This is a version of the keynote address I planned to give at the 2011 international conference of the International Association of Energy Economists (IAEE), and which took place that year in wonderful summer Stockholm. What happened though was that I was not invited to present any kind of address, nor was it certain that the conference management would have allowed me to enter the building where those noble scientific proceedings were taking place.

I did not lose any sleep over my exclusion however, because many of my thoughts on this subject were published about the same time in Concordiam, which is a journal sponsored by the George C. Marshall European Center of Security Studies. Since the expression “security” has a very serious interpretation after 9-11, I understood that had I been welcomed to that splendid meeting, and found it necessary to express my innermost thoughts about nuclear energy to what probably would have been an openly unfriendly audience, I might have said things that might have made me a candidate for one day  presenting a brilliant lecture in a special seminar at the Guantanamo Detainment Center.

I happen to believe that bad mistakes have been, and are being made, about the viability of nuclear energy, and so I felt it necessary in my forthcoming energy economics textbooks (2014, 2015) to insist that ‘cost-wise’ –  in the medium run –  nuclear is the optimal electricity source for base load electric power. Eventually this will not only be obvious to managers and engineers, but also voters, because in the long run, voters will comprehend that they will be subjected to some ugly income and welfare consequences if they cannot prevent the  kind of bizarre nuclear travesty that is taking place in Germany.

The background to my thinking on this subject is the impressive availability of nuclear fuel (uranium and thorium), in comparison to fossil fuels, and I also know what the march of technology will mean for the characteristics of the next generation (Gen 4) of reactors. I pointed this out at a Singapore Energy Week, and a friend could barely restrain his displeasure. This was extremely embarrassing, and not just for me, although later I was able to understood though not sympathize with his ‘pique’: he has a financial interest in one of the most popular – though financially hopeless – renewables. 

A Basic Though Unknown Argument

In my new energy economics textbooks, I do not suggest but order my students to turn to Google when they have a question. For instance, I want Google to tell them that nuclear is the real deal, and talk about it not being viable is foolishness.

Google is not prepared to make this sacrifice. The two experts they cite for opinions about nuclear are unknown in virtually all of the credible listings of energy scholars, and/or the main energy literature. As a result I would like to cite two other researchers. Richard Rhodes and Denis Beller (2000), who say that “Because diversity and redundancy are important for safety and security, renewable energy sources ought to retain a place in the energy economy of the century to come.” By itself, this statement is enough to warm the heart of every environmentalist between Stockholm and the Capetown Navy Yard, and I hope that I am warmly appreciated for referring to it.

But they continue by insisting that “…nuclear power should be central. Nuclear power is environmentally safe, practical and affordable. It is not the problem – it is one of the solutions.”

One of the solutions! I wonder what the two Google experts would say about that, or for that matter Mr Axelsson, the director of the Swedish Environment Protection Bureau (Naturvårdverket) if he had consented to favour the Stockholm conference with his presence and opinions on nuclear energy.

The same cannot be said about the physics PhD Tomas Kåberger, earlier chief of the Swedish Energy Directorate (Energimyndigheten), although he displayed a naïve and unsatisfactory knowledge of economics by congratulating the Japanese people for blithely submitting to a 30% reduction in their access to electricity, which took place as a result of an abortive nuclear retreat commenced after the Fukushima tsunami.

Dr Kåberger wants to see the Swedish nuclear sector locked down and replaced with wind turbines, which I consider a poor. Moreover, it is an attack on the standard of living in this country. Certainly he and his network must know that the cost of electricity in Sweden is determined by nuclear and hydro, and before suppliers of electricity were given licences to make fools of the rate-payers in Sweden, was among the lowest in Europe. By way of contrast, the cost (and price) of power in Denmark – perhaps the promised land of wind energy – is among the highest in Europe, and maybe the world. He must also know that had Swedish electricity not been deregulated, it would easily be among the least expensive in the world.

Some Examples

Germany plays a provocative and often mentioned role in the global energy drama. What is not adequately understood is that if a complete nuclear retreat takes place in that country, and the illogical (environmental) ambitions of the European Union’s energy directorate are realized, energy prices in Germany (and Europe) could go into orbit. I get the impression that Germany still maintains high hopes where renewables and gas imports from Russia are concerned, however in a few years, Russian natural gas that was earmarked for Germany will be burned in Asia.

