Nuclear Power and Externalities

Externalities are one way in which markets and private enterprise can fail to reach socially desirable outcomes.  An externality exists whenever there’s a third party or parties that are affected by a transaction, yet they have no direct say in the transaction.  Typically we assume that any market transaction involves two parties, a buyer and a seller. Either is free to refuse, negotiate, or accept an offer depending on whether the total package including price is right for them.  If the two parties agree, then there’s a deal. 

But what happens if two parties agree to a deal but the decision to pursue the deal causes harm to others who don’t have the power to say no to the deal? That’s an externality. And it’s one of the justifications for having government regulation or even prohibition of some transactions.  

Supporters of nuclear power like to claim it’s a clean industry and energy source.  By that, they imply there are no externalities.  But that’s not quite true. Nuclear power as traditionally implemented has enormous externalities of two types. First, when something goes wrong, it goes really wrong.  Three-mile Island, Chernobyl, and Fukashima wrong.  All are externalities because the original designers/operators do not suffer the consequences of their mistakes.  Second, nuclear power as traditionally implemented produces enormous radioactive waste that the nuclear power plant operators are not responsible for.  Perhaps thorium is a better way, perhaps not.  We need to be very careful. And we need to remember that whenever possible corporations will attempt to manipulate the regulatory authorities so as to create the maximum externality and minimum responsibility.

In the meantime, it’s worthwhile to review the full extent to which nuclear power and nuclear bomb development has made many places on the planet totally uninhabitable.  Der Speigel magazine has an excellent expose here on the fifteen no-man’s lands created by nuclear power.  It’s worth the read and viewing.  It’s sobering.

Corporate Influence – GE and Radioactive Fallout

This morning the news came that more than 2 weeks after the tsunami in Japan, 4 of the 6 nuclear reactors at Fukashima are still not stable.  Indeed, 1 or 2 of the reactors are suspected of having leaks from, at best, the pipes into and out of the core reactor containment housing, and, at worst, the reactor containment housing itself.  Numerous stories have already been run about how Tokyo Electric Power (TEPCO), the owner and operator of the Fukashima plant has had a checkered past with regard to safety and inspection compliance.  That’s to be expected when large corporations have unwarranted political influence and when an established industry “captures” the regulators. See here for more about regulatory capture.

But let’s ask who made the containment vessels and the reactor itself which has failed.  Why it’s none other than the U.S.’s own General Electric.  The very same firm that holds itself as “bringing good things to life” in this case is “bringing half-lives to things and people”.  Economic Policy Institute explains:

There can hardly be a more frightening person to be President Obama’s pet CEO than GE Chairman and CEO Jeffrey Immelt. Yet, that is exactly who has the President’s ear at the White House.

It is becoming apparent that GE, rather than “bringing good things to life”, has a unique ability to cozy up to government, massage regulations and bring dangerous toxins into our lives—and I mean seriously dangerous.

NYT now tells us about the containment vessels at the damaged nuclear power plants in Japan are manufactured by GE:
…the type of containment vessel and pressure suppression system used in the failing reactors at Japan’s Fukushima Daiichi plant — and in 23 American reactors at 16 plants — is physically less robust, and it has long been thought to be more susceptible to failure in an emergency than competing designs.

G.E. began making the Mark 1 boiling water reactors in the 1960s, marketing them as cheaper and easier to build — in part because they used a comparatively smaller and less expensive containment structure.

Feeling better about the value system and judgements of the people advising the President?  I’m not.

Beyond Regulation: Thorium As Safe Nuclear Power?

The disaster at the Japanese Fukashima nuclear reactor has, not surprisingly, re-opened debates about nuclear energy, it’s safety, and energy policy in general.  I’m not going to go into the whole debate or the merits of nuclear energy vs. coal-powered vs. solar, etc. here now. But what I do want to do is to talk about the role of government in any energy policy and safety debate.

