NNSA to Remain in DOE

Well, that didn't take long:

The Obama administration has scrapped a plan to study placing U.S. nuclear-weapon research under the control of the Defense Department, Albuquerque, N.M., Mayor Martin Chavez said following a Friday meeting of U.S. mayors and top administration officials (see GSN, Feb. 6).

"I think that one is nipped in the bud," Chavez said after discussing the proposal with Energy Secretary Steven Chu.

It will be interesting to see how DOE changes under this administration--Obama's emphasis on energy issues (and the very large sums for energy and science research he's proposing) imply a need for serious changes in the way DOE is organized and run. Only time will tell how these issues play out.

Down To Earth

Atomstroiexport has issued a new tender for the proposed nuclear complex in Turkey:

Russia's Atomstroiexport has offered to cut the price of power from its planned nuclear power plant in Turkey by 27 percent, the state Anatolian news agency said on Friday.

Atomstroiexport and its partners -- Russia's Inter Rao (IRAO.MM) and Turkey's Park Teknik -- will sell power from the planned plant for $0.1535 kilowatt hour, instead of $0.2116, Anatolian said, citing Duran Gokkaya, general manager of Tetas, the state power company.

Atomstroiexport was the only bidder in a September tender for Turkey's first nuclear license.

I put a fair amount of effort last month into determining why the original tender was so expensive, but details of the bid were not public knowledge. In any case, the Russians have now offered a new price that, while steep, is not unreasonable. We'll see if the Turks take it.

A VERY Special Relationship

A rather shocking revelation published in The Guardian:

The US military has been using Britain's atomic weapons factory to carry out research into its own nuclear warhead programme, according to evidence seen by the Guardian.

US defence officials said that "very valuable" warhead research has taken place at the Atomic Weapons Establishment at Aldermaston in Berkshire as part of an ongoing and secretive deal between the British and American governments.

The Ministry of Defence admitted it is working with the US on the UK's "existing nuclear warhead stockpile and the range of replacement options that might be available" but declined to give any further information.

Basically, this is tantamount to an admission that the RRW is a joint American-British project, with the Atomic Weapons Establishment providing vital assistance with research that the US weapons labs are apparently unequipped to do. This makes sense in light of the British decision to build new Trident subs--after all, the main purpose of the RRW is probably to replace the W88s on the USN's Trident II SSBMs.

This news makes it clear why the RRW program is unlikely to disappear, even if Obama elects to formally cancel it. The RRW is supported by powerful, entrenched interest groups and is likely to be realized eventually, even if it is delayed another ten years or so. The project has apparently been shared with our closest ally, presumably with the condition that the new warhead could be manufactured at AWE for deployment by the RN. If this is any indication, the "special relationship" between America and Britain is stronger than ever.

NNSA to DOD?

Obama's pondering it, apparently:

The Obama administration is considering moving the nation’s federal weapons complex, including New Mexico’s Sandia and Los Alamos national laboratories, under military control, ending decades of civilian oversight.

The Albuquerque Journal, in a copyright story Wednesday, said an internal memo it obtained shows the administration is looking into turning over control of the labs to the Department of Defense. They currently are controlled by the Department of Energy.

The Office of Management and Budget memo, which carried no date, said such a change would not occur until at least 2011.

I'm not sure what this would entail for some of the labs. LLNL and Los Alamos would presumably move to DOD control; but would ORNL remain with DOE while the Y-12 weapons complex moved to DOD? Growing up in Oak Ridge I do think that the current DOE management of the national labs leaves a lot to be desired, but DOD might not make a better home. Perhaps a better idea would be to recreate the old Atomic Energy Commission and delegate DOE's various nuclear functions to it. In my view, DOE's big problem is that it wears far too many conflicting hats; an agency with a narrow nuclear focus might do a better job than DOE dealing with issues ranging from managing the weapons complex to developing advanced nuclear fuel cycles.

The Soviet "Doomsday Device" Myth

Those of you who watch the History Channel may have come across this clip, which is from a series titled "Secrets of War." The speaker, Victor Suvorov, is the author of a notorious and now wholly-discredited book about the Soviet entry into WWII. I was wondering where this persistent "Soviets planned a doomsday machine" myth came from, and it appears it is simply another of Suvorov's many imaginative fabrications. I can find no Russian-language references to this tale whatsoever, and all the English ones lead back to this "documentary," and to the ever-unreliable Mr. Suvorov. Given what I know about Soviet nuclear war planning (my field of academic specialization) the story is ludicrous on it face, as well. The concept of self-immolation implicit in a doomsday machine like this is absolutely alien to Soviet political and strategic thought. The Soviet "doomsday machine" is no more than a fairy tale to concocted to amuse American basic cable subscribers, nothing more.

Aqueous Homogenous Reactor Research in US

As I noted in my recent post, the Russians are developing an aqueous homogeneous rector (AHR) for medical isotope production at the Kurchatov Institute and the Institute of Physics and Power Engineering in Obninsk. But as I read a Russian-language article about the problem of Mo-99 production using LEU, I was surprised to discover that the Russians have some American competition.

The resurrected Babcock and Wilcox is developing a 200kW AHR called the Medical Isotope Production System to produce Mo-99 and other isotopes. As described by the September 2008 IAEA report Homogeneous Aqueous Solution Nuclear Reactors for the Production of Mo-99 and other Short Lived Radioisotopes:

Current concepts under consideration include a 200 kW reactor, capable of producing approximately 1,100 six day Ci/week of 99Mo and other useful isotopes. An existing containment structure formerly housing a pool type research reactor at the BWXT facility in Lynchburg, VA, is under consideration for an initial commercial facility (Figure 1). The reactor would contain approximately 150 L of LEU solution and would operate at approximately 80˚C and atmospheric pressure. A new separation/purification facility is envisioned with hot cell capacity for the several separation/purification/packaging and shipping functions as well as a waste management facility.

The recently-published Medical Isotope Production Without Highly Enriched Uranium has more details. B&W hopes to field the MIPS 5-6 years after a radiopharmaceutical partner is identified, but faces a bevy of challenges related not only to the conceptual design of the reactor, but also to the fact that NRC regulations are ambiguous as to the classification of an AHR and its waste stream. They hope to convert an existing containment structure in Lynchburg, Virginia from an old pool-type reactor to house the first unit. B&W is hiring a lead project engineer to manage the development effort. Anyone out there with experience in liquid-fueled reactor design?

UPDATE: B&W has announced a partnership with radiopharmaceutical manufacturer Covidien to develop the MIPS.

So Much For "Solar Baseload"

One of the most-hyped renewable energy technologies of the moment is CSP--concentrating solar power. Joe Romm, in particular, is an unabashed CSP booster who has gone so far as to claim that CSP will be "the technology that will save humanity" and that this "solar baseload" make new nuclear builds unnecessary. However, CSP is already failing to live up to the hype.

