Nuclear Energy: Coming or Going? Peter Schwarz Professor of Economics, Belk College of Business and Associate, Energy Production and Infrastructure Center (EPIC) UNC Charlotte of 13

Outline Introduction A Brief Economic History Regulation Private Cost Social Cost of 13

Introduction (1) Case for nuclear energy Baseload power Reliable 20% share of electricity generation in U.S. Reliable None of the emissions associated with fossil fuels Energy security 100 year supply Similar for global supply Static analysis appropriate given that today’s decision to use uranium has little impact on future availability of 13

Introduction (2) Case against nuclear energy Construction cost can exceed $10 billion Ten or more years to build Large scale to minimize average cost High levelized cost Costs and size consistently exceed projections Unique design characteristics Ever-increasing safety requirements Safety issues High-level radioactive wastes Remain active for 100,000 years or more No permanent solution Yucca Mountain still being deliberated Temporary solution: On-site storage Reprocessing used in France U.S. banned in 1977. Fear of nuclear proliferation. Even though President Reagan lifted ban in 1981, we do not reprocess due to a combination of risk and high cost. of 13

Brief Economic History (1) Nuclear fission 1917: Ernst Rutherford “split” the (nucleus of) the atom Bombarded it with alpha particles Occasionally dislodges a proton Changes element Energy released (E = mc2) Released neutrons start self-sustaining chain reaction If uncontrolled, get explosion 1942: Enrico Fermi produced first controlled self-sustaining reaction Initial interest was bomb to end WW II. 1946: Atomic Energy Commission established to look for peaceful uses. 1953: “Atoms for Peace” Nuclear submarines 1957: First large-scale nuclear energy plant Shippenport, PA U235 used in nuclear reactors. As compared to U238, it is easier to cause fission and the release of energy. of 13

Brief Economic History (2) U.S. and globally (Japan, France, and other countries) Rapid growth in 1960s and especially beginning in 1973 in wake of rising oil costs. Growing doubts about safety What to do with spent fuel waste? 1979: Three Mile Island partial meltdown. No deaths or injuries Nevertheless, led to a virtual moratorium on new plant construction. Occurred 12 days after the movie, “The China Syndrome” (nominated for 4 Academy Awards). 1986: Chernobyl: the most serious accident Used a different technology than U.S. plants No containment building Not the same safety culture Nevertheless, reinforced the fears about nuclear energy of 13

Brief Economic History (3) 2000s: Talk of nuclear renaissance Increased attention to carbon emissions, climate change 2005: U.S. Energy Policy Act U.S. Department of Energy (DOE) offered incentives for new nuclear plants. Advanced designs compared to 1960s, 1970s-era plants 16 applications Then came Great Recession 2011 Fukushima Plant built in 1960s. Located by Pacific Ocean; nuclear plants require large quantities of cooling water. Hadn’t been upgraded based on updated information Regulatory capture (Recall Stigler (1971)) Renaissance ends Even if Japan’s experience unlikely elsewhere of 13

Brief Economic History (4) Germany accelerates phase-out of nuclear energy Subsidized renewables Very costly Returned to coal (lignite) Now has some of highest electricity prices in the EU Japan shuts down nuclear plants Had accounted for 30% of electricity generation High electricity prices even before Fukushima Few energy reserves Returning to nuclear energy Deregulating its electricity industry of 13

Brief Economic History (5) Fission vs. Fusion Fission Strength: No carbon, NOx, Sulfur emissions Weakness: Possibility of radioactive release If reactor core overheats Ordinary (light) water reactor Water moderater (slows the reaction) and coolant (keeps fuel from overheating). Backup cooling system- Backup generator to provide power to cooling system. Containment building to prevent radiation from escaping Fusion Fuse lighter elements together Potentially produces much more energy than fission But so far, energy required to initiate the reaction exceeds energy produced Research ongoing at France’s ITER (International Thermonuclear Experimental Reactor) of 13

Brief Economic History (6) Pressurized Water Reactor (PWR) vs. Boiling Water Reactor (BWR) PBR most common in U.S. Pressurized water reaches 300 degrees without boiling Hot water pumped from reactor vessel to second water supply away from fuel source. Hot water creates steam to spin turbine, drive generator, and produce electricity Unused steam condensed back to water, recycled to create more heat BWR Higher thermal efficiency- only a single circuit Reaction easier to control by monitoring water around core Less radiation, fewer components But requires larger reactor vessel because of larger amount of steam released in accident Allows small amount of radiation to get into turbine system Workers must wear protective clothing. https://www.clpgroup.com/nuclearenergy/Eng/power/power4_1_2.aspx of 13

Regulation (1) Origins of nuclear energy with government, not market Find peaceful uses to justify continued research Nuclear submarines 1957: Shippenport, PA, First large-scale nuclear plant owned by U.S. DOE Operated by Duquesne Power and Light, a private company U.S. Atomic Energy Commission (1946) Charged with regulating and promoting civilian commercial uses Inherent conflict (Recall Stigler (1971) (Capture) Theory of Regulation) 1957 Price-Anderson Nuclear Industries Indemnity Act Limited liability of nuclear operators in event of an accident 1975: Nuclear Regulatory Commission (NRC) succeeds AEC Concerns about cozy industry-regulator relationship continue. 2005: Extension of Price Anderson, loan guarantees, production tax credits of 13

Regulation (2) Spent Fuel 1982 Establishment of Nuclear Waste Policy Act to identify permanent waste site Beginning in 1983, electric utilities contribute 0.1 cent/kWh (paid by consumers) Towards establishment of permanent waste site $75 billion collected Some spent on site preparation of Yucca Mountain Obama (with urging by Senate Majority Leader Harry Reid) abandoned project in 2010 In 2013, fee suspended since no prospects for permanent site. In what state is Yucca Mountain? Hint? What state did Harry Reid represent? of 13

Regulation (3) Spent Fuel (cont.) Temporary sites Reprocessing Spent fuel rods stored at reactor sites in lined concrete pools reinforced with steel rods. As pools reach capacity, utilities move some of the older spent fuel to dry casks. U.S. NRC originally pronounced method safe for 30 years. Recently extended it to 60 years. Reprocessing Used in France, where nuclear accounts for about 75% of energy used to generate electricity. Only a small fraction of uranium used to generate electricity is spent. Recycle and use again (closed loop) In U.S., President Ford suspended and President Carter banned reprocessing Fear that separated plutonium would fall into wrong hands. Currently makes little economic sense as long as price of uranium remains low. Mixed-Oxide (MOx fuel) Mix of plutonium and uranium. Plant under construction. Savannah River Site, Georgia Multiple cost overruns, time delays. of 13