Thursday, September 25, 2008

Energy Subsidies

A new study. titled Analysis of Federal Expenditures for Energy Development challenges the assertion that nuclear power receives large subsidies from the Federal Government. The study, by About Management Information Services, Inc. ( MISI), demonstrates that much of that the Federal investment in nuclear research included a broad spectrum of projects, and was not simply confined to civilian reactor research. MISI has a long history of research of energy and economics issues for the National Academy of Sciences, the U.S. Department of Energy and others.

MISI looked at Federal energy related expenditures between 1950 and 2006. It demonstrates that Federal spending on Nuclear power research peaked during the 1950's and dropped significantly after. The study finds that among energy sources oil, natural gas, coal, and Hydro-electric generation have received larger federal subsidies than nuclear during the time frame.

A review of MISI data, however, reveals that much of the "Federal research and development subsidy" did not in fact benefit the civilian power industry.  The study also reveals that most of the so called research subsidy to the "nuclear industry", was not focused on conventional power reactor technologies. Only $5.8 billion, was spent on Light Water Reactors, the only civilian nuclear technology used to generate power in the United States. In contrast various research projects related to the breeder reactor received $23.78 Billion and more that $38 Billion dollars were spent on other reactor research projects that were unrelated to the light water reactor. Only Light Water Reactor research benefited the civilian nuclear power Industry, and thus could be considered a subsidy.

Most Federal spending on reactor research occurred before 1975. Between 1998 and 2003 Federal spending on all reactor research was only about 10% of federal Reactor research levels in the 1970's and 1970's research levels were far lower than during the 1950's. Since 1976 over 50% ($14.5 billion) of Federal reactor research expenditures have been devoted to the LMFRB. In contrast, only 6% ($1.68 Billion) of Federal nuclear research dollars since 1976 have been spent on Light Water Reactor research, despite the fact thatr Light Water Reactors provide 20% of power in the United States. Another $3 Billion was spent on reactor waste management research, but most of that money cannot be considered as a subsidy for the Civilian nuclear industry, because that industry continues to manage and store its own waste in temporary local storage facilities at its own own facilities.

Unlike all other energy sources there has never been a tax based subsidy for the nuclear industry. In contrast, renewables as well as oil, gas, and other energy forms receive heavy tax subsidies. Most of the cost of hydro construction is paid for by the Federal government with no return to the tax payers. Most energy forms have received more money from the Federal Government than they have paid to it. The one exception is the civilian nuclear industry, which has paid $14 billion more to the Government that it has received. The imbalance came about because the Federal Government has failed to provide waste management services to the nuclear industry, which nuclear plants owners are paying for. Thus fat from receiving subsidy from the Federal Government, the civilian nuclear industry has in fact subsidized the Federal Government, and the net value of that subsidy is far greater than the value of all of the benefits that the civilian power industry has received through the Federal Government. If we subtract the $5.8 of R & D expenditures on Light Water Reactors paid by the Federal Government, we find that the Civilian Power Reactor Industry has given the government a net subsidy of $8.2 Billion. In addition unlike other energy technologies including renewables, the civilian nuclear power industry pays 100% of its tax obligations.

Payments into the the nuclear waste fund, have not had their value adjusted for inflation, nor is interest paid on the fund's balance. The inflation adjusted value of the of the fund, the value of the
interest on the fund the fund and the value of future contributions on the fund, makes the nuclear electrical industries contribution much bigger than is stated by nuclear critics. Add to this the fact that the Federal government is obliged to pay for the one third of the storage at Yucca Mountain that is used for nuclear waste from government facilities, and the supposed government subsidy disappears.
A note on Price-Anderson: Critics of nuclear power consider the Price-Anderson Act to be subsidy. This is a conceptual error. In fact the primary function of the Price-Anderson Act is to create a form of self-insurance for the civilian nuclear power Industry. Under Price-Anderson, the primary insurance obligation falls on the reactor owner. Reactor owners must obtain the largest accident insurance protection available on the insurance market. Beyond that all reactor owners have a joint obligation to pay at least $9.5 Billion into a compensation pool, in the event of a large accident. It is possible that the Federal government could impose an even larger obligation on reactor owners. Only in the event of a larger payout would the Federal Government be under any obligation. Since Government has never paid a cent in accident compensation, and and given the safety features of Light Water Reactors, it is virtually impossible that the Government every will pay out a cent under the Price-Anderson Act, and pays no insurance premium, the Price Anderson Act ought to be considered a potential subsidy, rather than an actual subsidy. The value of Price-Anderson cannot be determined, since it is very unlikely that any compensation will every be paid out by the government under Price-Anderson. In the absence of a Government payout, the Price-Anderson acts that the primary obligation for all claims payments up to $10 Billion rests with the Nuclear Industry.

We ought to compare the Nuclear Industry's obligation under the Price Anderson Act with the insurance of the hydro electric industry. Serious accidents involving large scale damage to property and loss of human life are far more likely with hydro electric dams than a catastrophic failure of a a nuclear plant. Typically nuclear plants have highly redundant safety systems, and place at least 5 levels of protection between radioisotopes trapped in nuclear fuel, and the civilian population. In contrast, dames typically have only one layer of defense between impounded waters and down stream populations and property. The failure of a dangerous dam like the Cedar Creek Dam on the Cumberland could kills thousands of people, and cause billions of dollars in damage. There is no Price-Anderson Act for the hydro-electric industry, perhaps because the Federal Government owns most of the dams.

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