Limited Liability – Nuclear Energy’s ‘Mother of all Subsidies’

By Stephen Leahy

UXBRIDGE, Canada, May 6, 2011 (IPS)

The nuclear energy industry only exists thanks to what insurance experts call the “mother of all subsidies”, and the public is largely unaware that every nuclear power plant in the world has a strict cap on how much the industry might have to pay out in case of an accident.

In Canada, this liability cap is an astonishingly low 75 million dollars. In India, it is 110 million dollars and in Britain 220 million dollars. If there is an accident, governments – i.e. the public – are on the hook for all costs exceeding those caps.

Japan has a higher liability cap of 1.2 billion dollars, but that is not nearly enough for the estimated 25 to 150 billion dollars in decommissioning and liability costs for what is still an ongoing disaster at its Fukushima Daiichi nuclear plant. Seven weeks after the tsunami caused the disaster, radiation levels continued to spike higher.

No one knows when the reactors will finally be in cold shutdown, or when the costs of theFukushima disaster will stop piling up. One report suggests decommissioning will take 30 years.

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Japan’s credit rating was downgraded because of the accident, noted Mycle Schneider, a Paris-based energy and nuclear policy analyst who has worked in Japan. “The Japanese know it’s just a matter of time before another large earthquake occurs,” Schneider told IPS.

“Japan will never build another nuclear plant.

On Friday, Japanese Prime Minister Naoto Kan ordered the undamaged Hamaoka Nuclear Power Plant, about  200 kilometres southwest of Tokyo, to cease operations over future earthquake concerns.

The Fukushima accident has been rated at the highest level (7) of the International Atomic Energy Agency scale, the same as Chernobyl accident.

Twenty-five years after the disaster at Chernobyl’s reactor number 4, the global community is struggling to find 2.2 billion dollars to build a permanent shelter to replace the collapsing cement and steel sarcophagus hastily built after the accident.

That 2.2 billion dollars does not include the costs of dismantling the radioactive material nor the costs of building a safe storage facility for the spent and damaged nuclear fuel from the plant. This material will be dangerously radioactive for thousands of years.

In the U.S., every company with a nuclear power plant is obligated to ante up around 100 million dollars per reactor into a no-fault insurance pool to cover off cleanup and liability costs of a disaster. This pool is worth about 10 billion dollars. However, even that higher cap is unlikely to cover the costs of a serious accident. BP Oil was forced by the U.S. government to set aside 20 billion dollars for damages caused by its Gulf of Mexico oil spill.

Experts estimate the U.S. nuclear industry’s liability cap of 10 billion dollars amounts to “an indirect subsidy of about 33 million dollars per plant per year over the lifetime of a nuclear plant,” according to a study published in Energy Policy in April.

If that 33 million dollars-per-plant-per-year indirect subsidy was instead used for loan guarantees for solar panel manufacturing plants, the U.S. would gain 5.3 trillion dollars worth of additional electricity over a 100-year time span, the study reported.

“Wind might be even better than solar under this scenario,” said co- author Joshua Pearce, a mechanical and materials engineer at Queen’s University in Kingston, Ontario.

“We’re wasting money on nuclear energy. It makes no economic sense,” Pearce told IPS.

The study looked at the 100 nuclear plants in the U.S. and factored the cost of insuring a nuclear plant in the event of a catastrophic accident, and the power produced over the lifetime of a nuclear power plant. It then calculated how much additional solar energy could be produced from the value of the indirect subsidy that the liability cap provides.

The potential costs to society of this liability cap are very conservative. They are based on 10-year-old data and were not adjusted for inflation. They also don’t include estimates from the potential costs of Fukushima.

When comparing energy choices, nuclear versus solar for instance, the full life cycle costs are rarely used. Nor are the financial risks taken into account, Pearce said.

“In my mind it is basically insanity to shoulder the public with risk to get relatively small amount of electricity out of it,” he told IPS.

The argument that nuclear power is needed to combat climate change is also incorrect. Mining uranium and processing ore into fuel and building nuclear facilities results in considerable carbon emissions. When the full life cycles are compared, the carbon emissions of nuclear on a per-kilowatt-of-power-generated basis exceeds that of wind and is about the same as solar, according to a 2008 study by the Centre for Integrated Sustainability Analysis at the University of Sydney, Australia.

“The energy solutions needed to combat climate change have to be able to be deployed quickly and at a low cost. Nuclear energy is just the opposite,” said Schneider.

The skyrocketing costs of nuclear compared with the steady decline in costs of alternative energy has resulted in world alternative energy production topping global nuclear installed capacity for the first time in history in 2010. Total investment in renewable energy technologies was estimated at 243 billion dollars last year, according to a new study, “World Nuclear Industry Status Report 2010-2011“.

Generating energy from wind turbines at sea would be cheaper than building new nuclear power plants, said Connie Hedegaard, the European Union climate change commissioner, last week.

While the global financial sector invests heavily in renewable, it will not invest in nuclear without generous government-backed loan guarantees, said Schneider. Areva, the world’s leading nuclear energy company and which is owned by the French government, lost more than 600 million dollars last year, he said.

The nuclear industry’s oft-touted claims of a “nuclear renaissance” were never real, added Schneider. “Now that claim is absolutely dead unless governments want to foot the entire bill.

“Fukushima will have a bigger impact on the nuclear industry than Chernobyl,” he predicted.

First published as The Nuclear Cost Shell Game – IPS ipsnews.net.

Other articles on Fukushima disaster:

Japan Nuke Disaster Could Be Worse Than Chernobyl

Who Controls the Nuclear Control Agencies?

Nuclear Power Costs Skyrocket, Cost of Renewables Plummet

One thought on “Limited Liability – Nuclear Energy’s ‘Mother of all Subsidies’

  1. […] of depending on the 4,800 employees of AECL to watch over them, the cost would be even higher. Limited Liability – Nuclear Energy’s ‘Mother of all Subsidies’ | Stephen Lea… Summary: All that being said, it seems to me that we have no choice but to include nuclear energy […]

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