient history.

I will support efforts to prevent any extension of the PTC beyond its current EPACT 2005 limits. Those limits are sufficient to take care of the first mover disadvantages; the next plants will be competitive without that gift from the taxpayers.

With regard to your comment about the nuclear industry being subject to the whims of Washington, I agree that we need to ensure strength that is apolitical. We need to keep encouraging our elected leaders to choose good people at the NRC to enforce valid regulations - I am personally encouraged by the three nominees who testified a couple of weeks ago. I even have a bit of hope that one of them - the one with extremely strong managerial credentials - will replace the current lightly credentialed and essentially zero experience chairman.

Joseph Somsel said...

I tend to agree with National Review. Of course the nuclear industry is absolutely dependent on government approvals. Our seeking loan guarantees is just a political way to keep us even more dependent on political favors.

The necessity of having the federal loan guarantees for financing ensures that every executive who aspires to new nuclear build will be in Washington seeking favors from the politicians who can influence decisions granting the guarantees. It is a veiled form of extortion.

The political systemic risk is this is another way that politicians steal power from the citizens.

Building new nuclear power plants is an important public issue but preserving our political liberties is even more important.