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The UnAtomic Age

Getting past the nuclear era’s fiscal meltdown.

Illustration by nik harron.
Illustration by nik harron.

Since the 2011 Fukushima catastrophe, the global decline in nuclear power has steepened. More than 20 countries are phasing out nuclear plants, have stopped the construction of new reactors, or passed laws prohibiting nuclear power. The number of reactors and nuclear electricity output is falling worldwide.

Illustration by nik harron.
Illustration by nik harron.

Since the 2011 Fukushima catastrophe, the global decline in nuclear power has steepened. More than 20 countries are phasing out nuclear plants, have stopped the construction of new reactors, or passed laws prohibiting nuclear power. The number of reactors and nuclear electricity output is falling worldwide.

Japanese citizens are still feeling the horror of Fukushima. Some 400,000 people were evacuated – and a staggering 100,000 people are still displaced three years later. In all, 800 square kilometers of land is too radioactive for human habitation. More than 225,000 tonnes of radioactive soil sits in plastic bags about the area, and 272 tonnes of radioactive water still flow into the Pacific Ocean every day.

The cost of the damage caused by the Fukushima Daiichi power plant meltdown is estimated at US$250-billion and could end up doubling. And guess who is going to bear that cost? Japanese taxpayers.

The fact that no company will insure nuclear power suggests that it is a financial catastrophe in waiting. In Canada, the Harper government has passed legislation that will limit the nuclear industry’s liability to $1-billion. So if a Fukushima-scale catastrophe happened in Canada, the nuclear industry would be responsible for less than 0.4 per cent of the cost. Taxpayers would be on the hook for the other $249-billion. Certainly the financial burden of catastrophic fallout would be unaffordable.

The real message is that we just cannot afford nuclear energy.

While the federal government obviously doesn’t have a grip on adequate liability, the nuclear industry also consistently and dramatically underestimates the costs of construction, operation and decommissioning of nuclear plants. In the United Kingdom, the decommissioning costs of Sellafield nuclear site have hit £70-billion (CAD$128-billion). If, for instance, the cost of decommissioning the Darlington nuclear reactors in southeastern Ontario were the same, every Ontario resident would have to bear $10,000 in additional taxes. The real message is that we just cannot afford nuclear energy.

Nuclear power has never been profitable when all costs are included. No private corporation will agree to construct and operate nuclear reactors without government guarantees of paying for construction cost overruns, covering or capping accident liability, and paying for the long-term disposal of nuclear waste.

The Darlington reactors went 4.5 times over budget, costing provincial taxpayers $14.3-billion. Every Ontario electricity user pays a global adjustment charge on her or his hydro bill, as well as a debt retirement charge. Much of both charges are associated with nuclear power. A study by Navigant showed that 42 per cent of the global adjustment charge is due to nuclear. When Ontario Hydro was broken up in 1998, its $19.4-billion nuclear debt was called “stranded debt” and has been paid for by Ontario taxpayers. As of 2010, Ontarians had paid $19.6-billion to retire this debt – and $14.8-billion was still owing. In other words, the total debt payments have already exceeded the original value of the debt!

Energy efficiency is the cheapest form of power generation because it creates more usable energy within the grid – someone somewhere can use every kWh of power that I don’t. Ontario can secure energy efficiency in homes and buildings for 2.3 cents per kilowatt-hour (kWh). Homeowners that insulate their attics and walls, install weather stripping or energy efficient lights, or swap out an old 150-litre hot water tank for an on-demand system to lower their home energy use. A staggering 24 per cent of electricity in North America is used simply for lighting, and LEDs reduce usage by 80 per cent compared to incandescent bulbs.

Alternatively, Ontario could source cheap hydroelectric power from Québec for three cents per kWh, or install combined heat and power (CHP – also known as cogen or cogeneration) for 6 cents per kWh.

Ontario’s residential utility customers currently pay 8.6 cents per kilowatt-hour (kWh) for the first 750 kWh per month, then 10.1 cents a kWh thereafter. Homes that use electricity on “time-of-use rates” pay 7.5 cents per kWh during off-peak hours (7pm to 7am); 11.2 cents per kWh for mid-peak (7am to 11am and 5pm to 7pm); and 13.5 cents per kWh from 11am to 5pm.

By contrast, Moody’s Credit Rating puts the cost of electricity generated by new nuclear power plants at 15 cents per kWh. According to Jack Gibbons of the Ontario Clean Air Alliance (OCAA), refurbishing Darlington’s four nuclear reactors will cost 19 to 37 cents per kWh. The Ontario Power Generation (OPG) lowballs the cost at eight to 14 cents per kWh.

