Nuclear power is a proven, safe, affordable, and environmentally
friendly alternative to fossil fuels. It can generate massive
quantities of electricity with almost no atmospheric emissions and
can offset America's growing dependence on foreign energy
sources. The French have used it to minimize their dependence on
foreign energy, and at one time the United States was on the path
to do the same.
However, the commercial nuclear energy industry in the U.S. is
no longer thriving. Investors hesitate to embrace nuclear power
fully, despite significant regulatory relief and economic
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
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.
Private Investors in U.S. Industry
Private investors have a key role to play in reestablishing
America's nuclear industry. The industry is no longer owned or
supported by the government, although the Energy Policy Act of
2005 does provide some incentives to utilities. In general,
private investors provide the capital and take the risks
necessary to develop the nuclear industry. The government's
role should be to ensure safety and allow the industry--just like
any other--to compete and flourish in open markets.
The heavy regulatory burden imposed on the nuclear industry
creates enduring uncertainties about the future of nuclear power in
the United States. While a strong public commitment does provide
some near-term certainty, it still is accompanied by
regulatory and investment uncertainty. This does little for the
long-term planning inherent in nuclear energy, which results
in higher risk assessments for America's energy companies.
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 oversight
while preventing activists from hijacking the regulatory
Dependence and Vulnerability
The federal government heavily promoted nuclear power throughout
the industry's rise in the 1950s and 1960s. The government
essentially picked nuclear energy as a winner to supply America's
energy needs. This public commitment attracted significant private
investment during the industry's growth phase. Investors made
decisions based on, among other variables, an expectation that the
government would not suddenly turn against nuclear power.
The United States spent decades encouraging the private sector
to invest in peaceful nuclear energy. This effort began with the
Atomic Energy Act of 1954, which gave industry easy access to
nuclear technology that was originally developed for national
security reasons, and included the creation of follow-on
public-private partnerships such as the 1955 Power Demonstration
Reactor Program. The federal government worked with industry on a
host of military, civil, and commercial projects throughout the
1950s and 1960s. Under the auspices of the Atomic Energy
Commission in the executive branch and the Joint Committee on
Atomic Energy in Congress, the government provided lucrative
guaranteed contracts and other subsidies that protected investments
and assured private-sector access to the latest nuclear
The peaceful use of the atom, it was claimed, was the answer to
future energy woes because it would produce electricity that, among
other advantages, was "too cheap to meter." The U.S. Navy's
desire to expand nuclear propulsion in its fleet also heavily
influenced growth in the private sector. Although direct subsidies,
such as rapid tax amortization and funding for reactor
construction, stopped in the late 1960s, entities within Congress
and the executive branch continued to promote nuclear power with
indirect support, such as market guarantees and access to
Private investment followed Washington's lead. In cooperation
with the federal government, the private sector expanded capacity
and capabilities and developed the necessary technology. Public
policy effectively harnessed the power of the private sector to
advance national objectives. The result was the emergence of a
world-class nuclear industry.
However, the nuclear industry's success was due largely to
public policy designed to promote its growth. Although the industry
grew, it became overly dependent on government. This left it
vulnerable to shifts in public policy. When policy shifted
toward outright opposition as the activist community convinced
America's political left that nuclear power was dangerous, the
industry predictably failed as investors cut their losses and
moved capital to opportunities that were perceived as less
threatened by increasing regulatory volatility.
Anti-nuclear activists understood that they could kill the
industry by turning public opinion--and therefore a democratic
government--against nuclear power. This process began in the early
1970s. Although other factors such as rising interest rates,
recession, and economic chaos caused by the oil crisis contributed
to the nuclear industry's deterioration, the growing regulatory
burden was paramount.
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. 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. In California, the Abalone Alliance
adopted similar tactics and frequently blocked the gates of the
Diablo Canyon power plant.
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,
utilities were required to hold public hearings before
obtaining a permit to start a project. This decision created a major
opening in the process that anti-nuclear activists could
Changing the Economics of Nuclear
The public-private relationship worked until nuclear power began
to fall out of favor with public officials in the early 1970s.
