by: Ferdinand E. Banks November 07, 2008
Seeking Alpha - New York,NY,USA
Let
me start by repeating what I said in an article in the journal Energy
and Environment (2004): We do not know if global warming is the
real deal, or just part of a cycle, but we have discovered that gas
and oil can become extremely expensive in a very short time. In these
circumstances the optimal behaviour is to get friendlier with the
friendly atom, and do what former Prime Minister Blair and the
founder of Greenpeace suggest, which is to increase the use of
nuclear energy.
What does nuclear energy have to do with the
depletion of oils and gas? As emphasized in my new energy economics
textbook (2007), it has almost everything to do with it, because
nuclear may well be the most flexible of all energy expedients, in
that it can supply the ‘extra energy’ required to
e.g. obtain the large quantities of motor fuels that voters in the
energy importing countries have no intention of doing without,
regardless of what they say or believe or hope. As Len Gould noted in
the important forum EnergyPulse (www.energypulse.net), those voters
intend to maintain their transportation activities at close to the
present level – which in many cases is mandatory if they are to
maintain the standard of living of themselves and their families –
even if they must go to war to ensure this outcome.
Germany is
a country that, together with Sweden, has expressed a desire to
abandon its nuclear ambitions. After the widespread distribution of
my short paper ‘Some Friendly Economics for the Nuclear Energy
Booster Club’, I received mails from several persons in that
country (and elsewhere) requesting their names to be removed from the
list of persons directly receiving my papers. I was especially
surprised by the origin of several of these ‘Dear Johns’,
however…
‘Wir Werden Wiedermal Marschieren’
(=We Will March Again), was the title of a book that gained
considerable attention in Germany when I was in that country with the
U.S. Army. It became a best seller, and was about the retaking by the
German military of places like the Sudetenland (in Czechoslovakia) in
the coming Third World War, which the author of that book and many of
his readers saw as inevitable as well as essential for their
peace of mind.
Early in my ‘tour’, the armies of
Nato countries participated in perhaps the largest peacetime
military manoeuvre ever held in ‘West’ Germany, which was
called ‘Apple Harvest’. Toward the conclusion of that
exercise, the referees ruled that the Red Army had broken through the
Fulda Gap and had almost reached Nuremberg, and it was judged that
the only way that they could be stopped was with nuclear
weapons. I had the opportunity to review the calculations for one of
the simulated nuclear projectiles fired from a large cannon at the
advancing Red Army. Had it been real instead of simulated, a portion
of the eastern suburbs of Nuremberg would have been removed from the
face of the earth. After that rather disturbing result came to be
known, German officers, journalists, book-club members, and various
decision makers lost their appetite for marching. The same kind of
reversion will likely happen when the German public comes to realize
that abandoning nuclear energy could wreak havoc on their
standard of living! Among other things it could mean that virtually
every factory in Germany becomes a candidate for transfer to regions
with an adequate and reliable supply of energy.
This is why I
make a point of suggesting in my lectures that a more realistic
attitude toward nuclear energy might be wise. The key issue of course
is not the calculations that I make from time to time concerning the
economic optimality of nuclear generating equipment, but my pension!
It is also the key issue for many of academics and energy
professionals in this country (Sweden) and probably elsewhere,
although they have been convinced by know-nothing members of the
anti-nuclear booster club and their favourite politicians that they
would be doing themselves a disservice by understanding the easily
understandable.
Perhaps the clearest argument for nuclear
power has been presented by Rhodes and Beller (2000), which is
similar to the basic contention of this contribution. They say
that “Because diversity and redundancy are important for safety
and security, renewable energy sources ought to retain a place in the
energy economy of the century to come.” The meaning here is
clear, especially if you add that we probably will never possess what
is known in intermediate economic theory as the optimal amount of
nuclear power. But they do state that “nuclear power should be
central….Nuclear power is environmentally safe, practical and
affordable. It is not the problem – it is one of the
solutions.” Actually, it is an indispensable component of any
rational energy program.
During the just
concluded presidential campaign in the United States (U.S.),
President-Elect Obama did not express a great deal of confidence in
nuclear energy. Instead he suggested that a larger involvement with
renewables should be undertaken in order to create 500,000 new jobs,
and remove the U.S. from the clutches of foreign sellers of energy.
This sounds as if there is some kind of choice as to what kind of
energy structure and strategy should be embraced in order to
restore the economic health of the Republic and ensure its energy
future.
