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Free Essays - Economics Essays
Fossil Fuel Resources
Introduction
The U.S. energy demand and costs of energy production continues to increase. The Energy Information Administration (EIA) of the Department of Energy (DOE) estimates that the U.S. will demand 5,478 billion kWh electric by 2030 which is 162 % higher than the domestic electricity demand in 1980. The EIA reports that U.S. energy production failed to meet the increasing energy demand and there will be a growing disparity between the domestic energy supply and demand until 2030. The U.S. has been intensively importing fossil fuels from the major energy producers to meet the growing energy demand. The energy growth in rapidly developing China and India tightens the global energy markets and increases the prices. The growth rate of global energy demand is estimated as 4.5 percent after the rapid development of China, India and other newly industrialized countries. There will be an additional 10 million barrel demand per day by 2012 but the global energy production remains nearly stable after the new millennium. The existing oil wells are aging and diminishing in the non-OPEC producers and OPEC members are less likely to meet the growing energy demand with existing facilities. Oil extraction will have to continue on harsher geographic conditions to keep pace with growing demand. Sufficient levels of oil extraction will require $20 trillion new investment by 2030.
The global fossil fuel resources have peaked and there is an expectation of decline in the natural gas and oil supplies. The United States is at a critical point to make substantial investments for future energy demand. Nuclear energy has the unique potential to push up the electric generation for the domestic demand without foreign dependency. However, the nuclear energy has been underutilized due to price concerns and misconception about the security challenges. This paper investigates the advantages and disadvantages of the nuclear energy production. The paper will provide a policy implication for the energy policy makers in the United States about future viability of nuclear energy through evaluating the costs of electric generation, environmental issues, proliferation, safety, waste management and public opinion towards the nuclear energy.
Overview of the global and domestic nuclear energy production
The United States continues to be the largest nuclear energy producer but nuclear reactor construction in the United States has been decreasing since 1970s. According to the Energy Information Administration the last commercial nuclear reactor started its operation in 1996 and no other nuclear power plants have been build after this date. However, the nuclear production in China and India has been rapidly growing during the past three decades. The IAEA reports that there are 443 nuclear reactors in the world in 2007. While the United States has 103 reactors, France has 59 reactors, Japan 55 and Russia operates 31 nuclear reactors. The International Atomic Energy Agency (IAEA) anticipates significant amounts of expansion at the number of nuclear reactors by 2030. The IAEA estimates that global nuclear energy production will increase from 370 GW to 679 GW between 2006 and 2030 with an annual growth rate of 2.5 percent.
Currently, France produces 78 percent of the electric energy from nuclear reactors. The ratio electric generation from nuclear power plants is "54 percent in Belgium, 39 percent in Korea, 37 percent in Switzerland, 30 percent in Japan, 19 percent in the USA, 16 percent in Russia 4 percent in South Africa and 2 percent in China." Among the nuclear countries France deserves a special attention. The energy independence desires motivated France to expand its nuclear energy production since the mid 1950s. The closure of the Suez Canal in 1956 by the Egyptian government and the Arab oil embargo in 1973 and triggered the nuclear investments in France. The French society did not have large oil and natural gas reserves but they were able to build the nuclear reactors to save them from energy dependency. The public opinion in France predominantly favored nuclear electric generation especially after the energy crisis in 1973. France was an electric importer during the 1970s but currently it became the largest net exporter of electric in Europe and the World.
Asia is the fastest growing region in terms of nuclear power plant construction. According to the IAEA report, more than 50 percent of the ongoing 29 nuclear facility constructions were in Asia in 2006. Indian nuclear production has grown 9.5 percent annually between 1970 and 2004 and almost a quarter of the global nuclear power plant constructions were conducted by India in 2006. Indian government is expecting to produce 26 percent of the domestic electric from nuclear power plants by 2052. China is the second fastest growing nuclear power. Currently, Chinese government plans to increase nuclear energy production by 500 percent until 2020. However, they will be able to meet only 4 percent of domestic electricity demand from nuclear power plants by 2020.
Currently the U.S. has 103 nuclear power plants, which produce 20 percent of the domestic electric energy but almost 45 percent of these nuclear power plants will require license renewals by 2030. The situation indicates that US nuclear electric generation will decrease nearly 50 percent if the energy companies do not build new commercial nuclear power plants. The overall role of nuclear energy in electric generation decreased 1 percent since 2002. Without new construction, the contribution of nuclear reactors to domestic electric generation will decrease from 20 percent to less than 10 percent by 2030.
