America’s Nuclear Energy Industry Seems to Be on a Gradual Path Toward Extinction

In 1954, Lewis Strauss, then the chairman of the federal Atomic Energy Commission, famously predicted that electricity from nuclear power plants would become “too cheap to meter.” As it turns out, it may be too expensive to make.

In fairness to Strauss, he was talking about power from hydrogen fusion, not uranium fission. Nearly 60 years later, hydrogen fusion still has no commercial application. On the other hand, the uranium fission plants that were on the drawing boards in Strauss’ day, which have since come to fruition, may soon be obsolete.

The New York Times recently reported that competition, mainly from cheap natural gas, has forced old nuclear plants to close and has prevented new ones from gaining traction. A plant in Wisconsin closed earlier this year, and a Vermont plant is slated to close in 2014.

Plants are closing for the simple reason that they cannot continue to stand against the combination of conservation concerns, flexible energy demand by large industrial customers, and competition from turbines fired by newly cheap and abundant natural gas.

James J. Hoecker, a former chairman of the Federal Energy Regulatory Commission, told The Times that nuclear plants are struggling because natural gas plants can be built more quickly and for less money, and offer flexible output in response to demand, while nuclear plants cannot vary their hourly production. “This is what’s happening in the real world,” Hoecker said. “It’s not something that the Federal Energy Regulatory Commission has made any conscious decision to affect.”

The only reason most nuclear plants were ever economically viable in the first place was a welter of government subsidies and costs that were hidden rather than recognized. Nuclear power producers could never have gotten private insurance to cover the potential costs of a major accident. They did not have to get private insurance, however, because the government capped liability for any nuclear power accident at less than $12 billion, and spread that risk across the entire nuclear power industry. By doing so, the government unyoked financial concerns from safety concerns. Though the Price-Anderson Act, the law that imposed this risk-limiting and risk-spreading structure, was originally intended to get a nascent industry off the ground, continued reauthorization has kept the nuclear power industry going. Without the law, nuclear power stations would be uninsurable.

While $12 billion in liability may sound like a lot of money, estimates of the long-term cleanup costs at Japan’s Fukushima disaster site are all over the map, from $11 billion all the way up to $250 billion. Nobody can be certain, since – more than two years after the accident – plant operator TEPCO has not been able to stabilize the site, which continues to pour radioactive water into the Pacific Ocean. The disaster at Fukushima prompted Japan to shut down its remaining nuclear reactors, leaving its energy prospects uncertain. We would be foolish to assume that such an accident could not happen here.

Besides capping liability, the government also sustained the nuclear power industry in another way: It has not made nuclear plant operators fund a long-term disposal solution for their radioactive waste. The government could not force such a move even if it tried, because we have no long-term solution in place, or even on the drawing board after President Obama canceled the planned Nevada disposal site. There has been no further word from the president about what to do with the stuff left over after nuclear plants exhaust their fuel or when the plants are eventually dismantled into heaps of radioactive rubble.

If investors had been forced to recognize the true costs of safely building, operating and disposing of nuclear power plants and their waste, nobody would ever have built one. The decision to create an atomic energy program was based on a combination of national politics, geopolitcal strategy, naive optimism and self-deception. The search for clean energy should have begun with clean accounting, but it didn’t. Ignoring the debris atomic energy will leave behind is not an option, but that does not mean we have to double down on a program whose economic risks and costs have been swept under the rug for decades.

So it is good news that America’s nuclear energy industry seems to be on a gradual path toward extinction. Market forces may yet prevail where political forces have failed, even in the wake of disasters at Three Mile Island, Chernobyl and Fukushima. We will still be left with a pile of waste and no place to put it, but at least we might stop making the problem worse for the generations that follow us.

About Larry M. Elkin 553 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

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