Actually there is no meaningful choice at all if
nuclear is excluded or reduced in scope. As is well known, nuclear
energy is not popular with everybody. It certainly was not a
favourite energy preference with many of the young people who voted
for the new president, to include those who came under the influence
of second-rate teachers of energy economics. As for France, mentioned
by Presidential candidate John McCain as an energy roll-model, there
are many persons who hope that someday the 80 percent of the
electricity supply that originates with nuclear can be replaced by
another energy source. Frankly, that yearning seems unrealistic. In
countries like France and Japan, where energy independence is
paramount, nuclear energy is not there to be questioned but to be
exploited. ‘No oil, no gas, no coal, no choice’ is
the way the French put it, and although the energy prospects of many
other countries may appear rosier at the present time, they could
find themselves in the same predicament some fine day.
Even in
Russia, which would be one of the richest countries in the world if
its industrial and agricultural potential were fully developed, plans
are being made to greatly increase its nuclear inventory in order to
provide a competitive advantage with its trading partners, and to
develop the Russian economy at a maximum rate.
This does not
mean however that it makes economic or political sense for any
country to ignore conservation and renewables, and/or other
non-conventional energy sources. The ugly fact of the matter is that
the world would probably be in a very bad way if these things do not
become prevalent in a few decades, or perhaps even sooner, because
they might have to accommodate a very large part of the energy burden
in all except a few lucky countries. But one way to make sure that
they will not be available is for naive voters and decision-makers to
accept the twisted hypothesis that it is already economical to
accelerate the introduction of these items, in concert with nuclear
stagnation or a nuclear retreat.
Statistical analysis and a
simple algebraic demonstration makes it clear that in terms of
reliability and cost, the Swedish nuclear sector was the most
efficient in the world before the curse of (electric) deregulation
arrived. It is due to an intensified concern for the economic future
that the irrational nuclear ‘downsizing’ in this country
(Sweden) has been at least temporarily halted. The key
departure was upgrading the ten remaining reactors so that they could
produce the same electric energy (in kilowatt-hours = kWh) as the
original twelve reactors, which amounts to nearly 47 percent of
the total generated energy. (Approximately the same amount is
accounted for by hydro.) The logic here is straightforward, and
cannot be altered by the resolute ignoring or downgrading of
mainstream economic history: a high electric intensity for firms,
combined with a high rate of industrial investment and the
technological skill created by a modern educational system, will lead
to a high productivity for large and small businesses. This in
turn results in a steady increase in employment, real incomes, and
the most important ingredients of social security (such as
pensions and comprehensive health care).
The
question for Sweden or the U.S. or anywhere else then becomes whether
welfare aspirations of the kind promised by the new U.S. president
can be realized if the most efficient electric generating facilities
in the world are scrapped or allowed to deteriorate because
they did not make the ‘cut’ in a half-baked popularity
contest. For instance, in order to recruit voters with anti-nuclear
tendencies, the former Swedish prime minister informed those members
of the population who prefer opinion and feelings to evidence and
logic that nuclear power was “obsolete”.
Behind
this crank conjecture was the allusion that the impressive prosperity
of an industrial country like Sweden could be maintained even if the
country’s nuclear assets were liquidated. What was not
mentioned was that few countries have made as great an effort to
include renewables in the energy mainstream as Sweden,
but even so the result in terms of energy generated is insignificant.
It is true that while (technically) renewables can be substituted for
nuclear, the benefit-cost ratio is economically unacceptable.
The decision makers in many other countries know this too, and better
today than ever, because as pointed out in a recent issue of an
American news periodical, energy policy has become a part of security
policy.
As far as I can
tell, wind energy is often pictured as a prominent alternative to
nuclear energy where the generation is of electricity is concerned.
In the United States the billionaire investor T. Boone Pickens has
proposed a ‘wind corridor’ through the middle of the
country, from the Rio Grande in the south to the Canadian border in
the north, filled with wind installations generating electricity that
would be inserted into new or old grids and transmitted both east and
west. The aesthetics of this arrangement are not clear to this humble
teacher of economics and finance, but I still remember
enjoying the charm of the occasional windmill as I proceeded by train
down the magnificent west coast of Sweden last summer.