One of the most advertised of the various companies promoting CSP is Ausra. This company was founded by Australians and financed largely by Silicon Valley venture capitalists. Ausra was notable for its excessive braggadocio, claiming that within a few years its technology would be cheaper than all other alternatives. In recent weeks, however, Ausra has essentially admitted that these claims were merely so much hot air. Ausra CEO Robert Fishman announced that Ausra was scaling back its plans to build large plants, instead focusing on equipment sales. According to the Mercury News, "Fishman said Ausra will build small plants for companies that need industrial steam or electricity." So far from building huge CSP plants with storage that could offer a form of baseload power, Ausra is now planning on providing process heat to factories and auxiliary capacity to existing steam plants--a far cry from its ambitious plans a few years ago. Indeed, Ausra is laying off employees whose expertise was in large power plant construction in light of their new strategy.

Ausra still plans to complete its 177MW plant in Carrizo, California, but henceforth it plans to concentrate on decidedly "non-baseload" applications. Whether this business plan will work remains to be seen (efforts to market similar technologies in the 1980s fizzled), but this is a sign that their technology did not live up to expectations. Particularly interesting is the fact that the new applications that Ausra is marketing its collectors for do not involve storage--suggesting that their ambitious plans to store steam geologically were far from the "trump card" they had claimed. Clearly, Ausra is now paying dearly for its hubris.

Although Ausra has been mum on the issue, I have a suspicion that their solar concentrators have probably failed to perform up to expectations. DOE tested similar solar concentrators in the early 1980s and concluded that the cost advantages of the fresnel reflectors weren't worth the tradeoff in reduced performance. If the concentrators had performed well at Ausra's test facilities I suspect that it would be widely advertised in Ausra's marketing, so its reticence (and its difficulty attracting utility-scale orders) suggest some problems in this arena.

While Ausra is far from the only player in the CSP field and as such it ought not be conflated with the entire industry, well-apprised figures say that it is likely that many other firms are in similar straights. "I think it's going to be a brutal, brutal year for solar, and a lot of companies will go out of business," said Andrew Beebe, the CEO of Suntech Energy Solutions, which develops solar-power facilities for corporations and utilities. "A lot of mistakes were made. Now is the time of reckoning, and it's going to be ugly." Far from being poised to save the world, the solar industry is apparently fully occupied trying to save itself.

Will 50% of Nuclear Loan Gurantees Default?

Critics of DOE's loan guarantees for new nuclear construction are fond of pointing out that the Congressional Budget Office reported in 2003 that it expected that "over 50%" of nuclear loans would default. For instance, this piece in the Washington Monthly trots out the figure as a means of pouring cold water on the prospect of new nuclear builds.

But what are the assumptions behind the 50% figure?

To find out it is merely necessary to refer to the CBO website. Reporting on the Energy Policy Act of 2003, the CBO found that:

CBO considers the risk of default on such a loan guarantee to be very high--well above 50 percent. The key factor accounting for this risk is that we expect that the plant would be uneconomic to operate because of its high construction costs, relative to other electricity generation sources. In addition, this project would have significant technical risk because it would be the first of a new generation of nuclear plants, as well as project delay and interruption risk due to licensing and regulatory proceedings.

In its 2003 Annual Energy Outlook, the Energy Information Administration (EIA) projects that production from new nuclear power plants would not be cost-competitive with other power sources until after 2025. EIA also reports that current construction costs for a typical electricity plant range from $536 per kilowatt of capacity for natural-gas-powered combined-cycle technology to $1,367 per kilowatt of capacity for coal-steam technology. Although construction costs could diminish significantly as a new generation of nuclear plants are built, a new nuclear power plant starting construction in 2011 would have a construction cost of about $2,300 per kilowatt of capacity. By 2011, that cost would result in capital costs that are 40 percent to 250 percent above the cost of capital for electricity plants using gas and coal. Because the cost of power from the first of the next generation of new nuclear power plants would likely be significantly above prevailing market rates, we would expect that the plant operators would default on the borrowing that financed its capital costs.

Assuming the nuclear plant is completed, we expect it would financially default soon after beginning operations, however, we expect that the plant would continue to operate and sell power at competitive market rates. Thus, over the plant's expected operating lifetime, its creditors (which could be the federal government) could expect to recover a significant portion of the plant's construction loan. The ability to recover a significant portion of the value of the initial construction loan would offset the high subsidy cost of a federal loan guarantee. Under the Federal Credit Reform Act, funds must be appropriated in advance to cover the subsidy cost of such loan guarantees, measured on a present-value basis. CBO estimates that the net present value of amounts recovered by the government on its loan guarantee from continued plant operations following a default and the project's technical and regulatory risk would result in a subsidy cost of 30 percent or about $375 million over the 2011-2013 period. Based on information from DOE, we expect other loan guarantees would not be issued for nuclear power plants until after 2013.

Basically, the CBO determined that nuclear plants would default because they would be uneconomical compared to conventional coal and natural gas generators. The former, it appears, are not going to be in the picture due to government regulation. The latter's costs will depend considerably on future natural gas cost trends, but by the time new nuclear plants enter operation in the 2018 timeframe chances are that natural gas prices will have returned to high levels due to resurgent worldwide demand. Furthermore, electricity prices are definitely going to go up in the next decade. The EIA is predicting that retail electricity costs will be about 12 cents kw-hr one decade from now. Finally, many of the new nuclear plants are being planned by regulated utilities that can use rate-recovery to finance construction, and so long as they convince regulators that they have incurred costs prudently they are allowed to adjust electricity rates to cover costs. The scenario outlined by the CBO--nuclear being uncompetitive with coal-fired electricty--is exceedingly unlikely to cause a default at a regulated utility, and given projected increases in retail electricity rates, deregulated utilities as well.

The assumptions behind the 50% loan default figure were dubious in 2003 and are indefensible now. It's time to consign this "fact" to the scrap heap.

The Aqueous Homogeneous Reactor Lives!

I'm a big fan of the aqueous homogeneous reactor. These are nuclear reactors that have their fissile fuel in an aqueous solution, rather than as solid fuel rods. Back in the late 1950s there was a major program at ORNL to try and develop an AHR on the Th-U233 cycle for commercial power production, but extreme corrosion issues resulted in the cancellation of the program. ORNL researchers decided (rightly, in my opinion) that molten-salt reactors were a better idea.

Soviet researchers never attempted to develop AHRs for power production, but they did develop these reactors for a practical application: radioisotope production for medical use, in addition to certain research applications. To this end they developed a series of AHRs culminating in the ARGUS: a miniature AHR producing a mere 20-50 kw thermal.

