The disaster at Japan’s Fukushima Dai-ichi nuclear plant, and the upheavals in the Middle East are the sort of events that send economists back to their forecasters’ drawing boards. As usual, there is a tendency to confuse the long run and the short run, and to blame developments that were due to occur anyhow on the most recent events.
This brings us to the U.S. sector most analysts are expecting to bear the brunt of the upsets in Japan and in the Middle East: Energy and in particular the nuclear power industry.
On one hand, President Barack Obama is committed to transforming the energy economy so that 80 percent of electricity comes from “clean energy” sources by 2035, has restricted himself to a measured reaction: recheck the safety of all U.S. plants, which account for 20 percent of our electricity.
Energy Secretary Steven Chu told Congress, “I think, no matter what happens, we will try to take the lessons of Fukushima and apply them to our existing fleet and any new reactors we will be building.”
But on the other hand, it is highly unlikely that any new nuclear power stations would have been built in America even if Japan’s stations had not proved vulnerable to natural disasters, despite the 12 applications now being reviewed by the Nuclear Regulatory Commission. Anti-nuclear activists have a new stick with which to beat any regulators who dare to approve such plants. There is wide agreement that new nuclear power plants are too expensive to compete in now-largely-deregulated markets for electric power.
John Rowe, CEO of Exelon, the largest nuclear plant operator in the U.S., first points out that we don’t yet know the extent of the problem in Japan, and that every energy source presents environmental problems (think mine disasters in Chile and West Virginia). But he then tells me, “In any event, new nuclear plants are not economic investments with today’s natural-gas forecasts.” So Exelon will “concentrate on keeping its existing plants safe.” No new nukes for this shrewd utility executive.
Peter Bradford, a former regulator and long-time Rowe sparring partner and skeptic about the safety and economic viability of nuclear power, agrees. He tells me, “The nuclear renaissance was dead in the water anyway, because nuclear power is just too expensive. At today’s gas prices, private capital was not going to be available for new nuclear.” He might have added that the refusal of the government to open the Yucca Mountain nuclear waste repository is an additional impediment to new construction.
Nuclear’s one hope is a dramatic rise in the price of natural gas. Which some forecasters are predicting will be one consequence of the pressure on oil prices from the uprisings in the Middle East, and the pressure on coal prices from rising demand.
With nuclear more or less out of the picture, oil too expensive for extensive use in power stations, and coal becoming more costly, it is little wonder that prices of natural gas are on the rise. Whether they will rise enough to make nuclear economic I doubt: There is just too much gas to be found around the world for demand to press hard upon supply, especially since we now know how to produce the virtually limitless supplies of shale gas.
But hope breeds eternal for advocates of nuclear power, even though they know that their problems were not all made in Japan.
Irwin M. Stelzer is director of the Hudson Institute’s Center for Economic Studies. This article is adapted from The Weekly Standard.