There  is a clear regulatory role for government to promote safety regardless of the type of energy program.  Economic theory (at least beyond the simple one-liner slogan economics) and economic history both clearly show a needed role for government.  The dangers posed by any energy source (coal, nuke, etc) are either:  a) long-term developing as in slow creation of cancers from breathing polluted exhaust or slow radiation poisoning, or b) highly uncertain, perhaps improbable, but horrific should it happen (nuclear meltdown), or c) extremely difficult to detect and assess for untrained consumers/neighbors, or d) some combination of a, b, and c.  This means that a purely privately -owned energy generating firm faces incentives to cheat or skimp on safety measures in the near-term and to under-invest in safety.  No legal mechanism exists  (or is practical to create) to adequately ensure that  the producers of the harm, the energy company, pays in full for all damages.  Indeed, most producers or investors need some assurance that they won’t be fully legally liable for all potential damage they may do – that’s why corporations exist instead of partnerships. Since the risks and externalities are unavoidable for consumers, it falls to the government to regulate and mandate safe procedures.

But regulation has it’s limits. Regulators, especially highly-technical and/or long-standing regulators are prone to “capture”.  In other words, the people in the regulatory agency become too friendly, too gullible, and too cooperative with the firms being regulated.  After all, for most of the regulators, these firms are where they’re going to work after their government job. No sense making enemies. The highly technical nature of the task makes it difficult for others in government to understand or get good information from either the captured regulators or firms themselves.  What often happens in this scenario is an increasing series of accidents that are covered-up or handled to the firm’s benefit and not the environment’s or public’s benefit.  The BP oil spill is a good example. Unfortunately, it appears that at least the initial responses to the Fukashima disaster fall into this category as well.  (I had a good link for this but I can’t find it now).

But  beyond regulation government has another critical role in safety.  Government can fund the new discovery of new technologies that are safer but disruptive of the existing firms and system. The really early research and development work that is highly uncertain but yet yields both the new ideas and the proof of concepts from which new industries and new technologies emerge are nearly always funded by government.  Early R&D, particularly for highly disruptive new technologies, is simply too expensive, too uncertain in payout, and too long in paying out to attract private investment.  It has always been thus.  Canals? Government funded. Cotton gin? Telegraph? Electicity generation? Railroads? Internet? The Web? Relational Databases? Computers? All government funded in the early critical stages. It is here where government can play a truly significant role in developing cheap, safe, non-polluting energy.

And it appears that in the nuclear arena, government is doing exactly that. Except it’s not the U.S. government or the French government (the French are really big in existing uranium-based nuclear).  It’s the Chinese and the Norwegians.  They are currently investing in development of thorium-based nuclear power instead of uranium chain-reaction nuclear power such as the U.S. and French and Japanese have relied on for decades. Now a disclaimer, I’m no nuclear physicist. I didn’t even sleep in a Holiday Inn Express last night. But I do understand something about systems.  Real safety comes from having a system that when something goes wrong, it naturally reverts to a default, inert state.  An example is a deadman’s switch on an industrial press. It takes two hands to press switches simultaneously to make the press work. That means as soon as a worker places or leaves a hand in the path of danger, one switch is uncovered and the machine stops.  Or another version means that as soon as the switch is released (reverts to an uncontrolled state), the machine stops.  A major problem with uranium-based nuclear power as I’ve come to understand it, is that this kind of safety isn’t possible. There’s no way to “stop” the process instantly.

Apparently [physicists are welcome to comment and correct], in uranium-based fission nuclear reactors the nuclear reaction is a chain reaction.  It keeps happening without an external input.  It takes an active external input to try to “stop” the reactor.  Yet even that, which happened at Fukashima correctly with the earthquake, doesn’t really stop things.  The fuel continues to react but gradually slows down.  It keeps generating heat for weeks, months, and even longer. This means an active system must be working properly to keep the system cooled and prevent disaster. That means back up systems and redundancies. But the tsunami overwhelmed the backup systems.  Any system that relies on increasing levels of redundant active systems to prevent disaster is a system that is playing probabilities.  It is relying on complexity for safety.  And complexity can never produce really safe systems. It is always limited by the incentives and imagination of the original engineers.