But it’s notable that Ontario’s past nuclear decisions have followed a predictable pattern: lowball costs are used to secure project approval, and then overruns are simply passed on to taxpayers. Nuclear projects in Ontario, on average, have gone 2.5 times over budget – so it’s reasonable to multiply OPG’s 8 cents per kWh by 2.5 and 4.5 (Darlington’s overruns) and get a more realistic range of 20 to 36 cents per kWh, in line with Jack Gibbon’s more accurate and trustworthy estimate.

A wise saying applies here: Never ask a barber if you need a haircut. Given that 50 per cent of Ontario’s electricity comes from nuclear reactors, perhaps we shouldn’t ask the OPG or Ontario Power Authority (OPA) about the province’s energy future. It is particularly telling that no company anywhere in the world will build a nuclear reactor unless it is shielded from liability and can pass cost overruns on to taxpayers.

Why then are both the Ontario Liberals and Conservatives advocating spending billions of dollars refurbishing old nuclear reactors? The NDP supports it too because of unionized power workers, but its party leaders are cagey about categorical statements. Only the Green Party of Ontario remains steadfastly opposed to nuclear refurbishment.

OPG admitted in June 2014 that the Darlington refurbishment project is already $300-million over budget – before any actual construction work has begun. Will Ontario’s new Liberal majority government continue to pursue nuclear refurbishment or stop throwing good money after bad?

McKinsey & Company, one of the world’s preeminent management consulting firms, has identified $2-trillion worth of energy efficiency initiatives not currently being pursued worldwide, which have an internal rate of return of 17 per cent or better. Government and business leaders should be aggressively pursuing these highly profitable opportunities rather than embarking on nuclear refurbishment.

But even smart people have problems predicting the future. In the 1980s, AT&T commissioned a study by McKinsey & Company that predicted the market for cell phones by the year 2000 would be 100,000 users. That year, 107 million phones were sold.

How could the leading phone company and management consulting firm have been so off? For the same five reasons that we should be investing in renewable energy and energy efficiency projects instead of refurbishing nuclear reactors.

Faster, Better, Smaller, Cheaper

In 1965, computer tech pioneer Gordon Moore predicted that a CPU (central processing unit – the ‘brains’ of a computer) would double in power every two years while the price point to produce it stayed the same. Practically, this means that transistor-based technologies – computers, tablets, cell phones, etc – get faster, better, smaller and cheaper. The same is true of solar photovoltaics (PV), the cost of which has fallen 100-fold since 1977, and 80 per cent since 2008 (see the chart below).

More solar energy can fall on Earth in a single hour than all the energy used globally in a year. 

Nobel Laureate and former US Secretary of Energy Steven Chu predicted in 2011 that solar power will be at grid parity by 2020 – meaning solar power will be dramatically cheaper than nuclear power. Renewable energy (excluding hydro) currently represents only 8.5 per cent of the world’s generating capacity – causing some critics to dismiss it. But in 2013, renewables created a staggering 44 per cent of new global energy capacity.

Here’s another stunning fact: more solar energy can fall on Earth in a single hour than all the energy used globally in a year. On June 9, 2014, Germany produced a record 50.6 per cent of its electricity in the middle of the day from solar power! Germany is not noted for a sunny climate, and 90 per cent of the world’s population lives in countries with substantially more sunlight – so the potential of solar power in the future is fantastic. The annual solar energy that Earth receives dwarfs all remaining fossil fuels.

 By 2030 renewable energy – primarily wind and solar power – will make up 66 per cent of the power supply according to Bloomberg New Energy Finance. But I believe the timeline for renewable dominance is actually closer at hand than that. In 2013, 29 per cent of the electricity capacity added in the US was solar. In fact, more solar was installed in the US in 18 months from June 2012 to December 2013 than in the prior 30 years combined.

But according to Ontario’s Long Term Energy Plan, the Darlington nuclear reactor refurbishment won’t be completed until 2025. If it proceeds, Ontario taxpayers will be locked into the most expensive form of electricity for the next 40 years. So while other provinces, states and countries will be basking in the endless supply of low-cost solar power, Ontario businesses, manufacturers and homeowners will be burdened with billions in high costs to pay for nuclear power.

As the famous energy consultant Wayne Gretzky said, “I never go where the puck is, I go to where it’s going to be.” The critical question seems to be: Where is the world’s energy future going?

A Crowdsourced Power Grid

Back when AT&T commissioned McKinsey to study cell phones, the technology was horrifically expensive and therefore ownership was very exclusive – only a small group of wealthy individuals or corporations could afford them. But as the technology plummeted in price – driven by Moore’s Law – millions of individuals became buyers. This completely revolutionized the industry.

