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Henry Sokolski's, "Making Sense of Fukushima," Published in the APEC CEO Summit Magazine 2011

This article was featured in the APEC (Asian Pacific Economic Cooperation) CEO Summit Magazine 2011, a publication distributed at the Summit, which brought together top Asia-Pacific CEOs, business figures, and leaders of the APEC economies.

Nov 07, 2011
AUTHOR: Henry Sokolski
Making Sense of Fukushima - Sokolski (PDF) 483.48 KB

Making Sense of Fukushima

By Henry Sokolski, Hinckley Scholar, Hinckley Institute of Politics


Ask a nuclear expert about the reactor accident at Fukushima and you are likely to get overwhelmed with a tidal wave of technical points—everything from how poorly the reactors’ hydrogen vents and emergency generator systems worked to what permissible exposures to radiation should be.  It can be mind numbing. 

None of these explanations, though, hit what matters most:  how Fukushima has dramatically increased nuclear power’s relative costs and risks.  Here the story is relatively simple.  Many of the world’s richer economies—including Germany, Switzerland, Italy, Austria, Sweden, Spain, Norway, Denmark, Belgium, Taiwan, Japan, Kuwait and the U.S.—have slowed or shuttered planned reactor construction and are focusing instead on alternative ways to generate, distribute and store electricity. 

The last time anything like this happened was nearly a quarter century ago in reaction to the nuclear accident at Chernobyl.  Then, the U.S. and much of Europe put their nuclear power plans on hold. Since 2000, though, growing concerns about carbon emissions and global warming garnered more support for new nuclear power construction, that is, until Fukushima.  Earlier this year the International Energy Agency (IEA) optimistically forecast a near doubling of reactors on line by 2035.  After the Japanese meltdown, IEA slashed its forecast dramatically.

Industry insists that all of this is just a temporary setback.  This, though, is mostly bravado.  Existing nuclear power plants will continue to operate and several more will be built in Eastern Europe, China and Korea, but any massive nuclear revival similar to that presumed before Fukushima is unlikely on several counts.

First, even before Fukushima, construction costs were making new nuclear power plants uncompetitive against modern natural gas systems.  A large power reactor was projected to cost anywhere from $6 billion to $10 billion and take five to 10 years to bring on line.  Now, with the nuclear safety reviews Fukushima has prompted, these costs and build times will only increase.  Meanwhile, large, advanced gas-fired generators, which emit roughly one-half the carbon of an equivalent sized coal-fired generator, cost as little as $700 million to build and take as little as 18 to 36 months to complete.  As a result, almost all U.S. electrical utilities are substituting their old coal-fired plants not with nuclear, but with natural gas-fired generators.    

Natural gas also is becoming more affordable and plentiful, not just in the U.S., but in the Middle East, Mediterranean, China, Australia, Latin America and Europe.  The reason why is the development of unconventional techniques for extracting gas.  These new methods, including deep fracturing and tight gas extraction, have turned the U.S. from a natural gas importer to a natural gas exporter. They also have ignited hopes of reversing Polish dependence on gas imports, and turned Israel and Lebanon into future natural gas gold mines.  Meanwhile, advances in pipe and liquefaction transport technologies are moving the world away from local to larger, regional natural gas markets.

All of this will buy time as the costs of more sustainable forms of clean electrical generation—e.g., wind, solar, small hydro, biomass—continue to decline.  Integrated, smarter electrical grids will also help deal with these intermittent energy sources, as will cheaper electrical storage systems.  Germany and others are banking heavily on these developments as they wind down nuclear power plant operations over the next two decades.  For them, the risks of increasing their reliance on nuclear power seem higher than the economic uncertainties of weaning themselves off it.

This, then, brings us to the second nuclear problem Fukushima dramatically compounded—how liability for nuclear accidents is now viewed.  Fukushima, which involved an advanced safety conscious country and U.S.-designed light water reactors, was not supposed to happen.  That it did happen dramatically increased all nuclear liability calculations.   

In the case of the l979 nuclear accident at Three Mile Island, the clean up cost less than $1 billion over 12 years.  Indirect damages caused by the 1986 Chernobyl accident have been estimated at several hundred billion dollars but the actual amount paid out by governments over the last two decades was no more than $10 to 15 billion. 

In contrast, the Japanese government already has pegged direct Fukushima damages at more than $50 billion and Merrill Lynch reported they could conceivably run as high as $130 billion.  These numbers are five to 10 times greater than the maximum amount of insurance coverage the U.S. government currently requires the U.S. nuclear industry to provide.  Under current law, U.S. nuclear operators have put roughly $300 million aside to cover off-site damages.  Industry can be required to pay out roughly another $12 billion over seven years for any specific accident.  But that is all.  Anything more must be covered by the U.S. government.  Before Fukushima, $12 billion seemed sufficient, but not any more. 

Now, the worry is that U.S. nuclear safety regulations are too relaxed.  Industry knows that tighter safety rules will drive construction costs to record highs; it is already resisting such rule making.  This may cheapen operation of existing plants but it is sure to delay agreement to new safety regulations, which will only put off new reactor construction further.

Meanwhile, potential nuclear customers in developing states are becoming far more wary of American nuclear vendors who continue to insist, as they did with Japan, that U.S. firms be absolved of any liability in the case of a nuclear accident.  In India, America’s insistence on this point has become a major political issue. 

This, then, brings us to the final reason Fukushima has dimmed nuclear power’s prospects.  Having spooked the world’s established economies from pursuing major nuclear expansion, Fukushima’s negative nuclear market fallout is goading the world’s nuclear vendors to shore up sales by pitching their wares to potentially dangerous customers in the Middle and Far East and in Africa. 

Saudi Arabia, whose leadership has announced that it must get nuclear weapons if Iran does and that it is willing to pay up to $300 billion to build 16 large nuclear power plants by 2030, is one such market.  Turkey, which once toyed with using civilian power plants as building blocks for a possible bomb program and now faces a nuclear weapons-ready Iran, is another;  it has plans to build 20 nuclear power plants.  Syria, which was caught building a covert nuclear plant in 2007, still wants to build power plants, as do Egypt, Algeria, Iran, Nigeria, Vietnam, Bangladesh and Burma. 

None of these states has anything approaching an independent nuclear regulatory authority.  Many have harbored aspirations to acquire a nuclear weapons option and refused to forswear making nuclear fuel—a process that can bring them within weeks of acquiring a bomb.

Why does this matter?  The answer is simple: one more Iraq, North Korea or Iran diverting a declared “peaceful” nuclear program to develop a bomb option, and nuclear power’s further expansion to developing states will be rightly viewed with the kind of suspicion that could jeopardize nuclear power’s development more generally.  So far, the world’s nuclear vendors have effectively opposed proposals to tighten nuclear export rules significantly, but this is a short game. In the long run it is yet another key reason why banking on a massive expansion of nuclear power in the advanced world is now a bet against the house.



Henry Sokolski is executive director of The Nonproliferation Policy Education Center in Arlington, Virginia, and editor of Nuclear Power’s Global Expansion:  Weighing Its Costs and Risks.  He served on the U.S. Commission on the Prevention of WMD Proliferation and Terrorism.

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