Thursday, September 25, 2008

Energy Subsidies Again

In 1999 the Federal Energy Information Administration (EIA) undertook a comprehensive study of Federal energy interventions during that year. EIA undertook a second study in 2007. Remarkably the EIA study foind that no growth in energy consumption had occurred during the previous 8 years.

The 1999 and 2007 EIA studies actually compliment and amend the 2008 MISI study I discussed in my last post. The MISI study did contain a summery of estimated subsidies from all sources for various segments of the Energy Industry from 1950 to 2006, there is no break down by year, except for R&D expenditures. There are discrepancies between the two reports. Thus The EIA found that nuclear R&D expenditures for 1999 to be $740 million, while the MISI estimated the 1999 nuclear R&D subsidy to be only $125 million. The EIA qualifies its R&D budgeting by describing the 1999 funding as being for "applied" R%D. Thus the entire $740 Million is the DOE budget for applied research, and not every research project is directed toward research that would qualify as a subsidy for the "civilian nuclear power industry".

A further breakout of the 1999 DOE expenditures demonstrates some of the issues.
New Nuclear Plants (Nuclear Energy Research Initiative) 36
Waste/Fuel/Safety (Environmental Management) 530
Other Allocated (Termination Costs and Program Direction) 173

Is any of this a real subsidy for the Civilian nuclear industry? The first line would be, but it would it really be a subsidy unless energy utilities got some benefit from it. Thus if the New Energy Research Initiative produces something that actually benefits the nuclear power industry, it is a subsidy. If not it might be considered a dead end science project. The first line looks like a subsidy, however.

The second line, I have argued, cannot be considered a subsidy, In the DOE Budget the term Environmental Management, refers to the cleanup of old Cold War and WWII AEC sites, that were either being shut down, or in the process of being shut down. The cleanup problems were predominately a legacy of military uses of nuclear power. Most of the civilian research programs that were involved in the subsequent cleanup were not involved with LWR research, and hence the cleanup is not a LWR subsidy,

Finally the third line refers to the shut down of a Cold War Era production plant. The facility in question was involved in weapons related work and its clean up thus was not a subsidy for the civilian power industry.

There are a few items mentioned for the year 1999 in the MISI study of nuclear subsides, that do not seem to be subsidies for the nuclear power industry. Other items might be seen as not real subsidies at the present, but possibly they might have a future subsidizing effect. Thus for example, DOe' grants for University Reactor Infrastructure and Education Assistance, benefit the civilian power industry? The answer is probably yes, and in several ways, But it could also benefit research programs that are unrelated to the nuclear power industry. It could also benefit the United States Navy, since the Navy might recruit naval reactor operators from such programs. The program might also be a source of earmark funds, that were far more about local politics, thn serving th interest of the nuclear power industry. Although the issue demonstrates how problematic determining a subsidy is, I would be inclined to think that the $10 million is a subsidy for the civilian power industry, even if it were not intended to be so.

In order to resolve some issues raised by the Energy Information Administration 2007 study of Nuclear Federal energy interventions, I reviewed the 2009 Federal Budget request for nuclear power, in order to identify 2008 appropriations.

In 2008 Congress appropriated for the Nuclear Power 2010 program, $133,771,000
For the Generation IV Nuclear Energy Systems Initiative $114,917.000
The Advanced Fuel Cycle Initiative received a 179,353,000

These programs at present cannot be described as nuclear power subsidies, unless or until research leads to a product or concept that benefits the nuclear industry.

In addition to research appropriations, other facilities which might been seen as a subsidy for civilian nuclear power would be the $278,789,000 appropriation for the Mixed Oxide Fuel Fabrication Facilities. However, the MOX Program is part of an ongoing nuclear disarmament/anti-proliferation effort. The long term goal of the MOX program is the lowering of stocks of Plutonium by using it as reactor fuel. The MOX facility is designed to manufacture reactor fuel containing plutonium and uranium. I believe that it would be extremely cynical for supporters of nuclear disarmament to describe a disarmament program as a subsidy to the civilian power industry.

Thus the current Federal budget contains few if any real subsides for the nuclear power Industry. Critics of nuclear power charge that the nuclear industry cannot live without subsidies, My review of the current Federal support roe nuclear power related research suggests that far from being subsidized by the government of the United States, the nuclear power industry is paying money to the Government but not receiving promised services. Relatively small long range DOE funded nuclear research programs have yet to produce any positive benefits for the civilian nuclear power industry, and may not produce any benefits for some time, if ever, Thus it is very inaccurate to speak of the current nuclear industry as being dependent on subsidies.

A note on the meaning of the word "subsidy":
The EIA defines subsidy as"the transfer of wealth from the federal government to the beneficiaries [of the subsidies]". Thus for there to be a subsidy, wealth must leave the government's hands, go directly into the hands of the subsidized. Many functions of government may enhance the wealth of some citizens but not others, and still be a subsidy. Thus a reliable, rational and trustworthy system of civil law may enhance the wealth of the American business community, without its cost constituting a government subsidy of business interests. Government financed collection of information and the creation of knowledge may be financially useful to some businesses, but still is not be seen as a subsidy. What then is a subsidy?

If the government asks a aircraft manufacturer to design and construct an aircraft for military purposes, and the manufacturer subsequently adapts the air craft for civilian purposes, did the government subsidize the manufacturer of the civilian aircraft? Now let us consider a variant of this case. After completing the design of the military aircraft, and its civilian variant, the design team is hired to design another aircraft by another aircraft company. The air craft turns out to be almost an exact copy of the first company's civilian aircraft. Is this a case of government subsidy? Now the design team produces almost exact duplicates of the aircraft design for every aircraft manufacturer that wants one. Is this a gonernment subsidy of the aircraft industry?

It is not always clear that a process in which money leaves government hands and as a consequence money enters the hands of a business is a subsidy. The definition speaks of a transfer, but does not address qualifiers. We can have direct transfers, and indirect transfers. But determining what an indirect transfer is is a real humdinger.

We do have some help from the definition. If the government does not transfer money, it would not seem to be a subsidy. Thus a promise to transfer money under certain circumstances is not a subsidy. If the alleged beneficiary does not receive money as a consequence of the government program, it is not a subsidy.


Anonymous said...

Thanks for pointing out that nuclear power industry pays in more to the federal government than it receives in subsidies. It is also interesting to note that during the past decade, renewables have received more subsidies than nuclear power.

randal.leavitt said...

Good work - you are really chopping the bottom out of this subsidy meme. Personally I guess I never really had the reaction that I was supposed to when this subsidy claim is made. I cannot see what is wrong with a central government establishing a technology that benefits everyone. Why do people think that the scoundrels who implemented sub-prime mortgages and derivative investments should also be the people who decide whether or not we use nuclear power? As I see it, I would not want the investing class to be making these decisions. Sewers provide a good analogy - would we really want bankers to decide which neighbourhoods get sewers and which dont?

Charles Barton said...

Subsidies for renewables are of course of an entirely different issue for the anti-nuclear crowd. The Irony is that is that renewables really are dependent are dependent on subsidies.


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