The Nuclear Option

There are many players in the electricity sector who believe that free market solutions are the answer.  Many of these people also believe that nuclear energy must play an ongoing role the future electricity supply.  But how does nuclear energy play in the “free” market?

They play very well.  They get everything for free.  Paid for by the taxpayers.

Ontario’s nuclear industry receives 5 important and substantial subsidies, from both the Federal and Provincial governments.

The Federal Limitation of Liability Act limits their liability in the event of a major accident to $75 million.  So if a Chernobyl type incident occurs, and we have to provide compensation to residents of the southern half of Bruce County because it is no longer habitable, the nuclear plant pays only $75 million.  Taxpayers pay the rest of the billions required.  They get free insurance.   A wind turbine owner has to buy their own insurance.  Some say that nuclear reactors would never be built if they had to pay for their own insurance.  The cost of the insurance, if they could get it, would be too high.
The research and development for nuclear is funded by Atomic Energy of Canada Limited (AECL), a Federal Crown Corporation.  AECL has received a subsidy from the Federal government of over $200 million/year since the 1950’s, and the grants continue.  Total grants to AECL have run into the billions over the years.  Two years ago, the wind industry in Canada received less than $500,000 in research support, principally to support the Atlantic Wind Test Center in PEI.  The other R+D in new materials, blade design, towers, controllers, software, wind resource assessment has been funded by the wind industry.  One wag said that if the same funds spent on nuclear research was spent on perfecting the gerbil flywheel, we would be able to supply our power needs many times over from rodent power.

Ontario’s nuclear plants were relieved of their debt as part of the transistion to an “open” market.  The Conservative government was convinced to do this by Ontario Hydro, as it was viewed as essential to allowing them to compete in the North American marketplace.  Over $20 billion of the debtload incurred to build the nuclear plants has been forgiven, and the debt is now carried by the Ontario Energy Finance Corporation, a provincial Crown Corporation.  The interest on this debt is funded principally by the debt recovery charge that you pay on your utility bill.  Wind turbine owners have to pay their own debt charges.

When a new generator of any type is installed, they are required to pay the most of the cost of connection, which may include protection and control, new wires, upgrades to the transmission system etc.  But not nuclear.  The recent agreement with Bruce Power to refurbish two of the reactors at Bruce A will require new transmission to get the power out.  While the cost estimates of building the new transmission are not finalized, some have estimated that it may be as high as $1.5 billion.  This will be paid for by the ratepayers in Ontario through their transmission charges.

Plant decomissioning and waste storage are other costs that fall on the taxpayers.  Ontario Power Generation has some funds set aside to do this, and claims it is adequate to do the job.  But the waste has to be stored safely for 100,000 years.  What exactly is the budget for security guards in 100,000 years?  And is the number accurate?  Nuclear reactors and waste material are highly toxic dangerous substances.  They cannot just be left to let nature take its course.  There is a reactor in Britain that has had a team of over 500 working for years on decomissioning a plant, and they have made very little progress.  The nuclear industry has decomissioned very few plants, and so cost estimates are wildly unreliable.  How can we possibly know what the cost of plant decomissioning and waste storage will be?  When have the cost estimates of the nuclear industry ever been accurate?  We haven’t even decided how it will be done.   Because the materials are so toxic, society will have little choice but to pay whatever it costs to look after the problem.  Yes, that will be the taxpayer.  Wind turbines can be removed at little cost, with the scrap value covering the removal cost.

So the nuclear industry receives a wide range of subsidies.  Their R+D is free.  Their insuance is free.  Their debts are forgiven, and therefore they use the plants built by the taxpayers for free.  Their transmission upgrades are free.  And their very costly decomissioning and waste storage is of undetermined cost, and cost overruns will be paid by all of us.  Hopefully the cost will just be money.

Free markets are usually a good idea.  They are the most efficient way to allocate capital resources.  But in the case of nuclear, “free” has a different meaning.

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