If Nuclear Is Superior, Why Won't "Wall Street" Provide All The Necessary Capital?

[wtmusic]

"From the outside looking in, the reluctance to put up the capital for nuclear power plants may seem to be based on a fear of unpredictable project delays, regulatory changes that require construction tear down/rebuild in the middle of the process, memories of an operator error at a new plant that turned a billion dollar asset into a billion dollar liability, or memories of Shoreham, a plant that cost more than $5 billion to complete and license, but which got sold off for a buck without ever operating. (Long Island residents are still paying off that loan and breathing the emissions from the diesel generators and waste to energy plants that are providing the power that Shoreham should have supplied.)

I want to offer you a different, and potentially more sinister reason. In the financial world, nuclear energy faces the challenges mentioned above, but it is also unpopular because it is NOT a fast way to turn money borrowed from the lifetime savings of millions of pensioners into the immense returns favored by the "private equity" funds. Nuclear plants are long term investments that pay dividends in the form of clean, emission-free, nearly zero marginal cost electricity for many decades. They cannot be flipped or traded on unregulated exchanges.

Nuclear energy also poses a serious threat to the continued viability of hundreds of billions of dollars worth of already existing investments and debts.

The fossil fuel industry, including all of the discovery, extraction, transportation, and refining components that make it possible to operate a gas fired power plant in Maryland on a large quantity of reliably supplied molecules of fuel originally formed millions of years ago under swamps off the coast of Dubai and transported across the ocean in liquid form, is built on the notion that energy is scarce, but necessary. The scarcity keeps the prices well above the marginal cost of production - after all of the capital equipment is in place - and the necessary part ensures that there is a large, reliable market.

Now introduce a disruptive technology, one that can supply an entire city with electricity or push large ships across the ocean by breaking apart a few pounds of a relatively easy to find metal that the United States has in abundance, all while not producing any waste products at all that need to be dumped into the atmosphere."

http://www.learningaboutenergy.com/2010/04/april-nuclear-energy-facts-report-available.html

[Warren Stupidity]

1. They love them the corporate socialism

they just don't like that people socialism.

Socialism for the people, not for the corporations!

[Cirque du So-What]

2. Corporations are playing a waiting game

They believe that Uncle Sugar will pick up the tab if they drag their feet long enough. Sad thing is, they're probably right. They want so socialize the construction & start-up costs, socialize the risk, and keep the profits for themselves.

[kristopher]

7. The OP poster is famous for treating harebrained blogs like they are gospel...

This is yet another case of the nuclear proponents reaching for idiocy because they have nothing factual to support their position.

The premise seems to be that only projects that have very high rates of return are the ones that get financed and projects that have a lower rate of return are not.

Think about the stupidity behind that premise for just a moment. It presupposes that risk isn't a factor in decision-making by investors. When all those rating agencies slam nuclear power they aren't doing it because the risk/reward evaluation is bad, but because the they want high risk returns on low risk projects. Forget the fact that trillions of dollars of other investments are setting the standard for risk/reward evaluations, poor little ol' bitty nuclear power is being singled out to be picked on.

What is absolutely true is that there ARE two sets of numbers involved - those produced by the people who want to sell nuclear power plants, and those produced by independent analysts, financial firms and credit rating agencies.

It is like saying who do you trust, the car salesman or Consumer Reports?

I'll take Consumer Reports every time.

[RC]

11. Consumer Reports doesn't always know what they are talking about either.

Sometimes the car salesman is more reliable.

[Dogmudgeon]

3. I don't think anyone has been reading the link ... or even the OP

Well, at least the last couple of respondents.

--d!

[wtmusic]

4. I hear you brother, it's all about the big corporations

robbing the people!

Now, what was that again? :crazy:

[Arctic Dave]

5. So the jist is, corporations can't make huge sums off of it?

Whoever builds them does.

If nuclear is so cheap and easy, why hasn't the entire US Naval Fleet been converted to nuclear?

[joshcryer]

6. The gist is that it has a slow long term payback as opposed to a short immediate payback.

The markets prefer short term profit over long term planning.

[kristopher]

8. No they don't.

You wrote, "The markets prefer short term profit over long term planning."

The "markets" prefer no such thing. They have slots for all types of investment - including long term STABLE and SAFE investments. The problem with nuclear is that it is a piss poor risk.

EVERYWHERE IN THE WORLD all the credit agencies say the risk simply isn't worth it - period. The only way these monstrosities get built is when a government shoves them down the throats of the public.

[joshcryer]

10. Tell me why we're in the current global financial crisis, then?

It's not because the markets have a balanced investment approach where long term investments are as good as short term. It's because the markets wanted to make short term profits very quickly.

[kristopher]

13. You have shown time and again that you are totally clueless on economic matters

This is just another in a long list of fact free conclusions you've jumped to.

Just look at a basic guide for investors to get at least a clue.

Moody's:
Moody’s is considering taking a more negative view for those issuers seeking to build new nuclear power plants. Rationale is premised on a material increase in business and operating risk.

Citigroup: We see little if any prospect that new nuclear stations will be built in the UK by the private sector unless developers can lay off substantial elements of the three major risks. Financing guarantees, minimum power prices, and / or government-backed power off-take agreements may all be needed if stations are to be built.

