Are competitive electricity markets and nukes incompatible?

In the U.S., argues economist and nuclear power advocate Edward Kee, nuclear power plants and competitive electricity markets can’t work together. In a new book, Market Failure: Market-Based Electricity is Killing Nuclear Power, Kee, head of the Nuclear Economics Consulting Group, writes, “The biggest threat faced by nuclear power is from a market approach to the electricity industry. Electricity industry reforms have led to the early closure of existing nuclear power plants and stopped new nuclear power development.”

Vogtle project

Nuclear power, Kee says, has “well-established” benefits, including scale and environmental footprint, reliability, no carbon dioxide emissions, and safety. Despite this, he says, “The nuclear power industry is failing in countries where there is a market approach to the electricity industry.”

What is it about competitive markets that are antithetical to nuclear power? Kee argues that the wholesale markets in the U.S. and U.K. don’t price the economic externalities of fossil fuel generation, particularly climate-changing carbon dioxide emissions. The markets also don’t properly value the positive externalities, or virtues, of nuclear power. “The combination of unpriced negative externalities from combustion-based generation air emissions and uncompensated positive externalities for nuclear power results in market failure.” This failure, he says, “lowers the public good for society.”

What to do? Kee’s approach is governmental. “An increased government role, a return to the traditional electricity industry approach, control of negative externalities, payment for nuclear power’s positive externalities, and improved electricity market design could help resolve nuclear power market failure.” The governmental role should include a system of pricing carbon dioxide emissions, tax credits, and relaxed regulation.

Kee does not address a major problem with building new nuclear plants: the soaring costs, which don’t seem to have learned from the earlier generations of off-budget, off-schedule plants.

A new paper from a team at MIT, published in the journal Joule, identifies what its authors believe are the major cause of the massive cost overruns of new nuclear projects in the U.S. (Vogtle and V.C. Summer), Finland (Olkiluoto), and France (Flamanville), As reported by World Nuclear News, “Nuclear plant costs in the USA have repeatedly exceeded projections, according to the paper. The authors have used 50 years of data and ‘bottom-up’ cost modelling to identify the mechanisms behind this. ‘We observe that nth-of-a-kind plants have been more, not less, expensive than first-of-a-kind plants,’ they said.”

Despite the decades-long claims of the nuclear and utility industry, the driving force for escalating costs in not regulation, but what the authors described a “soft costs,” or indirect expenses that arise during construction that lead to last-minute changes on the ground do to unforeseen or changing circumstances.

Lead author Jessika Trancik said that conquering cost escalation requires the “need to be rethinking our approach to engineering design,” including new methods and theories of technological innovation and change.

“They’re not hardware costs,” she said. “They are changes to processes responding to the environment in which the construction is happening. … If you build that into your engineering models and your engineering design process, then you may be able to avoid the cost increases in the future.”

–Kennedy Maize