The ARGUS reactor: it's a wee little beastie

The AHR has two big advantageous for medical isotope production: firstly, its fluid fuel form makes extraction of isotopes from the fuel much simpler than from solid-fuel reactors. Secondly, AHRs have excellent safety characteristics. They have strongly negative temperature and void coefficients, making them essentially self-controlling. However, the corrosion issues associated with uranyl sulphate fuel have resulted in the abandonment of AHR research in most of the world. This is not the case, however, in Russia. In September of last year the Physico-Energetic Institute in Obninsk (normally known as the Institute for Physics and Power Engineering) announced plans to build a new nuclear medicine facility on the basis of a modernized AHR:

На промышленной площадке ГНЦ РФ «Физико-энергетический институт» в г. Обнинске Московской области предлагается создать комплекс по производству радиоизотопов на основе новой технологии с применением растворного реактора малой мощности. Как отметили в ФЭИ, проект растворного реактора для наработки и выделения радиоизотопов непосредственно из топливного раствора является одной из самых существенных разработок, осуществленных с участием радиохимиков. По словам директора отделения изотопов и радиофармпрепаратов ФЭИ Николая Нерозина, проект позволяет использовать реактор малой мощности 50(82) кВт для получения следующих изотопов медицинского назначения: Mo-99, Sr-89, Xe-133, а также смеси изотопов йода.

In the industrial sector of the GNTs RF "Physico-Energetic Institute" in the city of Obninsk, Moscow Oblast, the construction of a complex for the production of radioisotopes on the basis of new technology utilizing a solution reactor of low power is planned. As described by FEI, the project for a solution reactor for the production and extraction of radioisotopes extracted directly from the fuel solution is one of the most significant developments, being carried out with the assistance of radiochemists. In the words of the director of production of isotopes and radiopharmaceuticals Nikolai Nerozin, the project will utilize a reactor of low power 50(82) kWt for the production of the following isotopes with medical uses: Mo-99, Sr-89, Xe-133, and also a variety of isotopes of iodine.

From the published articles I gather that this reactor will be an evolved version of the ARGUS, designed to operate on 20% U-235 rather than the HEU utilized in the original ARGUS. Given the recent economic downturn, these plans for a new AHR in Obninsk may be scrapped, but clearly the researchers at the Kurchatov Institute and IPPE believe that the AHR is the solution to the worldwide problem of producing radioistopes for nuclear medicine without resorting to reactors using HEU. Personally, I wish them all the success in the world.

Just Say No to Portfolio Standards

The latest regulatory boondoggle, this time from Illinois:

Omaha-based energy company Tenaska Inc. plans to move forward with building a $3.5 billion clean-coal plant in Illinois after the Illinois General Assembly passed the Clean Coal Portfolio Standard Act.

The new legislation would require large utilities in the state to enter into long-term contracts to buy up to 5 percent of their electricity from clean-coal facilities, such as Tenaska's Taylorville Energy Center in Taylorville, Ill., said Bart Ford, vice president of business development at Tenaska.

Clean-coal facilities must capture at least 50 percent of their greenhouse gas emissions in order to qualify.

This is the stupidest thing I've ever heard. But then again, it makes as much sense as portfolio standards for renewables, or nuclear power, or anything else. The problem with portfolio standards is that they are corporaratist giveaways to the manufacturers of various technologies, which mandate the use of certain options whether they make physical, economic, and environmental sense or not. Portfolio standards are bad policy and will not be an effective substitute for carbon pricing. The sooner our country's leaders realize this, the better.

Russia Seeks Japanese Nuclear Plant

From The Japan Times:

The government plans to send senior officials to Moscow for final-stage negotiations on concluding a bilateral civil nuclear cooperation agreement with Russia, government sources said Saturday.

The move, which could happen later this month, is part of efforts to settle the matter before Russian Prime Minister Vladimir Putin visits Japan, taking into consideration that Putin is placing importance on energy. No date has been set for the trip.

The plan expected to pave the way exporting a modern nuclear power plant to Russia. The Japanese government's initial plan was to conclude the deal if Putin visited Japan by the end of 2008. But the visit was scratched by the global financial crisis, and the talks remain in limbo.

In past negotiations, Japan and Russia have clashed over involvement by the International Atomic Energy Agency. Japan is demanding the agency conduct a "strict examination" of Russia's nuclear facilities to confirm the plant will be used for peaceful purposes. Russia showed reluctance by insisting the country is already a nuclear power, the sources said.

Since Japan will field its own candidate this fall to take over the U.N. nuclear watchdog, the government is expected to continue to press Russia to accept the demand so it can gain support from other countries in the election.

The idea of Russia importing Japanese nuclear power plants is an old one--it was first floated in the 1970s when the USSR was experiencing great difficulty building VVER-1000 pressure vessels. My guess, however, is that Russia may be interested in acquiring more modern technology to bolster their nuclear export business. Currently, Rosatom can only sell its reactors to former Soviet satellites and developing countries. But if Rosatom licensed more modern technology, it could conceivably market its wares in the first world while undercutting Japanese and European vendors on price--potentially winning profitable new markets for Russia, while avoiding the need to develop a new LWR itself.

Note that Russia's primary next-generation reactor effort--the BN-series liquid-metal fast breeder--cannot be exported for proliferation reasons, in addition to the fact that it will probably prove economically uncompetitive with LWRs. So the royal road for Russia to compete in the global nuclear reactor market in the intermediate term is to import foreign technology. (Note that China and Britain are basically doing the same thing with their plans to start building AP1000s domestically). Especially worrisome (for Rosatom) is that cost trends suggest that its latest version of the VVER-1000 is probably going to be only slightly cheaper than reactors like the AP1000, so it really needs to come up with a strategy to compete in the global nuclear market after the 2020 time frame. But I'm not quite sure what's in it for the Japanese.

A Federal RPS: A Very Bad Idea

However thrilled I am about Obama's choice of Steve Chu as Secretary of Energy, I am not exactly thrilled by the proposals being put forth by the transition regarding energy policy. Take, for instance, this component of Obama's stimulus proposal:

Obama and Biden will create a federal Renewable Portfolio Standard (RPS) that will require 25 percent of American electricity be derived from renewable sources by 2025, which has the potential to create hundreds of thousands of new jobs.

A federal RPS is simply bad policy, for a variety of reasons:

1) It's inequitable. Because different parts of the country vary enormously in their renewable energy potential, some parts of the country (such as my native Tennessee) would probably never be able to meet the 25% standard, even if cost were no object. I imagine that there will be some kind of trading scheme to address this imbalance, but it will both place enormous pressure on more endowed areas of the country to overinvest in renewable generation, and also increase the cost of compliance for have-nots. Therefore, to the extent that renewable portfolio standards are good policy (which I don't think they are) they should really only be mandated on a state-by-state basis.

