After decades of winter for nuclear power in North America and Western Europe, there’s recently been some long-overdue signs of spring.
In the state of Georgia, the first unit of the 2.2 gigawatt Vogtle expansion project — $34 billion and 17 years in the making — was connected to the grid April 1. It may have come in at more than double the cost and seven years later originally forecast, but it’s just the second new civilian reactor completed in the US since 1996. The unit has begun testing and may start up as soon as this year.
Similar green shoots are showing in northern Europe. Finland’s 1.6 gigawatt Olkiluoto 3 reactor, plagued by similar time and cost overruns, finally delivered electricity April 16, becoming the continent’s first reactor in more than 15 years.
It’s popular to blame environmentalists for the way atomic power stopped growing in rich countries three decades ago. Too many protests and consequent safety regulations have made it impossible to build nuclear power plants (the argument goes) slowing what should be an easy path to decarbonising our economies. Clear away the red tape, and the market will do the rest.
Look at the long and painful histories of Vogtle and Olkiluoto, however, and it becomes clear that the truth is close to the opposite. It’s not simply a surfeit of regulations, but more importantly the deregulation of energy markets that has stifled atomic power in recent decades.
Most of the world will need modest, but crucial, shares of nuclear energy in tandem with wind and solar to build affordable zero-carbon grids over the coming decades. Correctly identifying the source of the problem, rather than turning renewables versus nuclear into a culture-war battle, will be crucial to making sure those plants get built.
Atomic power facilities are, by their nature, megaprojects. Only hydroelectric dams can compete with them in terms of sheer energy output. There’s an entire United Nations agency dedicated in part to ensuring that the fissile fuel supply isn’t diverted toward military uses, and a complex global convention to help governments share liability in the event of an accident. Even in a best-case scenario, nuclear plants take the best part of a decade and billions of dollars to build, followed by further decades before they’ve paid for themselves.
Almost every other megaproject we construct depends on coordinated
government support, if not outright ownership, because only states or protected monopolies have the capacity to take on the financial and operational risks. That was the case for power, too, during the nuclear boom from 1970 to 1990, when monopolistic utilities in Europe, North America and the former Soviet Union constructed plants with little regard to cost or even demand.
Those risks have only been heightened by the way that western countries have deregulated energy markets since the 1990s, exposing multi-decade nuclear projects to the vagaries of volatile pricing rather than the fixed returns that they once expected. It’s no coincidence that the nuclear construction boom has lasted longest in Asian and former Soviet countries where state-backed monopolies and managed power pricing still hold sway.
While being ostensibly private-sector projects, Vogtle and Olkiluoto both underline this point. The former was only finished thanks to some $12 billion of loan guarantees from the US government. VC Summer, an almost identical plant across the state border in South Carolina that ran into simultaneous difficulties when their common contractor Westinghouse filed for bankruptcy in 2017, failed to attract funding from Washington and was abandoned. The key ultimate shareholder in Olkiluoto, meanwhile, is not a profit-maximising investor, but a cooperative of local power users.
Some form of government support will be necessary if atomic power isn’t to wither as its aging plants reach the end of their lives. Contracts-for-difference are a type of financial derivative used in the UK power market that allow low-carbon generators to swap volatile electricity prices for fixed ones, with a government agency acting as counterparty. Sticking to boring but familiar water-cooled reactor designs, rather than trying to reinvent the wheel with fast neutron or small modular reactors, is the best way of ensuring that projects come in closer to time and budget plans. Governments shouldn’t be long-term owners of reactors, but their vast financial capacity and ability to knock heads together means they’re best-placed to manage the construction stage before selling off operating projects to private investors.
It might be an enjoyable sport to turn the problems of our power grids into a cage fight between hippies and engineers. If we want affordable zero-carbon power in 2050, however, we will need to fix the real-world issues that have held back nuclear energy for decades, rather than blaming everything on omnipotent environmental campaigners. There are solutions to atomic power’s malaise. But the first step toward recovery is admitting you have a problem.
David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. Views are personal, and do not represent the stand of this publication.
Credit: Bloomberg
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
