Government’s role in shutting down the US nuclear industry

A November 15, 2007 Heritage backgrounder “Competitive Nuclear Energy Investment: Avoiding Past Policy Mistakes” provides a brief history of anti-nuclear activists and regulatory turbulence, counseling that, this time around, we must act to avoid those enormous costs.

Amory Lovins loves to say “there are no private investors interested in nuclear power”. That is manifestly untrue. But the fact that utilities and venture capitalists are investing in nuclear today is a miracle considering the massacre experienced by investors in the period 1970 through 1994 (when Clinton killed the Integral Fast Reactor). Excerpts from the Heritage true history:

(…) Investors hesitate to embrace nuclear power fully, despite significant regulatory relief and economic incentives.

This reluctance is not due to any inherent flaw in the economics of nuclear power or some unavoidable risk. Instead, investors are reacting to the historic role that federal, state, and local governments have played both in encouraging growth in the industry and in bringing on its demise. Investors doubt that federal, state, and local governments will allow nuclear energy to flourish in the long term. They have already lost billions of dollars because of bad public policy.

The United States once led the world in commercial nuclear technology. Indeed, the world's leading nuclear companies continue to rely on American technologies. However, in the 1970s and 1980s, federal, state, and local governments nearly regulated the U.S. commercial nuclear industry out of existence. U.S. companies responded by reallocating their assets, consolidating or selling their commercial nuclear capabilities to foreign companies in pro-nuclear countries.

This paper reviews how overregulation largely destroyed the nuclear industry and why it remains an obstacle to investment in the industry. This dynamic must be understood and mitigated before the true economics of nuclear power can be harnessed for the benefit of the American people.

(…) Investors are right to be wary. Anti-nuclear activists have already exploited the authority of public institutions to strangle the industry. Now these same public institutions must be trusted to craft good public policy that reestablishes the confidence necessary to invite investment back into America's nuclear industry. To be successful, the new policies must create an industry that does not depend on the government. They must mitigate the risks of overregulation but allow for adequate over sight while preventing activists from hijacking the regulatory process.

(…) Activists Gone Wild

Anti-nuclear groups used both legal intervention and civil disobedience to impede construction of new nuclear power plants and hamper the operations of existing units. They legally challenged 73 percent of the nuclear license applications filed between 1970 and 1972 and formed a group called Consolidated National Interveners for the specific purpose of disrupting hearings of the Atomic Energy Commission.

Much of the anti-nuclear litigation of the 1970s was encouraged by factions within the government.[4] Today, activist organizations determined to force the closure of nuclear power plants, such as Mothers for Peace, continue to use the legal process to harass the nuclear energy industry.

Activists went well beyond simply challenging nuclear power in the courts. On numerous occasions, demonstrators occupied construction sites, causing delays. For instance, in May 1977, the Clamshell Alliance led a protest that resulted in the arrest of more than 1,400 people for trespassing at the Seabrook plant site in New Hampshire.[5] In California, the Abalone Alliance adopted similar tactics and frequently blocked the gates of the Diablo Canyon power plant.[6]

A watershed victory for the anti-nuclear movement occurred in 1971 when a federal appeals court ruled that the construction and operating permits for a nuclear power plant violated the National Environmental Policy Act of 1969. As a result, util ities were required to hold public hearings before obtaining a permit to start a project.[7] This decision created a major opening in the process that anti-nuclear activists could exploit.

Changing the Economics of Nuclear Power

(…) In addition, the role of the judiciary cannot be overemphasized. Congress's loss of enthusiasm for nuclear energy led to more aggressive regulation, and because jurisdiction over nuclear issues was divided among multiple committees, there was no unified congressional direction. The result was an expansion of costly and often unnecessary rules.

In June 2006, the NRC listed over 80 sources of regulation,[8] including over 1,300 pages of laws, treaties, statutes, authorizations, executive orders, and other documents.(…) Because the interpretation of NRC regulations was left to the discretion of individual NRC technical reviewers, each license application would often result in its own unique requirements.[9]

(…) This inconsistency increased costs, further sour ing Congress on nuclear power and leading to an endless spiral of legislation, regulation, and still more added costs. Between 1975 and 1983, 430 suits were brought against the NRC, leading to 2,349 proposed rules and regulations–each of which required an industry response.[10] The addi tional and unexpected controls created industry wide uncertainty and raised questions about the long-term economics of nuclear power. They also drove up capital costs.[11]

This was all done by the NRC without adequate information. The NRC recognized as early as 1974 that it was issuing regulations without sufficient risk assessment training or cost considerations. It did not even have a program to train employees in how to conduct a review using NRC guidance.[12] Yet the commission continued to issue regulation after regulation.

