The Tennessee Valley Authority held a nice little ceremony late last year to celebrate its shiny-new, fueled-up-and-almost-ready-to-go nuclear reactor near Spring City, Tennessee. Touted as the first new reactor of the 21st century, Watts Bar Unit 2 had finally received its operating license. The ribbon-cutting was supposed to suggest a rebirth of the American nuclear industry. The truth is far less rosy.
If the industry were a patient, doctors would privately refer to what’s happening to it as “circling the drain.” People don’t typically descend from perfect health to death in a smooth glide path. They rally, then they crater, then the cycle repeats. The good days become less frequent and less encouraging as days pass. If you’ve watched a hospital patient die, the pattern is unmistakable.
The U.S. nuclear industry is circling the drain. It’s suffering from a large number of problems—public disenchantment, risk of meltdown, fuel disposal issues—but its primary illness is simple economics. Nuclear cannot compete financially with other forms of electricity production. It hasn’t been able to do so for four decades, and there’s no reason to believe it ever will. That the obtainment of an operating license for a long-delayed and over-budget reactor qualifies as a good day is an indication that the end is near.
The Glory Days
Nuclear’s heyday came in the 1970s. Utilities broke ground on dozens of reactors around the country, including two units at Tennessee’s Watts Bar facility in 1973. During this time of rude health, though, problems were already developing. By the time President Richard Nixon called for a thousand reactors by the end of the century, the seemingly flourishing industry was riddled with economic challenges.
Start with a seemingly simple question: How much does it cost to build a nuclear reactor? Your guess is about as good as any expert’s. The constantly changing construction cost has made accurate budgeting for a reactor impossible. In the early 1970s, a utility could build a reactor for only $170 million. Cheap. Too cheap, in fact. The industry cut corners on safety back then to keep prices low.
“People were in such a hurry to get going that the engineering design was only 10 percent complete when construction was started,” says Victor Gilinsky, who sat on the Nuclear Regulatory Commission between 1975 and 1984. “Design and construction were running a three-legged race.”
Gilinsky rattles off a disturbing list of inadequacies at the dozens of nuclear reactors in operation or under construction in the late 1970s. The electrical cables that ran the main system and the “fail-safe” sat next to each other, so a single fire could knock them both out. The emergency equipment wasn’t rated to withstand the high temperatures associated with a nuclear accident. Obvious mistakes in the seismic calculations at some sites rendered plants vulnerable to earthquakes and other natural disasters.
Since each plant was individually designed, the NRC had to fix the nation’s nuclear reactors one at a time. The commission’s initial prescription was concrete—lots and lots of concrete. The NRC tightened safety regulations, and the amount of concrete, steel, and piping required for new reactors increased substantially. The NRC also introduced stricter emergency preparedness requirements, which forced redesigns of many plants already in the pipeline.
Spikes in the cost of materials, labor, and borrowing laid the industry low. By the early 1980s, the average price for building a reactor had risen to $1.7 billion—a tenfold increase in a decade. Reactors coming on line in the late 1980s carried $5 billion price tags, 30 times the prevailing 1970s rate.The industry’s failing health burst into the public conscience on March 28, 1979. Although the partial meltdown at Three Mile Island wasn’t strictly an economic issue, the accident convinced an already suspicious public that the reactors couldn’t be controlled at any cost. Support for nuclear power fell precipitously.
More explicit financial catastrophe followed. In 1982, after issuing more than $2.25 billion in municipal bonds to build two new reactors, the Washington Public Power Supply System (WPPSS) canceled both projects. Investors lost billions in what remains, to this day, one of the largest municipal bond defaults in history. The incident was dubbed “Whoops,” a clever play on the initials of the reactor builder.
Utilities suddenly faced an awkward problem: What do you do with an unfinished reactor that will never cover its costs? Imagine pouring the basement, building the frame, and putting a roof on your dream home—then abandoning it. It’s what happened at nuclear plant sites around the country as projects were axed or suspended, including the Unit 2 reactor under construction at TVA’s Watts Bar.
Energy analyst Irvin C. Bupp told The New York Times in 1985, “Any plant which is less than 50 percent complete today should definitely be canceled. Plants in the 50 to 80 percent range probably should be canceled.” As for plants more than 80 percent complete, Bupp said, “Some kind of case can probably be made to finish them, but my personal opinion is that none of those cases are very good.''
New reactor construction stalled. None of the reactors still in operation in the United States today had a groundbreaking after the 1979 Three Mile Island meltdown. Construction companies stopped training their employees in nuclear-grade fabrication. Students stopped pursuing nuclear engineering, and academic programs shrank. The contraction became a self-feeding cycle. Still, nuclear supporters weren’t ready to call hospice quite yet.