So I’m very excited to read about the existence and potential of thorium-based nuclear reactors.  Ambrose Evans-Pritchard in the U.K. Telegraph explains:

China’s Academy of Sciences said it had chosen a “thorium-based molten salt reactor system”. The liquid fuel idea was pioneered by US physicists at Oak Ridge National Lab in the 1960s, but the US has long since dropped the ball. Further evidence of Barack `Obama’s “Sputnik moment”, you could say.

Chinese scientists claim that hazardous waste will be a thousand times less than with uranium. The system is inherently less prone to disaster.

“The reactor has an amazing safety feature,” said Kirk Sorensen, a former NASA engineer at Teledyne Brown and a thorium expert.

“If it begins to overheat, a little plug melts and the salts drain into a pan. There is no need for computers, or the sort of electrical pumps that were crippled by the tsunami. The reactor saves itself,” he said.

“They operate at atmospheric pressure so you don’t have the sort of hydrogen explosions we’ve seen in Japan. One of these reactors would have come through the tsunami just fine. There would have been no radiation release.”

Thorium is a silvery metal named after the Norse god of thunder. The metal has its own “issues” but no thorium reactor could easily spin out of control in the manner of Three Mile Island, Chernobyl, or now Fukushima.

Professor Robert Cywinksi from Huddersfield University said thorium must be bombarded with neutrons to drive the fission process. “There is no chain reaction. Fission dies the moment you switch off the photon beam. There are not enough neutrons for it continue of its own accord,” he said.

Dr Cywinski, who anchors a UK-wide thorium team, said the residual heat left behind in a crisis would be “orders of magnitude less” than in a uranium reactor.

So back to the question of government role.  When an existing industry such as nuclear power generation exists, dominated by only 1-2 manufacturers of equipment (such as GE) and a small number of very large, very entrenched producers, the utilities themselves, there is enormous resistance and active hostility to change. New technologies are not seen by the existing industry as opportunities. They are only threats. The immediate profit-maximizing “rational” action is to invest not in the new technology, but to in government lobbying efforts to block the development of the new technology. Since nuclear power is an established, well-regulated industry with big bucks behind it, it’s well positioned to stop the new technology, at least in the U.S.   According to Evans-Pritchard, that’s what’s happening in the U.S. and France.  The U.S., which actually first developed the idea of thorium reactors, has dropped the ball. (apparently thorium can’t be used for a-bombs) France, another established uranium player, has actively lobbied against EU research funding of thorium.  And the short-sighted UK government has cut funding for it. Fortunately, there’s a different view in China and Norway where no entrenched uranium-based companies currently exist.

… a few weeks before the tsunami struck Fukushima’s uranium reactors and shattered public faith in nuclear power, China revealed that it was launching a rival technology to build a safer, cleaner, and ultimately cheaper network of reactors based on thorium.

This passed unnoticed –except by a small of band of thorium enthusiasts – but it may mark the passage of strategic leadership in energy policy from an inert and status-quo West to a rising technological power willing to break the mould.

If China’s dash for thorium power succeeds, it will vastly alter the global energy landscape and may avert a calamitous conflict over resources as Asia’s industrial revolutions clash head-on with the West’s entrenched consumption.

China’s Academy of Sciences said it had chosen a “thorium-based molten salt reactor system”. The liquid fuel idea was pioneered by US physicists at Oak Ridge National Lab in the 1960s, but the US has long since dropped the ball. Further evidence of Barack `Obama’s “Sputnik moment”, you could say….

… France’s nuclear industry killed proposals for funding from Brussels, though a French group is now working on thorium in Grenoble.

This is the kind of research and development that could be provide a dramatic spark to the U.S. economy through spin-off effects. But I wouldn’t hold my breath.  Jeffrey Immelt is Obama’s chosen economic advisor from the private sector (at least non-bank private sector). Immelt is CEO of GE. And GE has a huge investment in uranium-based nuclear power, including those reactors and cooling ponds that are melting at Fukashima.