The energy companies in the United States have been reluctant to build new nuclear power plants because of the comparative high cost of nuclear energy production. Number of nuclear reactors remained stable during the past three decades. However, currently the increasing electricity demand, government commitment and environmental campaigns are pushing for revival of nuclear energy for the future energy demand. A Financial Times (FT) on November 18, 2007 reports that 20 American companies are seriously considering about constructing 30 new nuclear power plants after the encouraging policies of the federal government.
The costs, reserves and nuclear energy economics
Nuclear energy continues to be the most expensive option for electric generation. Interdisciplinary MIT Study indicates that nuclear energy is uncompetitive with the coal and natural gas in terms of the construction costs of power plants. Contrary to the popular belief, cheap electric generation from nuclear energy is not predominantly dependent on the price of uranium. Generally the cost of uranium accounts for less than 8 percent of all the expenditures in nuclear power plants. The main portion of the total costs of the nuclear electric generation is the capital cost. According to Alan M. Herbst and George W. Hopley "A new 1,000 megawatt nuclear power plant costs $1.5to $2.0 billion and takes at least five years to construct. This compares to $1.2 billion and three to four years for a coal-fired facility, and $500 million for a combined-cycle gas plant." The MIT study argues that total costs of electric generation is higher in nuclear power plants but the Nuclear Energy Institute (NEI) found that total costs of nuclear electric generation have been reduced to a favorable level during the past decade. NEI suggests that while the coal fired reactors needed an average 2.37 cents to produce a kilowatt (kWh) electric energy in 2006, the natural gas fired power plants only needs around 6.75cents to produce this energy. On the other hand, as seen in table 1, nuclear power plants only need 1.72 cents to generate a kWh electric energy. The operation and maintenance costs of nuclear reactors (1.26 cent/kWh) are higher than the maintenance costs of coal (0.54 cents) and natural gas fired reactors (0.52 cents) but fuels costs of nuclear reactors (0.46 cents) are much lower than the fuel costs of coal (1.83cents ) and natural gas (6.23 cents) fired reactors.
The nuclear energy becomes more advantageous and price competitive when we consider the externalities of carbon emissions from the natural gas and coal fired power plants. The carbon emissions lead to environmental damages and major health problems in the society. The relative social cost of nuclear energy decreases as the governments increases the taxes on carbon emissions. Currently the emission tax rates vary between $50 and $200 per ton of carbon released to the atmosphere. The World Nuclear Association anticipates that the tax rates will increase in Europe and the United States as the governments have become more concerned about the global warming.
The price of fossil fuels has been highly volatile since the past three decades. The nominal crude oil prices have increased almost 27 fold between 1970 and 2007. While a barrel of crude oil was $3.35 per barrel in January 1970, the price skyrocketed to $ 94.62 in November 2007. Energy Information Administration notes that the nominal price of natural gas has increased 11 times between 1976 and 2007. While price of a cubic feet of natural gas was $0.54 in 1976 it increased to $5.92 in 2007. On the other hand, the price of uranium only increased 73 percent between 1978 and 2007. The price in 1978 was $43.40 per pound and it increased to $75 in 2007 in the global markets. Natural gas will be a less viable alternative energy if the prices continue to soar in the future. Moreover, the United States has experienced high levels of price vulnerability and supply disruptions of natural gas during the Hurricane Katrina and Rita. President Bush has become committed to increase nuclear energy productions after these disasters and he believes that nuclear energy is the safest and most dependable alternative energy source for the United States. From the energy security perspective, nuclear energy is more viable since the U.S. owns one of the largest Uranium reserves in the world. Moreover, other largest uranium and thorium reserves are stationed in friendly regimes such as Canada, India, Australia and Turkey. Thus, the nuclear energy prices and costs will be more stable than fossil fuels in the future.
The MIT study suggests that "worldwide supply of uranium ore is sufficient to the fuel the deployment of 1,000 reactors over the next half century." On the other hand World Nuclear Organization (WNO) estimates that the existing uranium reserves are sufficient to fuel the nuclear reactors approximately 200 years. The WNO anticipates that the new technology could extend this period to over hundreds of years. Contrary to decreasing the fossil fuel exploration, uranium exploration rates have been stable since 1975. Moreover, nuclear energy is also produced from the plutonium and thorium elements which are abundant in the world. Accumulation of uranium, plutonium and thorium reserves may almost double the supplementation period of the nuclear power plants with new technology. Thus, nuclear energy appears to be much more viable than the fossil fuels.
Safety of the nuclear power plants
The safety concerns have been one of the major challenges against the energy policies which are advocating for promotion of the nuclear energy. The United States have been generating electric energy from the nuclear reactors for the past five decades. The safety of the nuclear reactors has been improved from the first generation to the fourth generation. The researchers and the power companies are cognizant of the fact that nuclear power reactors could yield to the deadliest accidents when the safety measures are omitted. Thus, the security has been a primary policy for the commercial nuclear reactor operators.