2) It's economically inefficient. Unlike carbon pricing, a RPS does not encourage end-users to change their preferences in light of environmental externalities, but rather forces utilities to purchase power from sources that may not be appropriate. The need to meet targets will also create a massive distortions, allowing the renewable energy industry to increase their prices and making their product more expensive than it needs to be. This deprives other possible carbon-mitigation measures, from efficiency to nuclear power, of capital that would be more efficiently invested in them.

3) It's probably unattainable, given European experience with similar policies. The UK's decision to pursue new nuclear power plants resulted from a politically unpopular discovery that even in windy Britain, renewable energy just doesn't live up to the hype. Despite the DOE's report that wind could provide 20% of US electricity by 2030, this estimate is based on extremely optimistic assumptions that seem thoroughly debunked by European experience. Keep in mind that US electricity use will probably grow at least some by 2025, so growing from current US renewable capacity to 25% would involve a near-unimaginable number of new generators--given average capacity factors for solar and wind generators, probably 4x or more the size of the current US nuclear fleet in terms of nameplate capacity, in just over 15 years.

On the whole, a federal RPS is a boondoggle that will misallocate resources and distract attention from more efficient and effective means of combating global warming. I will grant, however, that it would probably live up to its promise to "create hundreds of thousands of jobs"--but only at the expense of being an enormous drag on the economy, in addition to huge federal subsidies. As the stimulus also promises:

They [Obama and Biden] will also extend the Production Tax Credit, a credit used successfully by American farmers and investors to increase renewable energy production and create new local jobs.

If renewable energy is a sensible investment, carbon pricing will be all that is necessary to expand its utilization to an appropriate level. If renewable energy is such a good idea, why is it necessary for the government to force people to buy it? Carbon pricing, whether cap-and-trade or a carbon tax, is a much more appropriate policy for addressing climate change. A federal RPS is simply a very bad idea.

Are Gen III+ Nukes "Prudent?"

The latest critique of building new nuclear power plants, Craig Severance's Business Risks and Costs of New Nuclear Power, has created quite a buzz. Severance comes to the conclusion that the "most likely" cost of electricity from new Gen III+ plants is an eye-popping 30 cents kw-hr. On this basis, he charges that new nuclear plants are not a good investment for utilities, and that capital should be invested elsewhere.

In his conclusion, he states that:

The goal should be a reliable and cost effective utility network. This is the goal – not a particular type of power plant or a particular set of plans to defend.

Utility management shouldn’t be too exciting. If an idea starts to look like it could have excessive business risks and costs, it is best to re-assess and find less risky ways to meet the goals. The last generation of utility managers nationwide reached this conclusion about nuclear power. This Paper has shown reasons why these executives were right, even though they had to cancel nuclear plans they themselves, plus a powerful nuclear lobby and a pro-nuclear government, had at one point advanced.

If current-day utility executives and utility regulators will now consider these facts, the nation can proceed to address the energy challenges we face, with far less rancor and risks, and lower costs overall, than if a futile attempt is made at great cost to revive a nuclear industry that has never kept its promises to provide a competitive and viable generation source.

The problem here is that utility executives do not have any kind of single-minded determination to pursue nuclear power at any cost. In fact, most of the utilities planning new nuclear builds are doing so not because they are stricken with an "irrational exuberance" they need to be disabused of, but because of the need to prepare for a carbon-constrained future. If the prospect of carbon pricing wasn't looming, no one would be pursuing new nuclear plants.

To understand why building new nuclear plants is a prudent decision for a utility to make, we have to think ahead, to what conditions might possibly be like in the 2020s. In light of carbon pricing, old coal plants will either have to limit their operation or shut down entirely. Those that do operate will be expensive (as this is the entire purpose of carbon pricing). Even with license extensions older nuclear plants will be reaching the end of their operational lifetimes. This will open a very important qualitative gap in the generation mix of the utilities thinking about new nuclear builds.

Much like Amory Lovins, Severance makes the erroneous assumption that a kw-hr is a kw-hr, no matter what, and we should simply select the very cheapest generation option and be done with it. But this raises an important question--why do utilities invest in generators that don't have the lowest available lifetime cost? In other words, why did they invest in gas turbines and not coal plants?

The answer, of course, is that utilities have to provide power when and where it is wanted, and demand is not constant. Different technologies vary considerably in their ability to adjust to rapid changes in load. As circumstances have it, only two technologies in widespread use really lend themselves to peak power generation--hydroelectric dams and gas turbines. It is unlikely that many more of the former will ever be built in this country; the latter were the great winner in the energy field in recent decades. But gas has high operating costs, which discourages its use for off-peak generation. Baseload power is produced by coal and nuclear plants, which serve as the foundation of the generating capacity of many utilities. Basically, any policy to address climate change will tear the heart of these utilities' generating fleets, and the new nuclear units are a hedge to avoid this possibility.

Since a carbon-pricing scheme will force the utilities to close their amortized coal plants, they need to plan new baseload capacity to be available to keep providing reliable services. And right now, new nuclear plants are the only available option available for this role. Of course, this claim is disputed by renewable-energy enthusiasts, but the most currently hyped "baseload" renewable option--concentrated solar thermal--will not work in most of the areas considering new nuclear plants, due to want of direct sunlight. These areas generally lack geothermal and wind resources as well, although the latter don't constitute a real "baseload" source in any case. Fanciful proposals to build huge CSP plants in the southwest and transmit the power east of the Mississippi are not realistic alternatives to nuclear reactors for utilities in places like South Carolina. For all the barriers to building a new nuclear plant, they are minuscule compared to the technical and legal barriers facing such a scheme.

It is possible to use natural gas for baseload. Indeed, this is how most electricity in Russia is generated. But the example of Russia neatly illustrates why increased reliance on natural gas is ill-advised. Firstly, electricity in Russia is expensive and in short supply; and secondly, the Russian government is determined to maximize revenue from gas exports, and therefor drive up world prices. For these reasons, the Russians are planning to nearly double the size of their domestic nuclear fleet in the next ten years and are betting the long-term future of their electricity sector on nuclear power.

