The debate about the nuclear generation of electrical energy and its safety following the recent catastrophe at the nuclear power plants in northern Japan after the earthquake there, reminds me a lot of the internal debates we had within the staff of the California Coastal Commission over 35 years ago as we first struggled with the many issues raised regarding the advisability of sighting electric generation facilities driven by nuclear energy along the seismically unstable and densely populated California coast. That debate took place during the early years of the coastal planning process in California prior to the completion of the California Coastal Plan and the passage of the legislation that implemented that plan.
Of course there were serious environmental issues raised, some over-blown, like the impact of heated waste water on the marine environment and others, like the disposal of the radioactive waste, real and unresolved to this day. There were also safety concerns, again some real and some not so.
But interestingly, what greatly concerned several of us who at the time were responsible for the land use regulation and planning for the coast were the economic and political implications of the then planned nuclearization of American electrical energy.
We realized that every nuclear power plant was a giant financial capital sink. Each plant cost more and required more sunk capital (Investment money not returned if the plant did not ultimately come on-line for its full economic life) than most other individual construction projects of that time. In addition, should all or most of the nuclear electrical generating facilities planned to be constructed in the United States within the period proposed actually be built, at that time (mid-seventies), they conceivably could have absorbed a significant amount of not most of the capital resources of the nation, potentially squeezing out other needed capital projects and increasing the cost of money.
In addition, because the sunk capital costs were so high, the only way they could be financed, then as now, required reducing risks to almost zero. This necessitated ever more governmental assistance to the industry in terms of subsidies, guarantees, regulatory exemptions, limits on liability and the like. In effect, either the taxpayer or the rate payer, would pay for or guarantee these plants while others (the lenders, engineering firms, construction companies, etc.) would reap the profits while leaving any environmental costs to future generations of Americans.
So, what else is new? This is the way things work, how things get done, right? Most of us looking into it agreed, but some still asked the question, why and was there another way.
Even back then we were told by the energy companies, their consultants and even other governmental agencies, that moving from coal and oil fired electrical generating facilities was good for the environment and necessary for the welfare of the nation if it were ever to be able to reduce its dependency of foreign oil.
Fair enough, but we knew there were alternatives as feasible as these over engineered, frightfully expensive, dangerous and risky projects. For example, although none of us thought it was practical, every home and business in the US could have been fitted with photovoltaic cells for less than the cost of the nuclearization plan with lower demands on the capital market and fewer environmental and social impacts. True, the cost of electricity would rise since the photovoltaic cells are less efficient in electricity production than power plants (a problem certainly as subject to future solution as the disposal of radioactive wastes). Nevertheless, even though it can be acknowledged that increasing per unit electricity costs would certainly be a political problem, the fact remained that technically alternatives to nuclearization appeared available.
So what was going on then?
The primary rule for investigating and discovering the source of public policy at the interface between government and private enterprise is "follow the money". That is, who benefits financially and why.
We soon understood that a commitment to nuclearization of the energy grid also meant a commitment to a small group of engineering, construction and supply and energy companies as well as the three or four financial entities large enough to finance such projects. While any electrical generating facility is a large costly project, few at the time were as large as nuclear plant nor required such specialized and centralizing financing and engineering. The potential profits that could be made by those few large companies from the engineering, construction and above all financing fees, not to mention the potential monopolization of a segment of the energy market was staggering and made it worthwhile for them (they were large enough and wealthy enough to do so) to mount a significant public and political relations campaign to benefit themselves.
Although denied in their public relations campaign, they themselves recognized that the generation of electricity from nuclear facilities carried with it inherent safety and environmental uncertainty and with it significant financial risk. What they could not tolerate, however, was risk, any risk, since the sunk costs were so large.
Ultimately, the complexity of the legal and regulatory process in the US generated, such unacceptable risk and that coupled with flattening demand and the continuing low price of oil, caused the nuclear electrical generating industry to fail in the United States.
In other countries however a powerful cartel of less than a dozen state-owned or state guided firms have spearheaded the growth of the industries in those countries.
Unfortunately, the capital project financial industry in the US could not see smaller decentralized electrical generating projects with lower capital needs as worth their efforts (although they continue to search and lobby for large capital intensive energy projects such as wind farms and huge solar arrays). The less capital intensive energy options have fallen to the much smaller investment financing market.
Regrettably, an unintended consequence from the failure of the nuclearization of energy production was its impact on a generation of engineers and engineering schools dependent and expectant on continued growth in the demand for super large capital projects like nuclear power plants. The high-tech boom failed to provide an adequate alternative to employ this excess engineering capacity resulting in civil engineering becoming almost a lost art in the US. Unfortunately, engineering as a valued vocation was soon replaced by a demand for and an explosive growth in business and financial schools. Unlike the nation's engineering schools that provided the country with a profession that makes things, the financial and business schools produced a generation of graduates knowing only how to make money. As Henry Ford observed, “A business that makes nothing but money is a poor business.”
(Adapted from an article first appearing in Trenz Pruca's Journal)
The most important goal for any democratic government should be to avoid removing risk from enterprise. Yet it currently appears that the only function of government is to shield enterprise from risk.
Trenz Pruca.