This, in part, led to bureaucratic restructuring in the legislative
and executive branches.
In Congress, the Joint Committee on Atomic Energy was disbanded,
and oversight responsibility for nuclear activities was
transferred to multiple committees. This led to decentralized
oversight and a weakening of nuclear policy in Congress. It also
provided additional avenues for anti-nuclear lobbyists to influence
In the executive branch, the Atomic Energy Commission, which
both advocated for and oversaw the nation's nuclear activities, was
replaced by the Nuclear Regulatory Commission (NRC), which was
given the sole function of regulating the nuclear
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,
including over 1,300 pages of laws, treaties, statutes,
authorizations, executive orders, and other documents. In addition
to obvious legislative efforts, such at the Atomic Energy Act
of 1954 and the Energy Reorganization Act of 1974, nuclear
activities in the United States must comply with the Inspector
General Act, the Clean Air Act of 1977, the Federal Water Pollution
Control Act of 1972, and the National Environmental Policy Act of
1969, to name a few of the other applicable laws.
This created numerous opportunities for anti-nuclear groups to
file noncompliance suits. Whether or not the groups' concerns were
legitimate, regulators often responded with additional
mandates, which were very easy to establish. A regulator could
compel a change in plant design simply by deciding that it would
add substantially to public health or safety. The problem was that
NRC statutes did not define "substantial." 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.
This inconsistency increased costs, further souring
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. The additional and unexpected
controls created industrywide uncertainty and raised questions
about the long-term economics of nuclear power. They also drove up
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. Yet the commission
continued to issue regulation after regulation.
At the same time, state and local governments expanded their
oversight functions. States often claimed jurisdiction over
construction and operations permits as well as environmental
regulation. For example, while the Federal Water Pollution Control
Act as amended by the Clean Water Act of 1977, the Clean Air Act,
and the Solid Waste Disposal Act mandated that states enforce
minimal federal environmental standards, many states chose to
adopt additional regulations. Environmental
standards that varied from jurisdiction to jurisdiction
imposed additional costs and opened additional avenues for
anti-nuclear activists to exploit.
Today, many states exercise significant authority over the
location and construction of nuclear reactors. Some
jurisdictions have outright moratoria on new nuclear construction.
For example, California prevents further construction of nuclear
power plants until both the California Energy Commission and the
federal government approve a method of disposing of nuclear waste.
Most states that limit construction of nuclear plants use some
variation of this theme. Public commissions and referenda can
impose additional restrictions.
The shifting regulatory environment gave rise to additional
reviews from numerous public institutions. Once permits were
obtained, additional design changes were often mandated--even
during construction. This inefficient and time-consuming process
increased the time required to build a nuclear power plant by 42
percent (from 86 months to 122 months) between 1966 and 1970. From
1974 to 1984, the average construction delay was nearly 40 months,
and 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. This significantly
increased both the cost of a plant and the risks to the investors
financing these projects. In addition, as the need for electricity
increased, lengthy delays further undermined public confidence
in the viability of nuclear power.
During the 1970s, regulatory mandates also drastically
increased the quantity of materials required to build a plant.
Steel requirements increased by 41 percent, concrete by 27 percent,
piping by 50 percent, and electrical cable by 36 percent. Even
though experience demonstrated that these increases were
unnecessary to maintain safe operations, regulatory relief never
followed. In some instances, builders even added
safety features that were not mandated in hopes of avoiding further
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.
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.
From 1981 to 1988, operations and maintenance costs
increased by 80 percent, and 30 to 60 percent of this increase was
the direct result of NRC regulation. High interest rates during
the 1970s meant that long delays significantly increased project
costs as rising interest payments drove up the cost of capital.
High inflation drove up the costs of materials. Furthermore, plants
were sometimes completed and ready to start producing electricity
but were not allowed to begin operations for one regulatory reason
or another. This prevented financiers from collecting on their
investment. These higher costs were passed on to investors as
investment losses and to consumers in higher electricity
rates. Neither could be sustained over time when other
alternatives, such as natural gas, existed.