Of course, no one in their right mind would build generating capacity as expensive as Severance's 30 cent/kw-hr figure. This figure is in "nominal" dollars--essentially, a value from ten years in the future inflated from present dollars, and so would be lower in 2009 terms. But the reason that companies like Progress and FPL are ordering new plants is that they will not cost this much. Part of the reason for this is that Severance has used excessively pessimistic estimates for aspects of the nuclear fuel cycle for mining, milling, enrichment, waste disposal and decommissioning. Another reason the 30-cent figure is an overestimate is because Severance makes the assumption that the massive run-up in nuclear construction cost estimates between 2000 and 2008 will continue until the end of the next decade, nearly doubling construction costs. There is no good reason to believe this, given the recent collapse in commodities prices and the probable near-term global increase in the number of nuclear component vendors. Finally, Severance assumes a 14.5% average cost of capital, but regulated utilities in Florida and South Carolina are expecting to use rate recovery to finance plant construction, resulting in far lower capital costs. So the power generated by these plants will cost nowhere near 30 cents kw-hr. Just how much will depend on the degree of construction cost escalation and the cost of capital, but I expect a final figure in the 11-15 cents kw-hr range.

This is admittedly not cheap, although ten years from now this will probably be fairly competitive in the electrical generation field. I myself, and many readers of this blog, are confident that with a concerted effort we can develop nuclear plants in the next decade with vastly lower capital and operations costs than Gen III+ LWRs. Still, at the moment these utilities have no better options. These nuclear plants are not premised on massive future demand growth; they are are premised upon massive future generation loss. They cannot reasonably expect any technology--be it wind, "clean coal," or, sadly, Gen-IV nuclear--to be available in the next fifteen years to avoid the need for these new units. Right now, the utilities can either order new nuclear plants or risk being left without the ability to provide reliable service in the 2020s. They've chosen the former. And that's just prudent.

Time Magazine on New Nukes

From Going Nuclear, by Micheal Grunwald:

Nuclear power is on the verge of a remarkable comeback. It's been three decades since an American utility ordered a nuclear plant, but 35 new reactors are now in the planning stage. The byzantine regulatory process that helped paralyze the industry for a generation has been streamlined. There hasn't been a serious nuclear accident in the U.S. since the Three Mile Island meltdown in 1979. And no-nukes politics has become a distant memory. It was a sign of the times when John McCain ridiculed Barack Obama for opposing nuclear energy--and the allegation wasn't even true. "There's only a very small minority in Congress that still opposes nuclear power," says Alex Flint, the top lobbyist at the Nuclear Energy Institute (NEI). "That's quite a change."
...
So how should we produce our juice? The answer may sound a bit unsatisfying: more wind, less coal but mostly the same electricity sources we're using, until something better comes along. The key will be reducing demand through energy efficiency and conservation. Most efficiency improvements have been priced at 1¢ to 3¢ per kilowatt-hour, while new nuclear energy is on track to cost 15¢ to 20¢ per kilowatt-hour. And no nuclear plant has ever been completed on budget.

It appears that the author's conclusions were influenced by our old friend Amory Lovins:

Energy maven Amory Lovins has calculated that, overall, new nuclear wattage would cost more than twice as much as coal or gas and nearly three times as much as wind--and that calculation was made before nuclear-construction costs exploded.

Indeed, he provides plenty of unreferenced RMI talking points [link mine]:

A Warren Buffett--owned company has scrapped plans for an Idaho nuclear plant; banks and bond-rating agencies are skeptical as well. In fact, renewables attracted $71 billion globally in private capital during 2007 while nukes got zero. The reactors under construction around the world are all government-financed. "I have to keep explaining: France and China are not capitalist countries!" says Congressman Ed Markey, an antinuclear Massachusetts Democrat. "Nobody wants to put their own money into this so-called renaissance--just ours."

Of course, the truth behind this is rather more complex. Buffett dropped his plans to build a plant in Idaho--only to turn around and buy Constellation, which owns five reactors and is planning to build more, beginning with Calvert Cliffs 3 in Maryland. Investment in nukes is definitely non-zero, as is evidenced by companies such as Hyperion and NuScale, among others. This also makes it sound as if renewables are never financed with government funds, when it's clear from the renewble industry's own lobbying that they lead a hand-to-mouth existence on the basis of government subsidies. Take, for instance, this Time piece from a few months ago:

In a press conference last week the leaders of the solar, wind, geothermal and hydropower industries called on Obama and the incoming Congress to look ahead. First, energy leaders asked Obama to immediately adjust the alternative-energy production credit to provide green investors with a cash rebate, rather than a tax reduction. With the economy tanking, simple tax credits — which Congress renewed in October and without which the renewable-energy industry would not survive — aren't the lure they once were for companies looking to invest in new energy projects.

This gives a much more realistic picture of the situation. Worldwide, the renewables industry benefits from mandates, feed-in-tarriffs, and similar distortions that render utterly meaningless any appeal to the "wisdom of the market" in comparing new nuclear capacity and renewables in terms of gloabl investment. As the leaders of the industry themselves make clear, private investors put money into their businesses because they are a spectacular opportunity for rent-seeking. But I digress.

I'll Take Nuclear, Please

Latest fossil fuel disaster, this time quite near my hometown of Oak Ridge:

A wall holding back 80 acres of sludge from a coal plant in central Tennessee broke this week, spilling more than 500 million gallons of waste into the surrounding area.

The sludge, a byproduct of ash from coal combustion, was contained at a retention site at the Tennessee Valley Authority's power plant in Kingston, about 40 miles east of Knoxville, agency officials said.

The retention wall breached early Monday, sending the sludge downhill and damaging 15 homes. All the residents were evacuated, and three homes were deemed uninhabitable, a TVA spokesman told CNN.

The plant sits on a tributary of the Tennessee River called the Clinch River.

"We deeply regret that a retention wall for ash containment at our Kingston Fossil Plant failed, resulting in an ash slide and damage to nearby homes," TVA said in a statement released Tuesday.

TVA spokesman Gil Francis told CNN that up to 400 acres of land had been coated by the sludge, a bigger area than the 1989 Exxon Valdez oil spill.

Could TVA please finish Watts Bar 2 and shutter these decrepit old coal plants? In terms of real environmental consequences, this is bigger than any accident ever experienced by the nuclear power industry in the U.S.--Brown's Ferry, Three Mile Island, any of them.

Furthermore, this is a good example of how "clean coal" can't be expected to be "clean." All the ash will have to be put somewhere--and some will inevitably leak out into the environment, with deleterious effects. But given that "clean coal" primarily exists as a marketing slogan at the moment, it's not really serious competition for new nuclear plants anyway. So make mine nuclear, please. Before your coal plants end up destroying my house and/or killing me.

An Energy Pick I Can Live With

WashPo's Al Kamen has a new piece on Obama's possible choices for remaining cabinet picks, including that for Energy Secretary. While the names we've been hearing for awhile are repeated, including Google's Dan Reicher (who according to Tom Blees was intimately involved in killing off the IFR in the Clinton Administration). However, Kamen also repeated some Washington buzz I hadn't heard:

There's buzz that the transition folks are also looking hard at some scientific types for the energy job, including Steven Chu, director of the Lawrence Berkeley National Laboratory and professor of physics and molecular and cell biology at Cal-Berkeley. Chu co-chaired a group producing the international study "Lighting the Way: Toward a Sustainable Energy Future." He also shared the Nobel Prize for physics, but that was back in 1997.

