Carbon-capping legislation and recent studies that conclude that a
massive build-up of nuclear power is needed to minimize the
negative economic impact of CO2 caps have spurred
several high-profile articles on the costs of nuclear energy. One
such article notes that estimated construction costs for nuclear
power plants and the overall costs of nuclear power have increased
significantly since 2000 and espouses wind power, solar power, and
energy efficiency as alternatives to new nuclear plants.
What these articles do not recognize is that energy prices are
increasing broadly. When considered properly, nuclear power is the
only available technology that is adequate, affordable, reliable,
safe, and environmentally clean. If the nation wants to limit
CO2 emissions, then it must turn to nuclear power.
Though nuclear energy is expensive and lowering its real costs
(as opposed to artificial discounts through subsidies and mandates)
should by a primary goal of public policy-especially in light of
its critical role in meeting CO2 targets-those who
criticize nuclear energy based solely on costs do not fully
appreciate the broader context of energy policy, energy inflation,
and rising construction costs in general.
Rising Costs Are Not Unique to
Cost problems are not specific to the nuclear industry. Energy
and construction prices are escalating across the board. Much of
the increase is a result of rising commodity prices for products
like cement, steel, and copper. The truth is that coal, wind,
and solar projects are all becoming increasingly expensive. If
those sources were inexpensive, few would even consider building
new nuclear plants, yet nearly 20 companies are pursuing
construction and operating licenses for up to 30 new reactors.
Renewable energy sources would not need mandates and subsidies to
survive if they were affordable.
Furthermore, assiging all of the costs of the first few nuclear
plants to future plants is inaccurate. As more orders are placed,
economies of scale will be achieved. Today, it is very expensive to
produce nuclear-qualified components and materials because steep
overhead costs are carried by only a few products. Additional
production will allow these costs to be spread, thus lowering costs
overall. Further savings should be achieved by applying lessons
learned from initial construction projects. Because nuclear plants
could have an operating life of 80 years, the benefit could be well
worth the cost.
To argue that nuclear power is not viable based on cost alone
while ignoring the many problems, including costs, that are
associated with wind, solar, and efficiency measures is to present
an inaccurate picture.
Wind and Solar Have Problems Too
Wind and solar power do have a role in America's energy mix, but
those technologies alone are not ready or able to power the United
States. Despite efforts to portray these sources as viable
alternatives to nuclear power, they have their own problems. They
are expensive, intermittent, and inappropriate for broad swaths of
the United States. For example, wind turbines are virtually useless
in the Southeast, where there is little wind. Even environmental
activists are beginning to oppose wind projects because they kill
birds, despoil landscapes, and ruin scenic views.
The costs of wind power have been increasing. The Department of
Energy reports that the price of wind turbines has gone up 85
percent from 2000-2007, citing the declining value of the dollar
and the increased input prices of steel and oil as the primary
reasons. In fact, the cost of planned wind
generation in the Rocky Mountain region now exceeds $14.5 billion
for about 8,000 megawatts of capacity. This may seem like a bargain
until two important points are taken into consideration.
First, wind is intermittent, producing electricity only
about a third of the time. This means that power plants are needed
to provide electricity when the wind is not blowing. If one is
going to rely on wind and the additional power-generating capacity
that is needed when the wind is not blowing, those additional costs
should be assigned to wind power as well.
Second, the life expectancy of windmills is projected to
be 20 years. Nuclear power plants produce power for up
to 80 years. This must be taken into account when considering
Solar energy projects are also running into trouble. Like wind,
solar is intermittent: It produces electricity only when the sun is
shining. The general economic problems of solar power were recently
described in a study by Severin Borenstein, a professor at the
University of California, Berkeley's Haas School of Business and
director of the UC Energy Institute. He looked at the costs of
26,522 photovoltaic solar panel installations, equal to 103
megawatts of capacity, that have received state support from
California and found that their cost ($86,000-$91,000) far
outweighed their value ($19,000-$51,000).
Other problems have arisen as well. For example, Solar, Inc.,
the world's largest solar company, recently told investors that its
largest market, the European Union, may ban its solar panels
because they contain toxic cadmium telluride. To replace the
cadmium model with a silicon-based model would quadruple the
The intermittent nature of wind and solar energy is important to
the overall economics of energy and how these renewable sources
relate to nuclear power. Given the low cost needed to operate a
nuclear plant, lifetime costs are very low once the plant has been
constructed. It is therefore difficult to conclude that
wind or solar power should be built at all.