Overregulation Leads to a Declining
Overall, regulation increased the cost of constructing a nuclear
power plant fourfold.  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,  which means that either
consumers paid significantly more or utilities incurred losses if
they did not charge market prices. Neither circumstance was
The U.S. government even banned entire commercial
technologies outright. In 1977, President Jimmy Carter dealt the
U.S. nuclear industry one of its greatest setbacks by issuing
Presidential Directive 8 (PD-8),  which forbids reprocessing
(recycling) nuclear fuel in the United States. "Closing the fuel
cycle," the term used to describe the recycling of spent nuclear
fuel, allows used fuel to be recycled and used again. Regrettably,
PD-8 has effectively been U.S. policy ever since. As a result,
nuclear fuel is run through U.S. reactors only once, wasting a
valuable resource and producing unnecessary amounts of high-level
Recycling spent nuclear fuel would help the U.S. and the world
to reduce the volume of high-level nuclear waste and recover vast
amounts of energy that remain in "spent" nuclear fuel even after it
has gone through a reactor. Currently, only about 5 percent of
the energy is used per volume of fuel. The U.S. does not recycle
nuclear fuel, but France, Great Britain, China, and Russia are
safely using recycling technology.
With recycling in place, the reemergence of nuclear energy in
the U.S. could finally move away from relying so heavily on the
proposed Yucca Mountain repository. It would allow for a more
reasonable "mixed" approach to nuclear waste, which would
likely include some combination of permanent geological
storage in Yucca Mountain, interim storage, recycling, and new
However, establishing economically viable commercial
recycling in the U.S. will not be easy. Carter's unilateral ban had
a chilling effect on the domestic nuclear industry, forcing
domestic nuclear suppliers to discontinue their activities at the
cost of hundreds of millions of dollars. One industry group
invested approximately $500 million in a project that never became
operational. Another major company spent $64 million
on a facility that never opened. This technology has since
been transferred overseas and is being used safely by other
countries, such as France and Japan.
With overregulation driving up the cost of nuclear power and the
government unilaterally banning critical commercial technologies,
the U.S. nuclear industry all but died. From the early 1950s
through 1974, 231 nuclear power plants were ordered. Another 15
were ordered by 1977. However, no new orders have been
placed since 1977, although some of plants ordered by 1977 have
since become operational.
Not only did orders stop, but previously ordered plants were
cancelled. Of the 246 plants ordered in the U.S., only 104 operate
today. Some were never built, others were shut down early, and
construction was stopped on many after substantial investments
had been made. The result was billions of dollars in losses. For
example, the Cherokee plant in South Carolina was cancelled in 1982
after over $600 million had been invested. In 1983, a group of
three utilities cancelled the Zimmer plant in Ohio after investing
$1.8 billion. In total, $30 billion was spent on
nuclear plants that were never completed, which is more than the
value of most of the companies that are considering new plant
The result is that the United States is no longer a technology
leader and does not receive the full benefits of nuclear power
as it searches for environmentally friendly, affordable, and
accessible sources of energy to meet future energy needs.
Conversely, other nations are well positioned to lead the global
resurgence in peaceful nuclear power.
This is not to say that the United States should build its
nuclear industry according to the French or Russian models, which
rely on state ownership and controlled markets. Like the old U.S.
nuclear industry, this approach creates an industry that relies on
government support for long-term success. The pitfalls of this
approach were aptly demonstrated during the 2007 French
election when the possibility that nuclear skeptic
Ségolène Royal would be elected president of France
raised fears about the future of the French nuclear industry.
The Effect on Ratepayers
The near death of the U.S. nuclear energy industry has
harmed both investors and consumers. First, ratepayers eventually
pay for the increased costs of generating electricity. More
important, by removing nuclear energy from America's energy
portfolio, anti-nuclear activists have limited the choices
available to America's energy producers and consumers.