The global nuclear reactors have been operating safely except for two of major accidents. The first accident took place in Three Mile Island of the U.S. in 1979 and the second accident took place in Chernobyl Nuclear power plant of the Soviet Union on April 28, 1986. Both of these accidents mainly resulted from operator mistakes rather than an outsider attack or system failures. The three mile accident released minimal radiation but fortunately the radiation could be contained without explosion and human loss. However, the Chernobyl accident has been the most damaging nuclear accident in the human history. The nuclear reactor operators disregarded the technical specifications when they were making the regular maintenance on April 28, 1986. The rapid flow of radioactive materials led to two explosions in the fourth unit of the reactor. Since the Chernobyl nuclear power plant did not have containment infrastructure substantial amounts of radiation was released to the environment. The Nuclear Energy institute reports that initially 19 personnel were killed during the incident but the accident is responsible for further death of almost 4,000 thyroid cancer patients.
The Mile Island accident has been a catalyst for increasing the safety of nuclear reactors in the United States. The Department of Energy and the nuclear operators launched a series of initiatives such as increasing the training of the nuclear personnel, reviewing licenses, improving reactor designs, increasing inspections, founding the Institute of Nuclear Power Operations to police the nuclear reactors and increasing international information exchange. There has been no nuclear accident the United States after the Three Mile Island thanks to these advanced security measures. On the other hand, the Russian government implemented serious measures to increase the safety of nuclear reactors after the Chernobyl accident. The Communist party launched a comprehensive program to improve reactor quality, improve the training of operators and to improve the automatic cooling system. However, the Russian reactors still have containment design and emergency management problems in comparison with the nuclear reactors in the United States. The nuclear power plants will be much safer after the fourth generation reactors will be introduced.
Nuclear energy and environment
Particularly the industrialized countries became more concerned about the global warming and the global greenhouse gas emissions by the mid 1990s. The Kyoto protocol was signed in 1997 with an immense commitment from the global community to reduce the greenhouse gas emissions. The Kyoto protocol proposes that each developed country should cut down emissions until 2008 to the level of 5 percent lower than their actual emission levels in 1990. The MIT study notes that during the electric generation coal and natural gas are two major sources of U.S. carbon emissions which have significant impact on global warming. Nuclear energy plays a significant role on curbing the carbon emissions in the United States. According to the Nuclear Energy Institute (NEI), Nuclear energy constitutes more than 70% among the emission free electric generation in the United States. The NEI report indicates that nuclear power plants prevented emission of 682 million tons of carbon dioxide, 3.3 million tons of sulfur dioxide and 1.1 million tons of nitrogen oxide gases in 2005. This amount approximately equals to the all carbon emissions by the passenger vehicles in the US. Especially after the Kyoto protocol, environmental benefits of the nuclear energy are highlighted by increasing numbers of energy and environment experts.
Patrick Moore, one of the co-founders of the Green Peace highlights that "More than 600 coal-fired electric plants in the United States produce 36 percent of U.S. emissions. Nuclear energy is the only large-scale, cost-effective energy source that can reduce these emissions while continuing to satisfy a growing demand for power." Another founder of the Green Peace, James Lovelock highlights that "only nuclear power can halt global warming" within the highly energy demanding future. The interdisciplinary MIT study found that 1,000 gigawatts of nuclear electric output will prevent the emission of 800 million tons of carbon emissions.
Nuclear power plants are much space efficient than the other energy production units. Nuclear energy production needs small amounts of natural resource and land allocation. On the other hand, energy generation from the wind, solar and biomass requires allocation of large areas. Jack Spencer notes that while producing 1000 MW electricity will require only 500-1000 acres for nuclear reactors, it will need 150,000 acres for wind and 14,000 acres for the solar energy facilities. Thus, nuclear energy could be a better option for the metropolitan cities such as Tokyo, New York and London which faces with land scarcity.
The management of the nuclear wastes
The radioactive waste of nuclear energy production is one of the core arguments of the anti-nuclear campaigns. The nuclear wastes can still be radioactive after thousands of years. According to the Energy Information Administration the nuclear reactors releases approximately 2,000 metric tons of spent fuel annually. However, a 1,000 megawatt capacity reactor only produces 23 tons of solid waste in comparison to 300,000 tons of ash from a coal fired reactor. Currently the nuclear wastes are stored in multiple destinations but the U.S. Federal Government has built a repository at Yucca Mountain in Nevada to collect the nuclear wastes into a single center. When it is fully functional the Yucca Mountain will be able to store 77,000 nuclear wastes in steel containers. However, operator mistakes, earth quakes, tornados, wars and terror attacks could destroy the containment infrastructure which could generate a nuclear disaster. The nuclear experts and the governments still debate how to contain a material over thousands of years. The amount of nuclear wastes continues to increase as more and more countries become nuclear. The MIT study estimates that we will need another Yucca Mountain for every three or four years to contain the global nuclear wastes.