The key
term in the above paragraph is “occasional”, because in
this country, where engineering science has always received the
highest respect, nobody in their right mind believes that an all-out
commitment to wind energy makes the slightest engineering or economic
or scientific sense, regardless of what they may say in a disco or
student club, or when the television cameras are turned in their
direction. I have a long survey of nuclear energy that I am revising
(2008), however it contains one simple technical aspect of this topic
that everyone should ponder, because it requires only a minimum of
secondary school algebra. It turns on the expression Capacity Factor
(CF), which has to do with the amount of energy that is actually
produced over a given period as compared to the amount that could be
produced if the facility had operated at maximum (or rated) output
one-hundred percent of the time. This can be written CF = Actual
Energy Output over a given period divided by Rated or Maximum Output.
When you hear about the beauty of wind energy, make sure that you ask
about the Capacity Factor.
Consider a wind turbine with
a power rating of 100 kilowatts. In a month of 30 days its maximum
energy output is 100 x 30 x 24 = 7,200 kilowatt-hours. However its
measured output during that period would likely be lower, and perhaps
much lower. Suppose it was 3,600 kilowatt hours. Then we would
have CF = 3600/7200 = 0.50 = 50%. For wind a capacity
factor of 15-35% appears average; and the important energy observer
and commentator Jeffrey Michel confirms a stable 0.17 average
for Germany before 2007, although it might have reached 0.2 in
2007. As for nuclear, 30 years ago capacity factors in the U.S. were
about 55% due to the ‘down-time’ caused by unscheduled
outages and scheduled maintenance, but now outages have decreased and
average values are above 85%. Also, if capacity factors are
calculated net of scheduled outages, then from time to time they have
reached about 95%. which apparently applies to plants managed by e.g.
Exelon.
By way of extending this theme , we can consider some
information about the capacity factors of wind installations that was
presented in EnergyPulse by Len Gould (2008) and Kenneth Kok (2008).
Unfortunately I cannot say whether these are extreme or typical
cases, but they have one thing in common that all readers of this and
other papers on energy economics should observe and remember: the
actual output from wind installations is often not just lower than
the rated (or ‘nameplate’) output, but very much
lower.
Gould cites an operation by an independent North
American wind power company in which the actual capacity factor for
2007 was somewhere between 8.67% and 17.35%. This might be
characterized as a revolution in energy technology in reverse. Even
so, it was superior to a performance noted by Kok, in which a TVA
facility on Buffalo Mountain (near Oliver Springs, Tennessee)
registered a capacity factor considerably under the above figures.
In these circumstances it should be easy to understand why it was
impossible to convince the voters and decision makers in Finland to
choose renewables in order to obtain the increase in electric energy
that might be necessary to maintain or augment the standard of
living, despite the considerable dislike of nuclear energy. Put
another way, nuclear installations with very high capacity factors
turned out to be preferable to windmills that did not rotate over
very long periods. As I like to insist, with nuclear energy you
generally have an excellent idea of what you are getting. With e.g.
wind (or even solar), you often are unpleasantly surprised.
I never tire of mentioning the bizarre fairy tale that was confected by two well known energy experts, Amory Lovins and Joseph Romm, and published in Foreign Affairs (1992-93), which is the prestigious journal of the (United States) Council on Foreign Relations. It goes like this:
For example, the Swedish State Power Board found that doubling electric efficiency, switching generators to natural gas and biomass fuels and relying upon the cleanest power plants would support a 54 per cent increase in real GNP from l987 to 2010 – while phasing out all nuclear power. Additionally, the heat and power sector’s carbon dioxide output would fall by one-third, and the costs of electrical services by nearly $1 billion per year. Sweden is already among the world’s most energy-efficient countries, even though it is cold, cloudy and heavily industrialized. Other countries should be able to do better.
I
called that statement completely wrong the first time I saw it, while
in my new textbook (2007) I suggest that it and similar contributions
are misleading bunkum. For example, there are a number of questions
that must be answered in detail before biomass can unambiguously be
classified a large- scale fuel-of-choice for the near future. (See
e.g. Grunwald (2008),) As for renewables such as solar and wind, and
probably hydrogen, they will undoubtedly increase in quality and
quantity, but hopefully it will not be at the expense of nuclear.
On
one occasion when I published the above, I was invited to participate
in a telephone conference that featured Dr Lovins. A telephone
conference no less. Better a telephone conference than fisticuffs
next to the latrine at Camp Gifu (Japan), but fortunately I managed
to propose a suitable alternative. He can put in an appearance in my
class in energy economics the next time I teach at the Asian
Institute of Technology (Bangkok), or for that matter any other
institution of higher learning, where he can attempt to turn into
reality some of the dreams of my students in which I am made a fool
of or seriously humiliated.