A False Recovery
The nuclear industry showed some green shoots of recovery during its vegetative state, as drain-circling patients typically do. Between the 1980s and 2000s, reactor efficiency increased by nearly 50 percent. In addition, growing concerns about climate change began beckoning a few wary environmentalists into the carbon-free nuclear camp, with such notables as Whole Earth Catalog founder Stewart Brand and renowned climatologist James Hansen endorsing a nuclear expansion. In 1999, Mark Yost of the Wall Street Journal predicted a “nuclear renaissance.”
Politics gave the industry its biggest booster shot, though. The lobbying staff of the Nuclear Energy Institute, which represents the industry, included (and still includes) former members of Congress and congressional staff. The group gave nearly $5 million in campaign contributions between 1989 and 2010. Utilities that operate nuclear plants, including Southern Company and Exelon, tossed in millions more.
They found a friendly ear on Pennsylvania Avenue. In 2005, George W. Bush became the first sitting president since Jimmy Carter to visit a nuclear plant. A year later, Bush was described as the industry’s best friend in the White House since Dwight Eisenhower.
Washington did everything in its power to incentivize reactor construction. The 2005 Energy Policy Act offered billions of dollars in nuclear research subsidies, construction funds, and energy production credits. Congress granted the U.S. Department of Energy broad authority to guarantee the necessary loans. The NRC streamlined the licensing process, speeding approval procedures for design, siting, and operation.
Their eyes alight with dollar signs, utilities applied to build dozens of reactors. Among those applications were TVA’s proposals to restart the long-suspended construction of Watts Bar Unit 2, which would become one of the beneficiaries of federal largesse.
Like a ward full of amnesiacs, our political leaders seem to have forgotten entirely what halted reactor construction in the 1980s: cost. Astonishingly few legislators bothered to ask whether the nuclear industry had ever solved its construction challenges.
Fortunately, financial analysts did ask. They recognized that the industry could be viable only if (1) the country instituted a carbon tax to increase the cost of fossil fuels, and (2) prices for coal and natural gas stayed high. Neither condition panned out. After climbing steadily for years, natural gas prices dropped almost 80 percent between 2008 and 2012. The push for a cap-and-trade system faltered in 2010, and utilities that owned nuclear plants were partially responsible.
“The nuclear industry’s talking points lead with climate change today, but their support for a price on carbon has historically been weak,” says Matthew McKinzie, director of NRDC’s nuclear program (disclosure). “Many of these companies also own electricity plants powered by fossil fuels.”
By the time President Obama called for an “all of the above” energy strategy in his 2012 State of the Union address, the nuclear renaissance was already beginning to look like a hallucination brought on by an unreasonably enthusiastic Congress.
As cost estimates went up, all but five of the dozens of reactors proposed during the Bush administration were abandoned. In addition to TVA’s restarting of construction at Watts Bar, Southern Company went ahead with plans to add two new reactors to the Vogtle plant in Georgia, and SCANA Corporation broke ground on two reactors at the Summer plant in South Carolina. The latter two companies chose the new Westinghouse AP1000 reactor.
The AP1000 was supposed to be the industry’s savior by reforming reactor construction, which historically involved massive crews of expert engineers fabricating reactors on-site. The new model required less cable, piping, and concrete and contained fewer pumps, valves, and other parts. Westinghouse’s marketing materials boasted of “modular construction” that would allow for a “reduced construction schedule.” Former Southern Company CEO David Ratcliffe said the system would ensure that “critical components are available for multiple projects.” He spoke of developing a “supply chain” for making new reactors.
The economics of modular construction, though, were also controversial from the start.
“The concept is like an iPhone—you can churn them out in factories and make lots of them,” says Greg Jaczko, the NRC’s chairman from 2009 to 2012. “But at best you’re making hundreds, not thousands with a massive economy of scale. There’s never going to be a factory-built reactor.”
Jaczko’s view has been vindicated. The AP1000 quickly ran into problems similar to those of its predecessors. The Georgia site received the first parts of the new reactors in 2010. By May 2011, the project was two months behind schedule. By the end of 2011, it was five months behind schedule. In 2013 the projected opening date was pushed back from 2016 to 2017. The opening has since been delayed again, to 2019.
Cost overruns accompanied the delays. In 2015 the company said the overruns had crossed the $1 billion mark, and it had to seek approval to pass costs on to consumers. Southern’s president of nuclear development sheepishly argued that the original projection of $14 billion “was never a budget—it was a forecast.” It’s hard to imagine, though, a major corporation asking a government agency to approve a multibillion-dollar project without a budget. Moreover, since the reactors are still far from complete, there could be yet more delays and expenses. The reactors in South Carolina are likewise running behind schedule and over budget.