Who is Steven Chu? From what I gather, this is the guy we want to head Energy. This is what he said about nuclear energy issues back in 2005:

Should fission-based nuclear power plants be made a bigger part of the energy-producing portfolio?

Absolutely. Right now about 20 percent of our power comes from nuclear; there have been no new nuclear plants built since the early '70s. The real rational fears against nuclear power are about the long-term waste problem and [nuclear] proliferation. The technology of separating [used fuel from still-viable fuel] and putting the good stuff back in to the reactor can also be used to make bomb material.

And then there's the waste problem: with future nuclear power plants, we've got to recycle the waste. Why? Because if you take all the waste we have now from our civilian and military nuclear operations, we'd fill up Yucca Mountain. [Yucca Mountain, which sits on federal land in Nevada , is under consideration as a long-term storage facility for spent nuclear fuel.] So we need three or four Yucca Mountains. Well, we don't have three or four Yucca Mountains. The other thing is that storing the fuel at Yucca Mountain is supposed to be safe for 10,000 years. But the current best estimates - and these are really estimates, the Lab's in fact - is that the metal casings [containing the waste] will probably fail on a scale of 5,000 years, plus or minus 2. That's still a long time, and then after that the idea was that the very dense rock, very far away from the water table will contain it, so that by the time it finally leaks down to the water table and gets out the radioactivity will have mostly decayed.

Suppose instead that we can reduce the lifetime of the radioactive waste by a factor of 1,000. So it goes from a couple-hundred-thousand-year problem to a thousand-year problem. At a thousand years, even though that's still a long time, it's in the realm that we can monitor - we don't need Yucca Mountain.

And all of a sudden the risk-benefit equation looks pretty good for nuclear.

Right now, compared to conventional coal, it looks good - what are the lesser of two evils? But if we can reduce the volume and the lifetime of the waste, that would tip it very much against conventional coal.

I like the sound of that! Furthermore, an experienced administrator from one of the national labs is a much better pick than an outsider unfamiliar with what DOE actually does and the byzantine world of internal DOE politics. In my opinion, this is by far the best candidate I've seen mentioned for this position. We should do what we can (however limited) to advance his candidacy.

Hyperion Poll

Rod Adams' post on Hyperion's claims about nuclear waste production from their Hyperion Power Module has elicited a very interesting series of responses, with several commenters casting serious doubt not only on the volume of fission products produced, but also on the viability of the entire Hyperion concept. I recommend that anyone interested in the Hyperion read the thread. In particular, there is concern that the finely divided hydride fuel used in the Hyperion has never been tested, and that Hyperion has not put out any kind of timetable for doing this despite their ambitious commercialization plans. I'm not sure if it's true that finely divided hydride fuel has never been tested; it's an elegant idea, and it's possible that the Soviets looked into it, so I'm going to do my small part by checking the Russian literature for any exploration of the concept. Personally, I'm choosing to be optimistic that Hyperion has some kind of good answer to the concerns that are being raised about issues like fuel testing, but the company needs to provide some kind of explanation of how they are expecting to demonstrate their technology. In order to gauge the sentiment of this blog's readership on the Hyperion issue, I have created a poll. Also, I'd like to hear about readers' concerns about the Hyperion concept, so please comment if you have any insights or strong feelings on the matter.

Marginal Revolution Discussion of Nuclear Power

Marginal Revolution, one of the internet's premier economics blogs, on nuclear power:

If President-Obama is serious about green energy it's not wind he needs to look at but nuclear. Nuclear is clean and green and we can build power stations where we need power, instead of having to invest in costly and inefficient transport networks.

As you can imagine, this has inspired intense debate. Feel free to contribute your insights.

Romm on Hansen

In response to Jim Hansen's latest piece on policies and taxes to get us to 350 ppm, Joe Romm felt the need to write an "Open Letter to Jim Hansen" in which he claims that

...you have made an uncompelling case about how President-elect Obama should go about achieving 350 ppm in your new draft essay Tell Barack Obama the Truth — The Whole Truth and in previous essays (see here). You are, for instance, overly dismissive of cap-and-trade and overly enamored of a carbon tax, when, in fact, neither holds any prospect whatsoever of achieving your goal. Your discussion of as-yet non-commercial 4th generation nuclear technologies is equally off the point, as we’ll see.

Romm's position is basically as follows:
1) Neither cap-and-trade nor a carbon tax can work because pricing carbon high enough to drive amortized coal plants out of business is impossible
2) Generation IV nuclear power is irrelevant
3) A WWII-style national economic mobilization (apparently based on command-and-control economics) is the only way to address the climate crisis

All three of these arguments are unconvincing, and indeed Romm seriously contradicts himself on the energy technology issue. But I believe that Romm's argument rests on his glib dismissal of Gen IV nuclear options. With Romm's favored technologies, 350 ppm is impossible; with LFTRs and IFRs, 350 ppm becomes feasible and potentially not even that difficult. As Blees put it, it's the "painless" option.

On nuclear, Romm claims that:

NUCLEAR: The single nuclear wedge requires building 35 nukes a year — roughly 10 times the current production rate, more than 50% higher than the greatest rate the world ever sustained for even a single decade, and far in excess of what current production bottlenecks would allow. Nuclear plant prices in this country have already tripled since 2000 to nearly price themselves out of the market (see “The Self-Limiting Future of Nuclear Power, Part 1“).

Is it now clear why your extended nuclear power discussion is off the mark?

If I can speak for Dr. Hansen, "Not really, seeing as none of those points have anything to do with the Gen IV reactors under discussion. You're just changing the topic to link to your critique of Gen III+ reactors, which has received a Bronx cheer from most of the informed people who have read it."

Romm continues in response to Hansen's comment that Gen IV reactors could be ready in the 2015-2020 timeframe:

Sorry, too late. The incomprehensibly fast scale up of low carbon generation we need for 350 ppm leaves no time for such hypotheticals, no time for hoping things get commercialized within 10 years. After all, somebody has to build the massive manufacturing capacity right now, and somebody has to train all of the people needed to build these reactors right now (not to mention training people to run them), and somebody has to contract for all of the relevant raw materials pretty damn soon.