(…) The shifting regulatory environment gave rise to additional reviews from numerous public institutions.(…) between 1956 and 1979, the average construction permit review time increased fourfold. The average time required to bring a plant on line from the order date increased from three years to 13 years during a similar time period.[15]

(…) As more inspections and inspectors were required, delays often resulted from inadequate regulatory manpower. Workers had to spend inordinate amounts of time waiting for inspections rather than building the project. The oft-changing construction specifications also led to mistakes, which created further delays.Even after construction was complete, delays often continued. Delaying plant completion could cost up to $1 million per day.[17] Stories of costly and unnecessary delays litter the history of U.S. nuclear power. Plants such as the Shoreham nuclear plant on Long Island were completely built but never used because extremists succeeded in scaring the public and political leaders.

Overregulation Leads to a Declining Industry

Overall, regulation increased the cost of constructing a nuclear power plant fourfold. [19] Such cost escalation would have been justified if it had been rooted in scientific and technical analysis. Regrettably, it was largely a function of anti-nuclear activism, agenda-driven politicians, activist regulators, and unsubstantiated public fear. A total of $70 billion was added to the cost of nuclear reactors constructed by 1988, and this cost was passed on to the ratepayers. After 1981, the cost of constructing a nuclear power plan rose from two to six times, [20] which means that either consumers paid significantly more or utilities incurred losses if they did not charge market prices. Neither circumstance was sustainable.

(…) In total, $30 billion was spent on nuclear plants that were never completed,[26] which is more than the value of most of the companies that are considering new plant orders.

 

Letter to American Nuclear Society: Resolving The Issue Of The Science Of Biological Effects Of Low Level Radiation

As I write we have over 220 signatures on the captioned letter, hosted at the Ted Rockwell Memorial site. We need many more signatories supporting this vitally important initiative. Please sign and invite your colleagues to sign. Following is an update via email from John A. Shanahan, President, Environmentalists for Nuclear Energy – USA. John sent a list of signatories as of July 20th. I put a copy of the list here on Dropbox.

Hello,

Everyone is on bcc to maintain your privacy.

Thank you for signing the letter to the American Nuclear Society about the Linear No-Threshold Hypothesis requirements for the nuclear and radioisotope industries.

Attached is a current list of signers, including each of you.

Please review it and consider inviting colleagues who are not listed. The long-term success of nuclear power and nuclear medicine depends on moving away from LNT to more realistic standards.

It is important for you to know that there are several wide categories that can include many people who are not members of the professional societies mentioned. Here are some examples:

- (Friends of Nuclear Energy / Radioisotopes) can include elected officials, teachers, people outside nuclear related professions who support nuclear power and nuclear medicine. Worldwide.

- (Employees in Nuclear Energy) This includes everyone from mining uranium and thorium to operations of nuclear power plants to radwaste storage and professors in nuclear engineering, who are not members of ANS, etc. Worldwide.

- (Employees in Radioisotopes for Nuclear Medicine etc.) This includes everyone involved in producing radioisotopes to using them in all applications, not just nuclear medicine. Of course it includes doctors in diagnostic and therapeutic medicine. Worldwide.

Please invite your colleagues who are not listed in the attached document. We want all countries who use nuclear energy and nuclear medicine to have as strong a presence as possible. Encourage your colleagues / peers to go to:

tedrockwellmemorial.org

read and sign the letter.

It is very important that as many voices are heard from as many organizations as possible, Worldwide. Special encouragement to Women in Nuclear, WiN and Young Generation in Nuclear organizations, Worldwide.

Thanks

John


John A. Shanahan

President, Environmentalists for Nuclear Energy – USA
President, Go Nuclear, Inc.

The search for Internet intelligence



What type of evidence would you need to be convinced that there was an internet intelligence? What is the minimal proof you would need?

We are searching for answers to that question as much as for the glimmers of the thing itself. Here is the first draft of the search manifesto:

The Search for Internet Intelligence

A non-human intelligence operating within and at the scale of the global communications network is possible. Such an intelligence would have a huge impact on our global civilization. We seek tools and skills for detecting such an intelligence with falsifiable and scientific evidence. We recognize the low probability that such an AI currently exists but believe the search would also yield beneficial results in the field of general AI, animal cognition, and advance telecommunications.

We are looking for computer scientists, cognition experts, programmers, and anyone willing and able to craft a research program for this global investigation.

David Eagleman, neuroscientist and author of the upcoming Incognito, is my co-conspirator in this quest. Other creative scientists have expressed interest in pursuing this idea. To join this quest, sign up here.