As David Schlageter pointed
out in EnergyPulse (2008), “Renewable energy sources only
supplement the electric grid with intermittent power that rarely
matches the daily electrical demand.” He continues by saying
that “In order for an electric system to remain stable, it
needs large generators running 24/7 to create voltage stability. Wind
and solar generation are not on-line when needed to meet energy
demand, and therefore to help decrease system losses.” In the
promised land of wind energy, Denmark, voltage stability is attained
by drawing on the energy resources of Sweden and Germany (and perhaps
Norway). The Danes pay for the imported electricity, but not for the
stability – which they would do in the great world of economic
theory.
It can be suggested though that the Danes may be
unable to afford more than basics where electricity is concerned.
According to NUS Consulting (of South Africa), the price
of electricity in Denmark was the highest in the world in 2006
and the next highest in 2005. It can hardly be lower today. In
2005 Sweden had the next lowest price, and in 2006 the fourth lowest.
Something must be drastically wrong in the Kingdom of Sweden for
voters and politicians to remain passive in the face of this
deterioration, particularly when NUS statistics indicate that the
rise in the Swedish price is one of the most rapid in the world, and
is almost certainly due to two things: a preposterous electric
deregulation, and the closing of two nuclear reactors. The thing that
should never be forgotten here is that for geographical and
industrial reasons, Sweden is one of the most energy intensive
countries in the world. As a result, a high energy consumption should
be considered by the decision makers a necessity rather than a
luxury, and treated accordingly.
But what about nuclear waste,
which is repeatedly portrayed as a malicious and unavoidable cost of
nuclear based electricity because, ostensibly, it will have to be
locked up for hundreds of thousands of years? It is sometimes
maintained however that the cost of disposing of nuclear waste
is balanced by the benefit of no carbon-dioxide (CO2) emissions
from reactors. For instance, the International Energy Agency (IEA)
has calculated that for France – the country with the largest
production of nuclear energy (as a per cent of the total output of
electric power) – the average person is responsible for 6.3
tonnes of carbon dioxide (per year), which e.g. is one-third of the
U.S. average.
The cost-benefit trade-off mentioned above
is worth remembering, however I prefer for students
to know (and be able to explain) why France intends to treat ‘waste’
as a potential fuel. (A similar strategy has been
proposed by the UK’s energy minister.) A law now exists in
France stipulating that toxic waste is to be stored in such a way
that it can be comparatively easily accessed and recycled if, at some
point in the future, “new” technologies appear which will
allow it to be classified a preferable input in the
nuclear fuel cycle. This option was also referred to, indirectly, by
presidential candidate John McCain, however it appears that
such thinking is not acceptable to an American
audience…yet.
On many occasions I have been told that
my own thoughts on nuclear matters are mistaken because of the
subsidies received by the nuclear industries. Everything is relative
in this old world of ours however, and so I always insist that
nuclear is essentially subsidy-free. Furthermore, with reference to
the second paragraph in this contribution, I like to cite an
observation in the Financial Times (October 6, 2006). Nuclear power
has provided “an abundance of cheaply-produced electricity,
made the country (France) a leader in nuclear technology worldwide
and reduced its vulnerability to the fluctuations of the turbulent
oil and gas markets.”
REFERENCES
Banks,
Ferdinand E. (2008). ‘Economics and nuclear energy: a modern
survey’
(Forthcoming).
______ . (2007). The Political Economy of World
Energy: An Introductory Textbook. London, Singapore and New York:
World Scientific.
______. (2004). A faith based
approached to global warming’. Energy and Environment. Volume
15, Number 5: 837-852.
Gould, Len (2008). ‘Comment on
Banks’. EnergyPulse, (3-26-08).
Grunwald, Michael
(2008). ‘The clean energy scam’. Time (April 14).
Kok,
Kenneth (2008). ‘Comment on Banks’. EnergyPulse,
(3-26-08).
Rhodes, Richard and Denis Beller (2000). ‘The
need for nuclear power’. Foreign Affairs
(January-February)
Schlageter, David (2008). ‘Comment on
Alan Caruba (‘Congress conjures up an energy deficit’).
www.energypulse.net, Feb 6, 2008.