Damn, it's a good thing Eskom and Hyperion are already well on their way to mass-producing small, mass-produced, idiot-proof reactors in the middle of the next decade. Rosatom is in the middle of constructing their "commercial" LMFBR, the BN-800, and has a lead-cooled passively-safe IFR-like fast reactor in the development pipeline as well. Speaking of which, even though Russia is short on forging capacity to build VVER pressure vessels, they have ample spare capacity to construct components for various Gen IV reactor designs, particularly fast reactors--a field in which Russia is undisputed world leader. Indeed, Russian companies like OMZ and Energomash would jump at the chance to build this stuff for export. This is one more reason why we need to get Gen IV reactor development going again in the US--otherwise, the Russians and other nations with more foresight will end up ruling our energy future.

Maybe fourth-generation nukes could be useful in the next set of post-2030 wedges, which is why a major ramp up of R&D remains incredibly valuable. But for getting off of coal in two decades, we gotta go with what we have.

Again, I’m not advocating building 700 nuclear plants over the next 20 years, and certainly agree with the myriad failings of existing commercial nuclear plant designs that you describe. I am merely pointing out what the logical technology and policy implications of your paper is.

This is one of your problems, Joe; you should be. Actually, I think you should advocate building, say, 2500+ GW of nuclear by 2030. About 3 1/2 "wedges" and eminently achievable using mass-produced small reactors like the Hyperion. This would require building an average of 6,200 27 MWe Hyperions every year between 2015 and 2030--and given that the reactors are about the size of a hot tub, not a serious manufacturing problem. What about the infrastructure? Why, we reuse what we already have, using the Hyperion to generate steam to turn turbines in existing coal plants, sending electricity through existing grid resources. Perhaps this scheme could be scaled up further, but it is not at all implausible at this scale. Between this and the number of LWRs that will probably be built in the next two decades, that's half of your eight wedges--without needing either the IFR or LFTR. Now, I'm certainly not saying that we can't do a similar deployment of those in the 2020s...

As for Romm's favorite energy technology, solar thermal:

And the other renewable wedges require an even more challenging ramp up. Solar thermal electric (aka solar baseload power) holds perhaps the most promise of all renewables because it can be integrated with low-cost high-efficiency storage to provide power when it is most needed, because it has no obvious production bottlenecks, and because the United States, China, and India have vast solar resources. The market might plausibly achieve 50 to 100 GW a year of growth, but only after a steady ramp up for the next 5 to 10 years. If you wanted to do that faster, you’d again need the WWII-style approach.

Never mind that energy storage on solar thermal plants is far from being proved cost-effective; there are several ways to do it, and between that and the diversity of different solar thermal technologies it's hard to issue any kind of blanket statement. Solar Two demonstrated molten salt storage in the 1990s, but its performance in terms of cost per annualized capacity factor was less than spectacular. Ausra's approach is apparently the same as that used in fireless steam locomotives, which is simple but comes with unavoidable thermodynamic efficiency limits. A lot of the solar thermal capacity currently being built is of the stirling-dish type made by Stirling Energy Systems; these do not lend themselves to thermal energy storage at all. What's really significant here is that Romm admits that solar thermal needs the government to force people to buy it in order for it to become the dominant energy source he insists it will become.

Indeed, it turns out that Romm simply distrusts "the market" to solve climate change. Instead, he repeatedly uses the metaphor of WWII to describe the policies he thinks should be enacted:

This national (and global) re-industrialization effort would be on the scale of what we did during World War II, except it would last far longer. . . .

But of course we had been attacked at Pearl Harbor, the world was at war, and the entire country was united against a common enemy. This made possible tax increases, rationing of items like tires and gasoline, comprehensive wage and price controls, a War Production Board with broad powers (it could mandate what clothing could be made for civilians), and a Controlled Material Plan that set allotments of critical materials (steel, copper, and aluminum) for different contractors.

He says to Hansen that "[this] is what you are talking about — or should be — not “tax & dividend” and fourth-generation nuclear power."

There is, in fact, a much more adept historical analogy for what Romm is proposing: the forced industrialization program undertaken by Stalin in the late 1920s and 1930s. And as an honest-to-God sovietologist, I feel I am more qualified than most to comment on the efficacy and pitfalls of command-and-control economics and central planning.

To be fair, the command economy worked--for Stalin. This was because Stalin had very definite goals--avoiding being conquered by the Nazis, building an atomic bomb--and cared not a wit at the cost paid by his subjects in blood and treasure to effect these ends. At the end of his life Stalin and the Soviet Union were more powerful than ever--he had won WWII, he built the bomb, he and his allies straddles most of Eurasia--but tens of millions were dead, living standards were abysmal, and the threat of a new war loomed. In order for a command economy to operate optimally, planners need to be both omniscient and precognitive. Generally, this approach is only called for in order to do something a market will never do--like mobilize resources for a large war. But as a rule, they are inefficient--given information problems, this is unavoidable.

Economically, Romm's charge that Hansen's proposed carbon tax would be ineffective makes little sense.

A price isn’t what is needed to stop building any new coal plants and shut down every existing one in 10 years in rich countries and 20 years everywhere else — and replace all that power (plus growth) with carbon-free generation and efficiency.

Indeed, I can’t imagine how high a price would be needed but it is probably of the order of $1000 a ton of carbon or more starting in 2010. Talk about shock and awe. Remember, we are talking about a carbon price so high that it actually renders coal plants that have been completely paid for uneconomic to run. And once you stop new demand and start shutting down existing plants, the price of coal will collapse to almost nothing.

Once you start building all of the alternatives at this unimaginable pace, bottlenecks in production and material supply will run up their costs. The collapse in coal prices, making existing plants very cheap to run, together with the run up in the price of all alternatives will force carbon prices even higher.

So carbon pricing is a bad idea... because it would fulfill its intended purpose by making carbon emissions expensive? I'm not sure what Romm is getting at. The point is that pricing carbon will make whatever changes are necessary cost-competitive, and nothing Romm presents suggests that this will not work.

He continues that

But, in any case, if you want to replace all those existing coal plants with carbon free power that fast, again the carbon price is almost beside the point. How are you going to site and build all the alternative plants that fast? How are you going to site and build all the power lines that quickly? How are you going to allocate the steel, cement, turbines, etc? How are you going to train all the people needed to do all this?

This is where Romm really falters. Of course, if you try and build eight wedges of windmills and solar thermal plants, you won't be able to build infrastructure fast enough. We need low-carbon power that can use existing infrastructure wherever possible, and small, mass-produced nuclear reactors fit the bill perfectly. Given an appropriate regulatory environment and a sufficiently high carbon price, utilities will buy these reactors. The initial adjustment will be painful, but once transport is electrified, the economy would actually benefit, since nuclear power was already qualitatively superior to carbon-based energy anyway. Meanwhile, the idea that massive government intervention into the economy is likely to successfully develop a low-carbon energy infrastructure seems profoundly improbable. In the absence of price signals, it is not merely implausible, but laughable. This is the same organization that gave us the Synthetic Fuels Corporation and ethanol subsidies; how is it wiser than individual consumers? Without a recourse to Romm's (apparent) skepticism about the ability of markets to solve complicated economic problems, this makes little sense.