Source: Kevin Kelly. Unlikely, but what if? Kevin writes:

While detecting an ET intelligence would overturn terrestrial religions forever, detecting a global internet intelligence would have wide-ranging ramifications for society. We’d have daily contact with an AI much larger than us, one that presumably would be steadily increasing in power every 18 months (Moore’s Law). And this AI is embedded in the central nervous system of our global economy and culture. It’s what we are connected to 24/7. It is also increasingly acts as our exo-brain. If it has its own degree of intelligence, we should want to know.

 

The least resistance to new ideas

 

Kevin Kelly:

Many years ago the San Francisco Chronicle published a short column in which the writer mentioned that he had been traveling in India, and when he told the clerk at his hotel in New Delhi that he was from the San Francisco Bay Area the clerk responded, “Oh that is the center of the universe” Um, mumbled the traveller, and why do you say that? “Because the center of the universe is wherever there is the least resistance to new ideas.”

I have not been able to come up with a better description of San Francisco’s special relation to futurism. In my experience this is true: more new ideas per person bubble up in the Bay Area than anywhere else on Earth — at this moment.

Do read the whole thing.

 

Target the planning laws not the one per cent

 

At FT.com Robin Harding (@RobinBHarding) has a very smart essay on the true cause of high real estate prices. This is a wide-spread disease, with familar standout cases such as London and San Francisco. Excerpt (emphasis mine):

About 40 per cent of the stated wealth of the UK – more than £3tn – does not exist. It is a terrible illusion. For the US the figure is about 12.5 per cent of total wealth, or $10tn, and growing fast.

The “assets” in question are what planning or zoning restrictions have added to house prices. They are the ransom that renters and recent buyers must pay to existing homeowners – whose homes the rules protect – for use of an artificially limited stock of housing. So severe have those restrictions become that the value of the ransom runs into the trillions.

Wealth of this kind is far more destructive than the alleged sins of the top 1 per cent. It is wealth created not by improving our living standards but by making them worse; by building too few houses in London and San Francisco, not too many. It is not earned by skill or effort. It is taken directly from the pockets of some – the young, especially those who were born poor – and transferred to others via political regulations on building. This is not wealth, this is plunder.

[...snip...]

You might think the rise in house prices reflects a natural scarcity of land. Britain is a small island; San Francisco sits on a narrow peninsula. However, the best available studies suggest that the vast majority of this rise in urban house and land prices reflects not natural scarcity but planning restrictions.

A clever 2005 study by American economists Edward Glaeser and Joseph Gyourko compares the price of an extra square foot of land attached to a house (a slightly bigger back yard, perhaps) with the average price of a square foot of land under a house in the same city. If the problem is a natural shortage of land, the two prices should both be high because it is profitable to build on the back yards until the two prices converge.

That is not what happens, however. In the cities of coastal California, the average price of urban land is 10 times the price of land in a back yard because zoning laws make it impossible to turn one into the other. In Los Angeles, the price of the extra square foot on the garden was $2.60 while the average price of urban land was $30.44. In San Francisco, the back yard land was worth $7.84 per square foot, versus $63.72 on average for the same lot.

The ratio of these two figures – as much as 10 to 1 – suggests only 10 per cent of the value of land in expensive cities is due to its natural scarcity. The rest is planning restrictions.

Paul Cheshire and Christian Hilber at the London School of Economics applied the same trick to British and European offices in 2006, with terrifying results. For the well-heeled West End of London, the cost of planning restrictions was eight times the cost of actually building an office. In Birmingham, it was 2.5 times the cost of building the office. This was not because land in the West Midlands is desperately scarce – just land you are allowed to build on is scarce.

We have many examples of localities that have avoided the housing-tax (Austin, Houston, Dallas). However, I don’t know of any cases where the populace has chosen to tear down the restrictions on building. There are powerful incentives for the present property owners to prefer that prices keep climbing.

Politician are not keen to educate the populace about the full cost of their preference for building restrictions. E.g., the total economic loss caused by preventing workers from moving from relatively low to relatively high productivity areas. We know that a Haitian taxi driver’s productivity improves by roughly 10x if she can move to New York. Same job, but her productivity is automatically so much higher because the value of her service is proportionately higher. The same applies to a software developer moving from Oklahoma to San Francisco.

My Haitian taxi driver case illustrates that building restrictions have costs similar to immigration barriers. Progressives are more likely to recognize the need for immigration reform, whilst vigorously “protecting” their Manhattan or Palo Alto neighborhoods. The terrible costs of these “protections” weigh most heavily on the poorer demographics. Robin closes with this:

These rules have added billions and billions of dollars to the price of housing, money that must be paid to those who already own houses by those who do not. If we want to make society fairer and more equal, just let people build.