This could explain why many opponents of nuclear power are
committed to renewable portfolio standards. These standards
dictate that a certain percentage of energy-production capacity
must come from wind and solar sources. This forces energy producers
to invest in wind and solar even though such investment may not be
Instead of mandating how energy is produced, the government
needs only to set the regulatory framework and should allow the
market to dictate how best to meet America's energy needs. If wind
and solar are competitive, they will succeed. The same holds true
Efficiency Mandates Do Not Discount
the Value of Nuclear Energy
Even critics of nuclear energy acknowledge that renewable
sources alone will likely not meet America's growing energy demand.
These critics assert that any shortfalls in supply will be met by
increased efficiency, and they want mandatory energy reductions to
assure that it happens. Such draconian measures are not needed and
would not work without dire economic consequences. Energy
efficiency standards have run into their own problems with higher
costs and unintended consequences, such as lower productivity.
This is not to downplay the importance of efficiency. Energy
resources are precious, and society benefits by their conservation.
However, the value of efficiency mandates is questionable. People's
interests are served by efficiency, and they will pursue it where
it most benefits them. That is why consumers and producers, not
government, should drive the push for efficiency.
Mandatory efficiency requirements often raise the price of
consumer goods and force engineering in directions that technology
is not ready to support. The result is often lower productivity and
less efficient technological innovation. This not only affects
everyday lives (toilets do not effectively flush, and washing
machines do not effectively wash), but also can have broader
technological effects. For example, new CAFE (Corporate Average
Fuel Economy) standards will force automobile
manufacturers to focus their research and development resources on
meeting new miles-per-gallon mandates instead of on revolutionary
The Market Should Decide
Government has no business making any decisions about nuclear
power based on costs. Its role should be to provide adequate
oversight and fulfill its legal obligations on nuclear waste. It is
primarily private companies that produce America's power,
and consumers pay for it. Their interactions in the marketplace
should determine the best way to meet America's energy needs.
The irony of mandates is that wind and solar may well have a
place in meeting America's long-term energy needs. Massive wind
farms that attempt to duplicate the model of high-output
centralized power stations and individual photovoltaic solar
installations on rooftops may not be the appropriate models. It may
be that a decentralized model where households or neighborhoods
have their own energy sources would work better for some of these
technologies while more centralized models may work for others. But
because the government attempts to funnel investment in one
direction rather than allow the market to respond to peoples'
needs, wind and solar many never get the opportunity to
A Sustainable Approach to Nuclear
In comparison to other emissions-free energy sources, nuclear
power is both competitive and critical to the success of
CO2 reductions. Even without those goals, nuclear
power's many advantages make it an attractive energy source. The
United States should allow nuclear power to reemerge as a viable
and robust American industry.
A recent Heritage Foundation paper outlines ten market-oriented
action items to reduce the cost of nuclear energy and prepare for a
nuclear renaissance. It recommends such policies as capping
financial support at the level provided by the Energy Policy Act of
2005, liberalizing commercial nuclear trade, removing commodity
tariffs, and resolving the impasse over Yucca Mountain.
Nuclear power must be expanded if CO2 caps are to
work. Despite claims of high costs, nuclear power is competitive
with renewable energy sources when all costs are factored in. The
time has come to acknowledge the critical role that nuclear power
will play in the United States.
Jack Spencer is Research
Fellow in Nuclear Energy and Nicolas Loris is a Research Assistant
in the Thomas A. Roe Institute for Economic Policy Studies at The
William W. Beach, David W. Kreutzer, Ph.D., Ben Lieberman, and
Nicolas D. Loris, "The Economic Costs of the Lieberman-Warner
Climate Change Legislation," Heritage Foundation Center
for Data Analysis Report No. CDA08-02, May 12, 2008, at
U.S. Environmental Protection Agency, EPA Analysis of the
Lieberman-Warner Climate Change Security Act of 2008, March
14, 2008, at http://wwwepa.gov/climatechange/downloads/s2191_EPA_Analysis.pdf
(May 22, 2008); U.S. Department of Energy, Office of Integrated
Analysis and Forecasting, Energy Market and Economic Impacts of
S. 2191, the Lieberman-Warner Climate Security Act of 2007,
April 2008, at /static/reportimages/95C27098369FF27A32739233F35EC699.pdf
(May 22, 2008).
Joseph Romm, "Nuclear bomb," Salon.com, June 2, 2008, at
Rebecca Smith, "New Wave of Nuclear Plants Faces High Costs,"
The Wall Street Journal, May 12, 2008, at
Simonson, "Prices Surge for Imports, Steel, Copper, Oil, Gas,"
Purchasing Magazine, April 16, 2008, at
BNP_GUID_9-5-2006_A_10000000000000311931 (June 5,