In any case, I believe nuclear technology already in the commercialization pipeline is more than sufficient for a 350 ppm strategy. Without nuclear, even 450 ppm is probably unfeasible. Hence, Hansen's preoccupation with nuclear power in his letter is absolutely justified--especially in a global perspective, Gen IV nuclear technology is the key to our energy future. Furthermore, Romm's critique of Hansen's carbon tax proposal is based far more on his own incredulity than any kind of reasoned argument. On the whole, I have to say that I'm proud to share Hansen's position on this one.

Is Obama's Energy Plan Enough?

I fear it may be too much--of the last thing we need more of.

From Time:

With the possible exception of Barack Obama's puppy-anticipating daughters, no one is more eagerly awaiting the incoming Administration than the leaders of the renewable-energy industries. President-elect Obama campaigned on the promise to spend $150 billion over the next 10 years to support alternative energy, like wind and solar, as well as the green jobs that the sector has the potential to create. At California Gov. Arnold Schwarzenegger's climate summit on Nov. 18, Obama, in taped remarks, reaffirmed that he would hold fast to those campaign promises, starting with mandatory caps on greenhouse gas emissions. "This is a crucial step forward," says Linda Church Ciocci, the executive director of the National Hydropower Association.

The problem is, it won't be enough. As ambitious as Obama's campaign promises were — at least compared to his predecessor's — the future state of global energy will demand government policies with a much longer reach, according to alternative-energy leaders.

And what precisely is it that these "leaders" want? Turns out, it's our tax dollars.

In a press conference last week the leaders of the solar, wind, geothermal and hydropower industries called on Obama and the incoming Congress to look ahead. First, energy leaders asked Obama to immediately adjust the alternative-energy production credit to provide green investors with a cash rebate, rather than a tax reduction. With the economy tanking, simple tax credits — which Congress renewed in October and without which the renewable-energy industry would not survive — aren't the lure they once were for companies looking to invest in new energy projects.

Other items on the renewables industry's wish list: a national renewable-energy portfolio standard, which would require a certain percentage of U.S. electricity to come from alternative sources. (More than 20 states already have similar standards, but a national one would be tricky, given that utility regulation in the U.S. is localized.) Green energy leaders would also like to see an executive order that would greatly expand the federal government's procurement of renewable energy — a smart idea, easily doable — plus a major initiative to update and smarten the nation's aging, overworked electrical grid.

Huh, I'm kind of curious as to why an industry that is supposedly so much more economic than nuclear power needs the PTC "just to survive." This is rent seeking, plain and simple, as are all the other desires of the renewable energy industry. The last thing America needs is another corporatist energy boondoggle--remember this one? How about this one?

In all fairness, it's not like this list is Obama's actual energy platform, which remains obscure. Recent indications, however, suggest that many of the desires of the renewable energy industry will be realized. Most worrisome is the prospect of a national renewable portfolio standard, which is just bad policy any way you look at it. Most forms of renewable energy are already a costly means of reducing CO2 output, but a national RPS would encourage building renewable generation facilities in marginal areas--making them increasingly uneconomic. Furthermore, certain parts of the country are far better endowed with renewable energy potential than others. For instance, my home state of Tennessee is deficient in solar, wind, and geothermal resources, and TVA has already tapped out most of the hydro potential. While an RPS would presumably allow trading so that utilities in such underendowed locales could buy offsets, this doesn't end up going anywhere near far enough. This is because it would require that the areas with better renewable potential (such as, say, California) develop an overdependence on renewable energy, creating all kinds of attendant problems and costs.

Furthermore, such a scheme actually encourages making compliance maximally expensive. Let's think through the incentives facing the "haves" in a system with an RPS that requires that every utility either produce a particular percentage of electricity from renewables or buy credits from another utility with excess renewable capacity. Say it's 2030, and you're a utility in Southern California. There's a 25% RPS, but thanks to some very expensive solar thermal plants built during the Obama administration, you actually generate 30% of your output using renewables. This gives you tradeable credits worth 5% of your output that you can now auction off to the highest bidder. These are worth a lot, since no utility east of the Mississippi has actually managed to meet the RPS by generating its own power. This, of course, means that whatever ratepayers ultimately pick up the tab for these credits end up paying the most any utility would bid on them. This is one disincentive to building more renewable capacity--the tighter the market for RPS credits, the more the utilities that sell these credits can get for them. If the utilities are rational maximizers, they will only build out their capacity to a point that is far less than adequate for supplying cheap credits to the rest of the country. The second disincentive is that the utilities' need to deal with the intermittency of the renewable resources on their grid. Even with the construction of "smart grids" and "green energy superhighways" (whatever the hell those are), this will be first and foremost a local problem, since renewable generation facilities have to be integrated into the utilities' own grid resources. Research from Europe indicates that once you start trying to integrate much more than 30% intermittent generators, things start getting really unmanageable (and it's pretty hard even below that). These two disincentives would work together to encourage the utilities with renewable resources to maximize the cost of compliance for the have-nots, rendering the RPS an extremely inefficient and expensive way of reducing CO2 emissions.

A better plan would be some kind of cap-and-trade scheme for CO2 emissions themselves. Indeed, I like the sort of "cap-and-auction" idea that Obama is pushing, but I'm extremely wary of the apparent plan to use the proceeds to subsidize certain energy technologies. Personally, I think that the ideal policy would be as follows:

1. Set stringent CO2 output limits that go down each year.
2. Auction off emissions permits for the legal CO2 emissions--no grandfather clauses for industry or other measures that would render the scheme impotent.
3. Enforce compliance, but let individuals and corporations find their own preferred measures for doing so.
4. Divide the auction proceeds among all American taxpayers as a dividend. This will both act as a way of helping American families deal with the costs of compliance, but also serve as an economic stimulus. And as the costs of permits go up, so does the dividend.

I believe that this scheme probably has the best achievable mix of economic efficiency and fairness. In practice, I believe that it would encourage investments in efficiency in the short run, and modular, mass-produced nuclear reactors in the long run. But even if I'm wrong about that, these measures should find the most cost-effective means of reducing CO2 emissions. Compared to the RPS, which even on paper appears to be a highly inefficient way of fighting climate change, this is a vastly superior policy prescription. But somehow I imagine we'll end up with an RPS anyway. Let's just hope the government realizes the folly of this before they've done any more damage to our already faltering economy than necessary.