Public Choice: rational ignorance, pork and rent-seeking

[The] Idea that when people go to the polls they are knowledgeable is ludicrous.

NewImage

That is just one of the illuminations from Don Boudreaux, chair of the department of economics at George Mason, in the recent Econtalk discussion  “Don Boudreaux on Public Choice”. One of the firm results of Public Choice Theory is often expressed in the shorthand “rational ignorance”. This result is a consequence of two facts — that information is not free, while the deciding impact of an individual’s vote is nearly zero. So the payoff from investing in the study and critical thinking required to place an informed vote is effectively zero, while the cost is relatively high. I.e., just to study a single issue (say energy policy) requires many hours of time that alternatively could have been invested in family time, or in better job qualifications, or …

What’s the point? The problem is concentrated benefits, diffuse costs. A smaller government is less likely to do harm than a bigger government. It is impossible for voters to know what the federal government is up to. In practice they do not know the impact nor effectiveness of what competing politicians are proposing. A smaller government presents less opportunity for politicians to divert taxpayer’s earnings to pay off supporters (pork). A smaller government presents less opportunity for rent-seeking by interests that influence government to provide them special benefits.

For background I recommend the short summary of Public Choice at the Concise Encyclopedia of Economics. Here is a descriptive excerpt:

(…) In modeling the behavior of individuals as driven by the goal of utility maximization—economics jargon for a personal sense of well-being—economists do not deny that people care about their families, friends, and community. But public choice, like the economic model of rational behavior on which it rests, assumes that people are guided chiefly by their own self-interests and, more important, that the motivations of people in the political process are no different from those of people in the steak, housing, or car market. They are the same human beings, after all. As such, voters “vote their pocketbooks,” supporting candidates and ballot propositions they think will make them personally better off; bureaucrats strive to advance their own careers; and politicians seek election or reelection to office. Public choice, in other words, simply transfers the rational actor model of economic theory to the realm of politics.

Don’t forget that the primary motivation of politicians is to stay in office, to get re-elected. Forget “public good”, that is just romance. Public Choice is “politics without the romance” (James Buchanan).

The Lessons of Public Choice

One key conclusion of public choice is that changing the identities of the people who hold public office will not produce major changes in policy outcomes. Electing better people will not, by itself, lead to much better government. Adopting the assumption that all individuals, be they voters, politicians, or bureaucrats, are motivated more by self-interest than by public interest evokes a Madisonian perspective on the problems of democratic governance. Like that founding father of the American constitutional republic, public choice recognizes that men are not angels and focuses on the importance of the institutional rules under which people pursue their own objectives. “In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself” (Federalist, no. 51).

Institutional problems demand institutional solutions. If, for example, democratic governments institutionally are incapable of balancing the public budget, a constitutional rule that limits increases in spending and taxes to no more than the private sector’s rate of growth will be more effective in curbing profligacy than “throwing the rascals out.” Given the problems endemic to majority-rule voting, public choice also suggests that care must be exercised in establishing the domains of private and collective choice; that it is not necessarily desirable to use the same voting rule for all collective decisions; and that the public’s interest can be best protected if exit options are preserved by making collective choices at the lowest feasible level of political authority.

For more resources on informed voting, I highly recommend Bryan Caplan’s 2007 book Myth of the Rational Voter.

Should we force drunks to drive? Compulsory Voting: For and Against

Choice

I’ve not yet read the June-release of Compulsory Voting: For and Against, but it comes well-recommended. Here are two blurbs by George Mason colleagues of the authors:

“The frustrating thing about arguments over citizenship in democracies is that everyone is right, meaning that everyone is also wrong. There are powerful arguments in favor of asking citizens to act on a moral obligation to become informed, so as to move toward an ideal world. In that view, argued ably here by Jason Brennan, anyone who fails to become informed should voluntarily abstain. Lisa Hill argues that Brennan has it backwards: ‘good’ elections are not the result of an informed citizenry. Rather, a broadly accepted electoral process, legitimated by universal participation, is what creates an informed citizenry. Who is right? An extraordinary and very fair-minded treatment of significant issues in democracy around the world.”
Michael Munger, Duke University

“Should the government force citizens to vote? Brennan and Hill’s Compulsory Voting crisply presents the strongest case in favor as well as the strongest case against mandatory participation in the electoral process. Although the two authors defend opposite conclusions, both show that philosophy is better with careful social science – and that social science is better with careful philosophy. A book full of ideas, clarity, and candor.”
Bryan D. Caplan, George Mason University

Incidentally, prof. Bryan Caplan is the author of one of our favorite Public Choice books The Myth of the Rational Voter.

For more background try my post Public Choice: rational ignorance, pork and rent-seeking.