The Department of Energy (DOE) initiated a Global Nuclear Energy Partnership (GNEP) program in 2006 to share the radioactive nuclear wastes with Russia, Japan, China, The UK and France. The DOE anticipates further partnership from the Australia, Bulgaria, Ghana, Hungary, Jordan, Kazakhstan, Lithuania, Poland, Romania, Slovenia, and Ukraine. The U.S. will have to build lesser nuclear waste reservoirs after the GNEP program is fully implemented. Moreover, the reprocessing will not only save from reservation expenses but also it will create economic opportunities for the United States.
Nuclear proliferation
The nuclear proliferation has been a serious concern for the global community after the Second World War. The peaceful commercial nuclear power plants could be abused by hostile regimes to produce nuclear warheads. The International Atomic Energy Agency (IAEA) was established by the UN Security Council in 1957 to monitor the global nuclear energy programs to prevent further proliferation. The nuclear programs in the Iraq, Iran and North Korea have raised particular attention by the U.S. federal government because of the hostile statements of their leaders against the United States. The containment of nuclear proliferation in the "rogue" regimes has become a very important pillar of the U.S. national security policy. Currently the North Korean government has stopped nuclear proliferation programs and accepted the monitoring conditions of the IAEA inspectors. The existence of weapons of mass destruction and nuclear proliferation was one of the reasons of the War in Iraq but the U.S. military forces could not find any nuclear proliferation programs in the Iraq after the Invasion.
The main challenge remains the potential nuclear proliferation program in Iran.
Iranian President Mahmud Ahmadinejad recently announced that they were able to develop 3,000 nuclear centrifuges for domestic energy consumption purposes. Nuclear experts believe that Iran can produce a nuclear bomb from the 3,000 centrifuges within a year. President Ahmadinejad proudly noted that "the West thought the Iranian Nation would give in after just a resolution, but we have taken another step in nuclear progress and launched more than 3,000 centrifuge machines". The timing of the announcement was critical as it took place when President Bush was celebrating the new agreements with North Korea. Although President Ahmadinejad and Supreme Leader Ali Khamenei declared that the Iranian nuclear facilities will only produce energy to meet the domestic demand, the Bush Administration has always been skeptical about "peaceful" intentions of Iranian regime. As a reflection to the recent revival of Iranian nuclear programs, the White house warned for new wave of international sanctions. The United States is pushing the international community and the UN Security Council to tighten the containment against the Iranian nuclear proliferation program.
The September 11 terrorist attacks revealed that non-state actors could be a serious threat against the national security of the United States. The U.S. government is seriously concerned that the terrorist organizations could obtain nuclear warheads. Phil Williams and Paul Woessner argues that particularly the organized crime groups in the Eastern European countries and Russia could provide the smuggled nuclear materials to the terrorist organizations. According to Williams and Woesnerr nuclear warheads could be produced from 3-5 kg enriched uranium or 1-8 kg plutonium and a kilogram of plutonium volumes about 50.4 cubic centimeters. The nuclear material seizure of the Russian security forces increased from 41 to 267 between 1991 and 1994. Fortunately none of the terrorist organizations have used nuclear warheads but it will be a disaster for our societies when the terrorists use the nuclear weapons against the metropolitan cities.
Current U.S. Nuclear Energy policies and public opinion
The U.S. Energy Policy Act of 2005 enabled a renaissance for the nuclear energy. The Act Authorizes the U.S. Secretary of Energy to provide 80 percent loan guarantees to the energy initiatives to reduce green house gases. The major beneficiary of the US department of energy loans will be the nuclear power companies. The act provides risk insurance for the nuclear power plant construction and licensing delays. Moreover, the Energy Policy Act of 2005 paves the way for 1.8 cent per kWh power production tax credit for the nuclear reactors. However, these tax credits are only restricted for the initial 6,000 megawatts of nuclear power production from the nuclear power plants. The tax credit is less likely to fill the production cost gap with other sources of electric generation.