The same thing is happening in the renewable energy sector. Feed-in-Tariff (FIT) programs around the world are driving the adoption of wind and solar power. FIT programs ensure that homeowners, farmers, private investors, community and Aboriginal groups are paid a fixed price for the electricity they generate and feed into the grid. Rather than the governments or electric utilities laying out billions of dollars of capital for big, expensive centralized power plants (as with coal, nuclear or gas operations), individuals, communities and local groups are investing in small-scale renewable energy.

As of 2010, more than 50 countries have FIT programs, which also have some ancillary benefits. They increase consumers’ consciousness about energy and as a result those people become more efficient at using and conserving it. Homeowners who are being paid a premium for electricity generation become conscious of the value of electricity and use less.

The resulting energy consciousness thereby lowers demand. FIT programs also reduce transmission line loss, which can reach as high as 22.5 per cent at peak demand because locally produced electricity does not have to be transported hundreds or thousands of miles from a centralized facility. Likewise, the FIT approach increases grid reliability because generation is distributed over a wider geographic area and is therefore more fault-tolerant.

Developing Economies of Scale

Nokia rose to dominance in the cell phone industry by producing inexpensive phones. In fact, Western nations have developing nations to thank for cheap cell phones. China, India and other developing nations in Latin America and Africa couldn’t afford the wire line infrastructure required to provide billions of landline phones to emerging middle-class and poor consumers. So these heavily populated areas leapfrogged the West and moved directly to cellular mobile technology. Their massive economies of scale dramatically reduced the price of mobile technology.

China has announced it will triple its current installed solar capacity to 70 GW by 2017. China already has the second-largest installed capacity of solar – by 2017 it will be the leading country globally.

And solar’s potential is already huge: A PV farm in the Sahara covering just 0.3 per cent of the desert could power all of Europe.

An Explosion of Exponential Growth

Imagine a pond that starts with one lily pad, and the number of lilies doubles every day. At the end of day two there are two lilies, then four lilies after three days, eight after four days, 16 after five days, and so on. However, on day 14, one day before the entire pond is covered, 50 per cent of the water will still be open. On day 13, 75 per cent of the pond will be uncovered, and on day 11 nearly 95 per cent is visible.

If you began warning people on day 11 that the pond was about to be covered over with lilies, they’d look at you like you’re crazy. The key lesson is that most people – most strategic planners, most OPA and OPG energy planners – cannot see exponential growth until it overwhelms their plans.

Solar power might only be a small percentage of the global energy mix at the moment. But global solar capacity has been growing by 40 per cent a year, compounded annually for the last 20 years!

People really don’t understand the power of exponential growth. The amount of computational power in a wristwatch is greater than all the computer power on the first lunar landing module. The average computer notebook today has more raw computing power than IBM’s largest mainframe 15 years ago.

Exponential growth is a game-changer. Whole industries are blindsided by it. The exponential growth in bandwidth resulted in Netflix blindsiding Blockbuster into bankruptcy. More than 33 per cent of all international long-distance calls are now facilitated by Skype, which blindsided the telecom industry’s traditional profit. The exponential growth of social media has vaulted the valuation of Facebook, Twitter and LinkedIn into the billions. The exponential growth of digital music compression transformed music consumption.

In industry after industry, exponential growth of a new technology or trend has dramatically changed the playing field.

Jobs, Jobs, Jobs

In 2013, 1,350,000 Canadians were out of work and another 914,000 were underemployed. At a time where we need to create two million jobs for Canadians, government policy should be focused on job creation as a first priority.

In 2011, produced a study about the value proposition of expanding US nuclear capacity versus household-scale energy efficiency, summed up by the infographic below. If Canada’s political leaders cared about jobs, they’d get busy promoting energy efficiency, building retrofits and mass transit.

Green Party of Ontario leader Mike Schreiner points out that energy efficiency could create 14 times more jobs than building new nuclear plants. You’d think all political parties would favour an overriding focus on energy efficiency, because it creates jobs in every community and insulates homeowners and businesses from inevitable rises in energy prices.

By pursuing the lower-cost options of energy efficiency and buying power from Québec, Ontario can assure taxpayers better electricity rates going forward without the threat of debt, provide better environmental choices and less risk, and create more jobs. To defeat nuclear refurbishment in Ontario, we need to delay the decision to proceed, and leave it to market forces and the falling price of solar power to eliminate this unneccesary and overly expensive option.    

Jim Harris is the author of Blindsided, an international bestseller published in 80 countries worldwide, and he speaks at 40 conferences a year around the world. | @JimHarris