The construction challenges also reinforced public concerns about safety; the issues can’t really be separated. The situation is startlingly similar to the one the NRC faced in the 1970s, when safety and cost effectiveness first became incompatible.
“The Nuclear Regulatory Commission said it didn’t matter that the AP1000 shielding was weak in places, because in those spots it didn’t have to be strong,” says Edwin Lyman of the Union of Concerned Scientists. “But that was assuming nuclear-grade welding. The quality problems they’re facing during construction raise questions about the safety of the entire concept.”
Over in Tennessee, the Watts Bar project hit its own speed bumps. Initially slated to open in 2014, the project is now two years behind schedule. TVA has also admitted the project would cost at least $1.5 billion more than anticipated—a 60 percent overrun on its $2.5 billion budget. And that doesn’t include the $1.7 billion the company spent in the 1970s and ’80s.
Watts Bar Unit 2 has one thing going for it: It’s almost certain to open. You can’t say that about the AP1000s in Georgia and South Carolina, which are still years from their updated completion dates. It’s possible that Watts Bar Unit 2 will be not only “the first new U.S. nuclear reactor of the 21st century,” but also the last.
Conducting an Autopsy
As the finishing touches were being put on the new Watts Bar reactor in January 2015, an energy analyst asked an Associated Press reporter, “Who in their right mind would want to build a nuclear plant?” To think, only six years earlier, U.S. Senator Lamar Alexander proposed building a hundred of them.
The U.S. nuclear industry isn’t dead yet. Many existing reactors have had their original 40-year licenses extended within the past decade, and many of them will continue to operate. But, if they do survive, they will be monuments to financial foolishness.
The problem is, and always has been, the economics. The 30-year hiatus is partly to blame. “Whatever the industry learned about construction and large-project planning in the 1970s and 1980s has disappeared,” says Paul Joskow, president of the Alfred P. Sloan Foundation and author of numerous analyses of the nuclear industry. “The people involved in those projects have gone on to other things.”
Construction capacity is also an issue. Since we didn’t build nuclear reactors for decades, contractors had no reason to keep up their training and certification in nuclear-grade fabrication. They had to get up to speed before they could build new reactors.
Those are only partial excuses, though. “Everyone knew that finding qualified contractors would be a problem,” says Lyman. Westinghouse and the utilities “didn’t say anything about these delays at the beginning. It’s only an excuse after the fact.”
Former NRC head Jaczko offers a one-word diagnosis. “A billion-dollar cost overrun isn’t a growing pain. It’s incompetence,” he insists. “The majority of the work is concrete and steel construction. We know how to do that. For whatever reason, the industry has a terrible record. There’s no excuse.”
He has a point, but there must be more to this than simple incompetence. What about the reactor delays and cost overruns in the 1970s and 1980s? Were those engineers and construction workers also incompetent? And what about the people working on reactors around the world? Those projects are also mired in delays and cost overruns. China’s AP1000 reactors have been delayed twice. France’s new reactor in Flamanville was originally scheduled to produce its first kilowatts in 2012. The date of completion is now set for 2017, and its budget has more than doubled to more than $11 billion. The start date for Finland’s largest nuclear reactor has been pushed back more than a decade, to 2018, and its costs will also likely double. These global failures suggest the problems run deeper than a few incompetents in the U.S. nuclear industry.
“Building nuclear plants is hard. If you do it right, you can’t get cost savings,” says Lyman. “There’s too much self-delusion in the nuclear industry.” Human ingenuity has so far proved insufficient at managing the fine margins of safety and profitability when building a nuclear reactor.
Yes, nuclear reactors are steel and concrete, but few steel-and-concrete projects cause so much trouble when they go wrong. The accidents at Three Mile Island, Chernobyl, and Fukushima fueled opposition to the industry. The lack of a credible, long-term storage facility for radioactive waste is a major worry. The specter of nuclear war will always hang over nuclear power as well. But opposing nuclear power for safety reasons invites a complicated and needless argument about probabilities. Money has already delivered the fatal blow. Nuclear was never competitive with fossil fuels, and it has no hope in an era of ever cheaper renewable energy.
“Energy efficiency gains, wind, and solar are now proven to be smarter, cheaper, faster ways to address climate change without the burdens of nuclear waste, the risk of severe nuclear accidents, or the nuclear weapons proliferation problem,” notes McKinzie.
At Watts Bar, TVA has just unveiled a shiny new mausoleum to this very fact. Its Unit 2 was born during a period of irrational nuclear exuberance, and then mothballed when reality struck. There was never a good reason to complete it, as demonstrated by a cost overrun of more than $1 billion.
The drain beckons, nuclear industry. Please go quietly.
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