The Bush Administration launched the Nuclear Power 2010 in 2002 in order to enhance to partnership between the Department of Energy and nuclear companies over future nuclear projects. The federal government provided $49.6 million financial support to the nuclear energy companies in 2005 and $56 million in 2006 within the framework of the Nuclear power 2010 program. According to a recent article on Science Daily News (SDN) the budget of the Office of Nuclear Energy has been increased 70% in 2003. The SDN article notes that the budgetary contribution on the agency catalyzed the research investment on the nuclear energy projects. Moreover, the Office of Nuclear Energy increased its efforts to develop new types of nuclear reactors and the agency began upgrading the existing nuclear programs that create hydrogen. The partnership program between the government and private initiatives reduces the time span for nuclear license requests. The Bush Administration reduced the bureaucratic procedures to enhance the construction of more nuclear reactors. Currently, the permission process is expected to take around 5 years for the NRG Company but before the new regulations, the usual time span for the permission process was longer than 11 years. President Bush shown his commitment on his speech in Limerick, Pennsylvania on March 24, 2006:
"Nuclear power is safe. It is safe because of advances in science and engineering and plant design. It is safe because the workers and managers of our nuclear power plants are incredibly skilled people who know what they're doing. For the sake of economic security and national security, the United States of America must aggressively move forward with the construction of nuclear power plants."
However, the public opinion is important for the energy policy makers to increase nuclear power which is mostly misunderstood by the global society after the World War II. Anti-nuclear lobbies launched several campaigns that nuclear energy production should be stopped because of the security risks and environmental damages. The CBS Poll Tracking found that the public favoring for nuclear energy has declined from 70 percent to 50 percent between 1977 and 2001. The least support for the Nuclear energy was during the mid 1980s after the Mile Island accident. Another survey conducted by the IAEA indicates that while 28 percent of the citizens in 18 industrialized countries favored construction of new nuclear power plants, 59 percent rejected new nuclear power plant constructions. The IAEA survey found that only 40 percent of the U.S. citizens favored nuclear energy.According to the public opinion research conducted by Bisconti Incorporation, the ratio of nuclear energy supporters has been increasing since 1980s. While less than 50 percent of the Americans favored nuclear energy in 1983, the ratio of pro nuclear Americans increased to 73 percent in 2006. The Bisconti report indicates that the ratio of opponents decreased significantly over the past two decades. Majority of the public surveys found that the public opinions do not favor construction of new nuclear power plants. The U.S. government has to increase the public campaigns to change the public opinion towards more pro-nuclear platform in order to be able to make future nuclear investments.
Conclusion
The vulnerability of US transportation, electric and industry sectors exacerbated as the price of oil reached to $95 per barrel. Nuclear energy is a powerful and reliable option to reduce US dependency on foreign oil and natural gas producers. The technological capacity of the nuclear energy changed over the past 60 years. The nuclear power plants became safer, more energy efficient and environmentally friendly. The fourth generation of nuclear reactors will be safer and energy efficient. However, there are five remaining counter arguments against the nuclear energy: the high cost, proliferation by the rogue regimes, reactor safety, public opinion and disposal of the wastes. The government policies to eliminate the concerns on these major challenges will contribute to the promotion of nuclear energy in the future.
There is no abrupt solution for the global energy supply disruptions and price volatility. However, nuclear energy stands as a substantial alternative. There are abundant uranium and thorium reserves in the world. The United States is one of the leading countries in terms of the global uranium and thorium reserves. Moreover, these the global reserves are situated in friendly regimes. Thus, the supply reduction risk is lower for the nuclear energy. Although the initial capital costs of nuclear power plants are higher than coal and natural gas fired plants, the average costs of nuclear energy will be leveled during the later phases of electric generation.
Although some public opinion surveys indicate that vast majority of the society favors public opinion, other public surveys still indicates that U.S. society is still predominantly against nuclear energy. Society is concerned with the potential environmental damages, safety and high price of electric generation from the nuclear power plants. Contrary to the widespread misperception, the nuclear power plants are the most viable environmentally friendly energy alternative for the United States. The GNEP program enables sharing of nuclear wastes with partner countries. Thus, the nuclear wastes will be a less environmental and economic challenge in the future. Nuclear energy saves us from substantial amounts of greenhouse gas emission every year.
The government of the Unites States should take the advantage of the best practices applied by the French nuclear policy makers. France is a unique example of energy independence through nuclear power generation. The country was net energy importer during 1970s; however it became the largest energy exporter within three decades thanks to its nuclear programs. The United States could reduce its foreign dependency by promoting nuclear energy. The government should increase the subsidies to the energy companies who invest for building new nuclear power plants. The municipal franchising and high capital costs of nuclear power plants creates natural monopolies in the nuclear energy market. The government subsidies can eliminate the concerns on the high capital costs. Thus the nuclear energy market can be more competitive in the future.
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