But I don’t spend any time dealing with this riddle. Instead I want to claim that by mid-century Germany could be the most nuclear intensive country in the world. What is not generally understood is that the German economy is in serious trouble. Philippe Legrain (2014) cites the decline in productivity in Germany, and comments on the phasing out of nuclear power and its replacement by expensive and unreliable renewable energy, but he fails to note that that issue is especially crucial for Germany because of the structure of its industrial sector. Vehicles, machines, electronic devices and chemicals account for more than half of Germany’s exports, and these are sectors that are inherently energy intensive.

Some Nuclear Logic

The final charge for the 1600 MW Finnish nuclear facility that Areva thought they could construct for 5 billion dollars will almost certainly be more than the 8 billion I have put in my textbooks and articles. 5 billion was also the announced cost for the reactors that a South Korean firm will construct in the United Arab Emirates (UAE), and it is not impossible that that will also be exceeded. At the other end of the scale, Westinghouse is advertising a large reactor that can be constructed in 3 years. I have some problem believing that claim, although if it cannot be done now, it almost certainly will be possible in a few years.

But it wouldn't make any difference to a teacher of economics named Fred Banks if the cost of large reactors were 10 billion or more. That has nothing to do with the economics I have studied and taught! When I think about the cost of nuclear reactors I think about what they cost in Sweden, when they constructed 12 reactors in about 13-14 years, and which – after that equipment had been around for a while, and the people working with those reactors understood what they could do –  produced electricity at perhaps the lowest cost in the world. If the Swedes could do that in the l970s-l980s, they could do it today.

Obviously the U.S. could do it. I worked for the U.S. Navy shortly after I left the army, and one of the things I discovered was that no country in history has done or could have done what the US Navy did during WW2 in terms of producing ships and planes and training men to use them. That they would and could build a navy as large as all the other navies in the world during a war in which both an army and huge navy and air force had to be recruited and supplied by a country that was just out of a major depression was not only a miracle, but a miracle unmatched in human history.

In these circumstances, isn't it clear that since nuclear technology is understood perfectly – except of course by some of the persons mentioned in Google –  the US could construct nuclear plants capable of producing the cheapest electricity in the world if they wanted to. Many persons that I have talked to – and not just charlatans – say that they can’t, but the reason they say that is because the U.S. government would have to be involved. Business and government might not be a happy marriage is the opinion I keep encountering, although they cohabited brilliantly during WW2.  

My language tutor in Vienna once assured me that when Adolf Hitler declared war on the U.S. (December 11, 1941), it was obvious to almost every intelligent person in Austria that Germany would be defeated, and for those of us who have studied that war in detail, could have been defeated in the short as compared to the long run if the U.S. had not made a catastrophic mistake in its choice of a main battle tank. The same is true here. Only the combination of poorly chosen Energy Ministers and Energy advisers,  stand in the way of an optimal energy future for many countries, which means an energy future that for industrial countries cannot be realized without nuclear. 

References

Abraham, C. and A. Thomas (1970). Microeconomie: Decisions Optimales dans

             L’entreprise et dans la Nation. Dordrecht (Holland); D. Riedel Publishing.

Banks, Ferdinand E. (2014). Energy and Economic Theory. London and

            Singapore: World Scientific.

_____.(2009). ‘Some Energy Myths for the 21^th Century’.

           Conference paper, University of Siena (Italy).

_____.(2007). The Political Economy of World Energy: An Introductory

            Textbook. Singapore and New York: World Scientific’

_____. (1996) ‘The future of nuclear energy in Sweden: an introductory

             economic analysis’. Energy Sources.        

Legrain, Phillipe (2014). ‘Don’t envy Germany’. Prospect (September)

Rhodes, Richard and Denis Beller (2000), ‘The need for nuclear   power’.  

            Foreign Affairs (January-February).

Roques, Fabien and William J Nuttall, David Newbery, Richard de Neufville, Stephen

           Connors, (2006), ‘Nuclear power: a hedge against uncertain gas and carbon

           Prices. The Energy Journal (No. 4).