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5 February 2014

China Can Make Nuclear Power Work

Published on The National Interest (http://nationalinterest.org)
February 4, 2014

The idea that nuclear power represents the clean energy solution to problems of pollution and climate change has supporters from across the political spectrum, ranging from Sarah Palin on the right to leftists like George Monbiot of the UK Guardian. Hedging its bets as usual, the Obama administration includes nuclear in its ‘all of the above’ strategy for responding to climate change.

Yet nuclear power has repeatedly failed the market test. Even before the Three Mile Island meltdown in 1979, the US nuclear power boom was close to its end. Though early advocates had promised electricity ‘too cheap to meter’, the reality was one of delays and cost overruns. Nor was the US unusual in this respect. Canada, the UK and most other developed countries had similar experiences, with the result that construction of nuclear power plants ground to a halt after 1980. In the US case, there were no new projects commissioned after 1977, except a handful that were abandoned before completion.

There was, however, one exception to this dismal pattern, which still looms large in the thinking of many nuclear advocates. In the wake of the 1973 oil crisis, the French government, led by PM Pierre Messmer, announced a plan for a complete shift towards nuclear power. And, at least in technical terms, the plan worked.

In the space of twenty-five years, France went from a standing start to a predominantly nuclear electricity-generating system, based on a small set of standard models, mostly designed by US firm Westinghouse. Unlike most other countries with large-scale programs, there were neither major disasters nor obvious cost blowouts. French electricity costs remain broadly competitive with those elsewhere in Europe, and would be more so if there were an explicit carbon price.

On the other hand, recent French experience is far less appealing and much more similar to that of, say, the US or Canada. Construction of conventional ‘second generation’ nuclear plants stopped in the 1980s. Subsequent attempts to develop a fast breeder reactor, called ‘Superphenix,’ failed dismally.

Then, in 2005, an attempt was made to restart the construction program with a new design, the European Power Reactor. The first plant, at Flamanville, had an estimated completion date of 2012 and a budget of 3.3 billion euros. As of today, the completion date has been pushed out to 2016 and the estimated cost is 8.5 billion euros. This ranks with some of the spectacular project failures observed in the US.

So, what did France do right under the Messmer Plan, and when did it go wrong? Given the length of time, and the generally opaque accounts of public utilities in the mid-20th century, this is quite a difficulty question. But determined researchers have looked at the question and have been able to disentangle the cost data. Most of the spadework was done by Arnulf Grubler of the International Institute of Applied Systems Analysis in Vienna, using data published by the Jospin government in 2000.

Grubler’s startling conclusion is that from the beginning of the program to the end, the construction cost per kilowatt for French nuclear plants tripled in real terms. That is, the disaster at Flamanville isn’t an outlier but the continuation of a trend that has been going on since the program began.

Given the trends identified by Grubler, the more recent failures of the French nuclear program are unsurprising. Whatever factors enabled so many plants to be constructed at low costs during the 1970s were eroding steadily, even at the time.

But why were costs so low in the first place? Grubler quotes Dominique Finon and Carine Staropoli, who summarize the unique institutional framework as consisting of four elements:

strong political support, a state-owned electricity monopoly endowed with [substantial] engineering resources, high regulatory stability...and efficient coordination resulting from long-term organizational arrangements.

Not only was the policy elite unified in support of the program, but the public were almost totally excluded, allowing local concerns to be overridden. In addition, at the beginning of the period, real interest rates were effectively negative and low-cost capital could be directed to favored sectors, such as nuclear power.

These conditions could not be sustained indefinitely, and weren’t. The inflationary conditions of the late 1970s saw blowouts in the costs of megaprojects of all kinds. As a result, the nuclear industry experienced increasing costs everywhere. France did a better job in containing costs than others, but couldn’t beat the trend.

By the time interest rates returned to lower levels in the 1990s, the other conditions for French success had disappeared. The centralised dirigiste state of the postwar era was long gone, and with it the possibility of anything like the Messmer Plan.

Looking at the implications for the future prospects of nuclear power, the conditions of France in the 1970s can no longer be replicated anywhere in the developed world. In particular, even if public opinion somehow shifted sharply in favor of nuclear energy generally, projects would still require a costly process of consultation, environmental impact evaluation and so on. And, of course, a return to an integrated public monopoly in the electricity sector is not on the agenda.

On the other hand, China today looks a lot like France in 1970. China is ruled by a modernising elite that’s procapitalist but happy to exercise state control over the economy, and to ignore or crush public opposition. Like France, China seems likely to standardize on a single Westinghouse model, the AP1000. So, it’s unsurprising to see Chinese nuclear projects being completed on time and on budget while similar projects in the US and Europe are floundering.

It remains to be seen, even with these advantages, whether nuclear power in China can compete with the rapidly declining cost of renewables, or with the option (still appealing to a significant part of the elite) of pushing ahead with coal-fired power regardless of the environmental consequences. And, as the French experience suggests, the cost of nuclear power is likely to rise over time as the economy and financial system are liberalized, and become less amenable to central control.

Despite these doubts, the urgency of the problem of climate change is such that all options must be explored. A Chinese repetition of the French success story of the 1970s is the best hope for a cost-effective nuclear option.

John Quiggin is a professor of economics at the University of Queensland, Australia and adjunct professor at the University of Maryland, College Park. He is author of Zombie Economics: How Dead Ideas Still Walk Among Us (Princeton University Press, 2010).

Image: Flickr/Bjoern Schwarz [3]. 


Links:
[1] http://www.addthis.com/bookmark.php?v=250&username=nationalinterest
[2] http://nationalinterest.org/profile/john-quiggin
[3] http://www.flickr.com/photos/bagalute/5172953200/sizes/l/
[4] http://nationalinterest.org/topic/economics
[5] http://nationalinterest.org/topic/economics/economic-development
[6] http://nationalinterest.org/topic/security/energy
[7] http://nationalinterest.org/topic/economics/political-economy
[8] http://nationalinterest.org/region/asia/northeast-asia/china
[9] http://nationalinterest.org/region/europe/western-europe/france

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