Ironically, a paper I presented at an American Nuclear Society meeting summarizing the nuclear/coal comparison won an award as the best student paper on power generating economics. Even though I was already known as a leader of the environmental and consumer opposition to Illinois electric utilities’ proposed nuke plants and rate increases.
I dropped out of grad school because that study led to a job as a Commissioner’s Senior Advisor at the California Energy Commission. It also fueled a career as an expert witness on utilities, energy, economics, finance and policy. With power generating economics being my first major area of expertise, I accumulated small partial credit over two decades helping stop a dozen nuclear units proposed around the country.
Today, I tell folks that, if there were an organization named Former Nuclear Opponents for the Resuscitation of the Fission Option, I’d be founder and president. How’d I get from there to here?
Even though I was politically active in utility and energy matters, I remained a serious objective analyst, essential for an expert witness. In particular, I studied closely the costs of nuclear plants, which were increasing in the 1970s and 1980s at stunning and sustained rates. Some other very good analysts were also studying that problem, and often testifying for utilities opposite me.
I proposed the hypothesis that regulation was increasingly requiring mitigation of environmental and public health and safety externalities of the technology. The costs were being internalized. In a sense, that was correct. But it missed two fundamental points.
In 1984, as the principal economist at the California Public Utilities Commission, I toured the Diablo Canyon nuclear plant, then nearing completion, as I was preparing my proposals for ratemaking treatment of that plant. In nearly every corner of the building, I saw a jumble of structural beams and other elements that looked like a mess.
I asked about that, and the engineers explained that the building had originally been designed and built to a 0.35g earthquake lateral acceleration specification. However, during construction, they learned that a major fault was closer to the plant and shallower than previously thought. So, federal regulators required them to retrofit the building to 0.85g standards. Thus, the mess.
Retrofit rang a bell for me. In 1973, as an assistant engineer at the City of Urbana, the crusty old public works director told me the environmental and other amenities I wanted to see in our neighborhoods were cheap and easy. I was stunned; he always seemed like Dr. No on those matters. But he explained that 100-year storm sewers, bikeways, underground utility lines, etc. were easy if they were designed into the subdivision from the start. The problem with putting them in existing neighborhoods is that retrofit is very difficult and extremely costly.
I also further considered cost internalization processes upon returning to graduate school at Stanford in 1987. I learned the key principle of regulation is that one should increase mitigation requirements (such as reduced radiation levels) until the benefit from the last increment of mitigation (such as greater reduction of emissions) exactly equals its cost.
Since costs of each increment of control or mitigation rise as more stringent levels are required and the value of benefits fall as mitigation levels approach 100 percent, controls added up to that equality point produce net social benefits. Beyond that point, the social costs exceed the social benefits of each measure, and thus those measures are socially wasteful.
But American environmental, public health and safety regulation don’t adhere to this fundamental principle. Instead, requirements are often set to technically achievable levels, regardless of whether they are economic. This problem is extreme for nukes because they have a long design and construction period – and regulators require retrofit late in the construction process to new standards adopted during construction.
The combination of excessive standards and retrofit convinced me that nukes would be economic (and environmentally beneficial) if we got public policy right. More next time.
Ron Knecht, MS, JD & PE(CA), has served Nevadans as state controller, a higher education regent, economist, college teacher and legislator. Contact him at RonKnecht@aol.com.