Limiting choice has two inevitable results: higher prices and lower
Without nuclear energy as an option and with coal being frowned
upon, utilities started moving toward natural gas power plants.
This growing reliance on natural gas has caused electricity
prices to follow the volatility of natural gas prices. As demand
for natural gas has increased, prices have become even more
Perhaps more ominously, it positions the United States to
increase its reliance on foreign energy significantly. Today,
America's energy dependence is largely a function of foreign
petroleum and the transportation sector. The nation gets only
about 2 percent of its electricity from oil-fired plants. However,
the growing U.S. dependence on natural gas is beginning to
exceed domestic supply. This has resulted in increasing natural gas
imports. Importing energy is not necessarily a problem if
those resources are coming from stable, friendly countries, but
foreign natural gas reserves are located largely in many of the
same, less predictable countries that have large petroleum
Congress and the Administration have cleared many of the
regulatory hurdles to new nuclear plant construction. For example,
the Energy Policy Act of 1992 allows utilities to combine their
construction and operations licenses, which should
streamline much of the regulatory process. The problem is that no
one has tried the procedure yet. The Energy Policy Act of 2005
added billions of dollars in regulatory protection for new nuclear
plant construction. These provisions should mitigate
much of the government-induced risk in the near term. Finally, in
2007, the NRC issued a new rule that will allow some pre-licensing
of site preparation activities.
While these efforts are important first steps, they do not
provide for long-term predictability. Instead, they provide
confidence that a small number of plants will be built over the
next few years. Industry is responding with investments to prepare
for meeting that demand. However, realizing the many
benefits of nuclear power will require a much broader
expansion of the nuclear energy industry. Changing the nation's
energy profile will require infrastructure investments on par with
what took place during the industry's prime.
The history of civilian nuclear energy in the United States
reveals the dangers of overt government promotion of or
opposition to any particular technology or industry. When public
opinion and government policy shifted against nuclear power, the
industry was ill-prepared to survive, investors lost billions, and
The role and potential of nuclear power in the United States are
too important to allow it to fall victim to the same mistakes
again. Investors must be assured that nuclear power will be allowed
to stand or fall on its own merits. While federal, state, and local
governments will have a role to play, especially in building
confidence with investors, the best long-term subsidy that they
could give the industry is the freedom to succeed.
Jack Spencer is Research Fellow in
Nuclear Energy in the Thomas A. Roe Institute for Economic Policy
Studies at The Heritage Foundation.
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Conflict," Social Problems, Vol. 32, No. 5 (June 1985), p.
"Abundant Power from Atom Seen: It Will Be Too
Cheap for Our Children to Meter, Strauss Tells Science Writers,"
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Magali Delmas and Bruce Heiman, "Government
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Industries," Journal of Policy Analysis and Management, Vol.
20, No. 3 (Summer 2001), p. 447.
For a full analysis of this phenomenon, see
ibid., pp. 433-546.
U.S. General Accounting Office, Nuclear
Powerplant Licensing, pp. 17-21.
For a state-by-state analysis of state
nuclear policy, see E. Michael Blake, "Where New Reactors Can (and
Can't) Be Built," Nuclear News, November 2006, pp.
Delmas and Heiman, "Government Credible
Commitment," pp. 450-551.
Delmas and Heiman, "Government Credible
Commitment," p. 454.
Cohen, The Nuclear Energy Option,
Christian Joppke, "Decentralization of
Control in U.S. Nuclear Energy Policy," Political Science
Quarterly, Vol. 107, No. 4 (Winter 1992-1993), pp. 719-720.
Delmas and Heiman, "Government Credible
Commitment," pp. 433-546.
Joppke, "Decentralization of Control in U.S.
Nuclear Energy Policy," p. 719.
Energy Policy Act of 1992, Public Law
102-486, Sec. 2801.
Energy Policy Act of 1992, Public Law 109-58,
Smith, "Nuclear Utilities Redefine One Word
to Bulldoze for New Plants."