Risk plays an important role in the nuclear analysis because of the history, long lead-times,
and economic and technological uncertainties involved in reactor construction and operation. The
decision to commit to a reactor that requires a long lead-time and produces a large quantity of power
creates sunk costs and results in rigidities that are vulnerable to changing economic, regulatory, or
financial conditions. Over the long construction and operation period, things can change, rendering
the initial decision uneconomic.

Regulators should not assume that ratepayers should bear the real risks of building nuclear
reactors. A decision to authorize a reactor that has the risks identified above can impose severe costs
on ratepayers, the utility, and the local economy. In addition to imposing excessive costs on
consumers, a reactor may become uneconomic during its long construction cycle due to the
development of alternative technologies, thus weakening the economy of the service area and the
financial status of the utility.45

In the regulatory context, there is a tendency to try to shift the risk to ratepayers before and
after the construction decision is made. Before the decision is made, utilities try to shift risks to
ratepayers by seeking recovery of costs before the plant is in service. After a decision is made, if
something goes wrong, the utilities will argue that they made the best decision they could at the time
and therefore should not be held accountable when things change. In a competitive marketplace,
however, they would bear the risk of their decisions, but also reap the rewards if the costs they
incurred were lower than other alternatives available.

Beyond the risk of cost overruns, marketplace and technological risk should be taken into
account in the resource planning process. Extensive assessment of the cost and availability of
alternatives should be made to ascertain whether the proposed plant is likely to be the least costly
alternative. At a minimum, the public utility commission should consider the likely technological
developments during the construction and early operation phase of the nuclear reactor, identifying
alternative technologies that could meet the need for electricity in that time frame.
A variety of mechanisms are available for incorporating risk into the decision-making
process and allocating the risk to various stakeholders. For example, commissions can put a cap on
costs, forcing utilities to bear the burden of cost overruns. The important point is to recognize the
risk and make its allocation explicit and transparent.

Figure VI-1 presents three characteristics of generation alternatives from the Lazard study
that, as we have noted, underestimates nuclear costs significantly. Nevertheless, it shows that nuclear
reactors are not the preferred option by a long shot. It shows the consumer cost, capital cost, and
the construction period. These are three key determinants of risk, as discussed above. Capital costs
are sunk costs, which render the option inflexible; long lead-times not only allow consumer costs to
escalate, but also give alternatives more time to develop, thus improving their competitiveness.
Finally, high consumer costs may reduce demand. The smaller the circle and the closer to the origin,
the lower the cost and the less risk.

The Lazard study used a construction period of 69 months for nuclear, but others have used
much longer time periods. Even with the underestimation of capital costs and the relatively short
construction period, nuclear has a unique set of characteristics that are unattractive from the risk
point of view – combining high costs, large capital outlays, and a long construction period. The coal
based alternatives present about the same risk profile as nuclear reactors. There are half a dozen
options that are clearly superior to nuclear reactors on all three risk dimensions, and the lowest risk
alternative. Efficiency is not shown because Lazard estimated only the cost, which, as we have seen,
is quite low. Efficiency would certainly have a short lead time and a low capital cost. If it were
included it would be the most attractive on all three risk dimensions. p.54

- THE ECONOMICS OF NUCLEAR REACTORS: RENAISSANCE OR RELAPSE?
MARK COOPER
SENIOR FELLOW FOR ECONOMIC ANALYSIS
INSTITUTE FOR ENERGY AND THE ENVIRONMENT
VERMONT LAW SCHOOL

[joshcryer]

16. I know enough about the markets to know that short term investments are preferred.

You are just attempting to spread disinformation.

[RC]

12. The size of the ship has a bearing here.

[Arctic Dave]

14. If they can put one in a sub which is about the same size as a Arlie Burke

class destroyer( which has eight turbines on them), they should be able to put one in it.

[joshcryer]

17. Nuclear submariners have a 10 fold radiation exposure than regular people.

And you have your answer.

(Note, this is still quite low compared to some humans who live in naturally more radioactive areas on the planet.)

[Arctic Dave]

18. If you would have said that the reason was because they would be

detected too easily from Russian sattelites I would have found that more believable then the military being overly concerned about the welfare of the people. :)

[joshcryer]

20. It's more that you have a higher level of risk management when radiation is like that.

And that can lead to unnecessary paperwork on a smaller ship. :)

[Nederland]

21. Subs are different

A nuclear sub has clear advantages over a sub powered by fossil fuels--most obviously the ability to stay underwater for months at a time. The advantages of nuclear for a surface ship are far less pronounced, so the increased cost of building a nuclear ship makes the decision less clear cut.

[Turbineguy]

9. Risk is too high

reward is too long in coming. It's more profitable to short-sell the US and hope millions of people will be made paupers.

[NNadir]

15. Because Wall Street consists entirely of people engaged in short term thinking living in a moral...

vacuum.

There was a time when investment was involved in long term thinking, the health of companies, the products they made, the society they served.

Those times are gone. We're living in the short age, and the short term thinking will have and is having short term effects that will prove, I would guess, permanent.

Anyone looking for wisdom is our business leadership may as well take up astrology.

[jpak]

19. clue- cuz it sucks and everyone knows it

well...not eveyone

:rofl: