Is It Time to Pull the Plug on Nuclear Power?
Is It Time to Pull the Plug on Nuclear Power?
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ACADEMIC SOURCES:
Stauffer, N. et al (2020), Building nuclear power plants. Why do costs exceed projections?
https://energy.mit.edu/news/building-…
Grubler, A (2010). The costs of the French nuclear scale-up: A case of negative learning by doing.
https://www.sciencedirect.com/science…
OECD, Unlocking Reductions in the Construction Costs of Nuclear (2020).
https://read.oecd-ilibrary.org/nuclea…
Hultman, N. \u0026 Koomey, J. (2015) Three Mile Island: The driver of US nuclear power’s decline?
https://www.tandfonline.com/doi/abs/1…
#Nuclear #Energy #VisualEconomik
Content
0.269 -> Hey there VisualEconomik viewers, in this
video, we are going to tell you why nuclear
3.899 -> power plants have been a failure in the West.
6.13 -> We are going to explain why their profitability
and development can be much more complicated
10.09 -> than it seems at first glance.
11.84 -> And we will also analyze whether this type
of energy is definitely dead, or if it is
15.55 -> possible for it to come back into fashion.
17.59 -> Are you ready, let's get started!
19.57 -> [Note: those of you that know us know that
we have made several videos on VisualPolitik
23.16 -> in which we have told you how nuclear power
plants can be a potential source of abundant,
27.48 -> clean and relatively cheap energy.
29.3 -> However, it's not all that easy.
31.41 -> That's why we wanted to make this video here
on VisualEconomik, to show you the other side
35.18 -> of the problem.
36.18 -> And no, we're not talking about accident risks
or anything like that, so stay tuned].
40.96 -> If I ask you why nuclear energy has been losing
favor for decades, I'm sure you will all think
49.82 -> of disasters like Chernobyl, or perhaps the
activism of groups like Greenpeace or the
54.34 -> Green Party in Germany.
56.09 -> After all, there is a widespread fear of possible
nuclear accidents and the ecological problems
60.59 -> they can cause.
61.59 -> And so, the construction of nuclear power
plants has plummeted.
64.909 -> But...
65.909 -> What if I told you that the collapse of nuclear
power plants had nothing to do with Greenpeace
69.33 -> or the fear caused by Chernobyl?
71.29 -> What if I told you that, in fact, it started
because of inflation.
74.69 -> Yes, that’s right: because of inflation.
76.47 -> But to understand why, let's rewind time a
bit.
83.08 -> The origin of our story begins in the 1960s
in the USA.
86.2 -> At that time, the United States was experiencing
one of the most important periods in its history.
91.03 -> NASA sent the first man to the moon, the baby
boom generation foretold an unbeatable demographic
96.65 -> scenario, and people like Martin Luther King
started major civil rights movements.
100.95 -> Those years were years of spectacular economic
growth, and the truth is that this was a great
105.54 -> opportunity for the development of nuclear
energy.
107.88 -> And why is that?
108.93 -> You may ask.
110.009 -> Basically, because the economy was growing
more and more, production was skyrocketing,
113.67 -> the use of machines, fuel and electricity
were increasing at an average rate of 7% per
119.15 -> year.
120.15 -> And given these conditions, politicians faced
a huge problem: if society needed more and
124.079 -> more energy, the government had to find a
way to produce it, and above all, to produce
128 -> it at low cost.
129.52 -> Well, this is when nuclear power plants came
into play.
132.319 -> So, no sooner said than done, the US government
went full steam ahead with nuclear construction.
137.34 -> To give you an idea, during the 1960s alone,
more than 50 commercial nuclear reactors were
141.63 -> built, a tenfold increase over the figure
for the previous decade.
145.4 -> And so, thanks to the huge investment in nuclear
power, the US was able to meet the country's
149.65 -> enormous electricity demand.
151.269 -> But wait a moment, because we have not come
here to talk about nuclear success, we have
155.44 -> come here to talk about its failure.
156.89 -> And for that, we have to go back to 1973.
161.879 -> 1973 was the year of one of the worst economic
crises of the 20th century: the oil crisis.
169.5 -> Basically, this crisis consisted of many Western
countries running out of oil.
173.909 -> Gasoline was no longer available at many gas
stations, and energy prices skyrocketed.
178.39 -> In theory, it would seem that the lack of
oil had to benefit other forms of energy generation,
183.89 -> such as nuclear energy.
185.349 -> However, the opposite was the case.
187.459 -> The oil crisis caused an enormous slowdown
in the economy.
190.769 -> Inflation skyrocketed, unemployment rose massively,
and a multitude of companies closed down.
195.26 -> And what did that all mean?
196.57 -> That energy demand came to a screeching halt.
199.33 -> From then on, the US even had 40% more energy
production capacity than it really needed.
204.6 -> Therefore, continuing to build nuclear power
plants no longer made much sense.
208.739 -> In other words, the first reason why nuclear
started to fall out of favor was the oil crisis.
213.069 -> However, that was not all.
216.08 -> A few years later, in 1979, inflation caused
by the oil crisis was still high.
223.63 -> And this is where one of the most important
characters in this story comes in: Paul Volcker.
228.11 -> Paul Volcker was the chairman of the Federal
Reserve appointed by Jimmy Carter, and he
232.83 -> was appointed with a very clear objective:
to fight inflation.
236.23 -> To this end, Volcker implemented one of the
most aggressive interest rate hikes in recent
240.2 -> history.
241.2 -> He raised rates to no less than 20%.
243.26 -> All in all, an axe to wield against inflation.
245.8 -> But believe me when I tell you that this was
also an axe that struck blows against nuclear
249.71 -> energy.
250.71 -> To which you will say, but what do interest
rates have to do with nuclear energy?
254.06 -> Well, one major problem with nuclear power
plants is that their investment costs are
258.04 -> very high.
259.04 -> Keep in mind that it can take more than 10
years from the time a plant is planned to
262.91 -> the time it is completed, while for a natural
gas plant this time usually does not exceed
267.82 -> 3 or 4 years.
269.06 -> This means that investors who want to build
a nuclear power plant will have to borrow
271.96 -> lots and lots of money.
273.49 -> In particular, it is estimated that investment
costs in nuclear power plants account for
278.44 -> 70% of their total operating cost, while in
other types of plants they account for only
283.41 -> 20%.
284.41 -> And of course, as you can imagine, by borrowing
money, or leaving it unproductive while the
287.94 -> plant is being built, investors are chained
to the interest rate.
291.6 -> The higher the interest rate, the more expensive
it will be to build a plant.
297.28 -> Well, that is exactly what we can see in this
graph.
302.54 -> As rates get higher, nuclear power is by far
the worst hit of all.
306.59 -> And in that sense, Volcker's rate hike practically
quadrupled the interest on nuclear investment.
311.9 -> Something that, by the way, was also repeated
in other countries such as France and, to
315.82 -> a lesser extent, Germany.
317.449 -> However, beyond the crisis and interest rates,
there is still a third reason for the decline
321.78 -> of nuclear.
322.78 -> And that reason is none other than the lack
of support and protection against risk.
326.49 -> I guess I don't need to tell you, but the
lack of support from Western governments for
329.66 -> nuclear development has gone from bad to worse
since the 1980s.
333.88 -> This lack of support has come about mainly
in two different ways.
337.63 -> The first of these was the liberalization
of the energy sectors in many countries.
341.85 -> For example, in 1978, President Jimmy Carter
implemented an energy deregulation plan in
347.41 -> the USA.
353.06 -> This plan consisted, among other things, of
breaking the legal monopolies that some electricity
357.6 -> companies had when selling their energy to
the public sector.
360.67 -> In addition, the plan also reduced subsidies
to the sector in the form of loans with very
365.04 -> favorable conditions or guaranteed prices
per megawatt hour.
369.22 -> This was good news for the sector's competition,
but, on the other hand, it was bad news for
372.93 -> the nuclear sector, which, as we have already
said, required sizable long-term investments.
377.07 -> So, in the absence of government support,
they became much riskier for investors, who
380.94 -> preferred to devote their efforts to investing
in safer options such as coal or natural gas.
385.5 -> ("The trend towards privatization and deregulation
of the electricity sector has (...) put pressure
390.97 -> on electricity producers to improve their
economic competitiveness.
394.38 -> In this context, (...) small-sized [coal or
natural gas] power plants with relatively
398.289 -> low investment costs and short implementation
times offer many advantages."
402.38 -> International Energy Association and OECD
Report, 1998)
406.419 -> Be that as it may, beyond the loss of direct
support, another problem that governments
410.169 -> have caused in the nuclear sector has been
the loss of legal certainty.
413.52 -> A very clear example of this is what happened
in Spain in the 1980s.
416.68 -> At that time, there were seven active nuclear
power plant investment projects ready to start
421.21 -> up.
422.21 -> In fact, there were nuclear power plants almost
finished and ready to produce energy.
425.629 -> But do you know what happened?
426.889 -> Overnight, a new government decided to stop
nuclear projects.
430.49 -> All the investment went down the drain.
431.949 -> Well, this was something very common, not
only in Spain, but also in other countries.
436.18 -> (15 April 2023: Germany switches off its last
three nuclear power plants today)
441.84 -> And remember that not only can we talk about
blocking projects or forcing the closure of
446.53 -> plants, but also about extraordinary taxes
on the sector and a multitude of other administrative
451.81 -> obstacles.
452.81 -> The point is that nuclear energy is so controversial
that, depending on the government, laws can
456.63 -> change overnight.
457.63 -> And if you don’t believe me, just take a
look at Germany.
459.85 -> In short, it is not only that nuclear investment
involves a long and costly development in
463.94 -> itself, but also that the government of the
day can screw it up at any time.
471.34 -> It is precisely for this reason, and for all
of the above, that nuclear energy production
475.86 -> has not exactly been in fashion since the
late 1970's.
479.22 -> In fact, it has been completely stagnant for
at least 20 years.
482.449 -> And take note, because the cancellations of
nuclear power plants, specifically 40% of
487.259 -> all of them, took place before and not after
the Chernobyl accident, and even before the
491.78 -> Three Miles Island accident in Pennsylvania,
one of the first events that turned the tide
496.599 -> of public opinion against nuclear power.
498.919 -> So, as you can see, the problems of nuclear
power go far beyond Greenpeace and the fear
503.06 -> of accidents.
504.06 -> Be that as it may, and given what we have
seen...
506.04 -> Does all this mean that if we lower interest
rates, give public support to nuclear power
510.24 -> plants, and guarantee legal certainty... the
nuclear industry could come back?
513.89 -> Well, VisualEconomik viewers, I am afraid
that the problems go even deeper than what
517.57 -> we have told you.
518.58 -> These days, the revival of nuclear energy
as we know it is a much more difficult task
523.24 -> than it appears.
524.24 -> At least in Western countries.
526.21 -> Want to know why?
527.21 -> Then let’s take a look!
528.21 -> (A PROBLEM OF SCALE)
532.16 -> I want you to pay close attention to the following
graph:
537.76 -> What you are seeing is the price-adjusted
cost of building nuclear power plants in France
541.98 -> over recent decades.
543.07 -> The trend is very clear: nuclear power plants
are becoming more and more expensive to build.
547.899 -> Even if we consider identical plants, the
cost of construction has not stopped going
551.63 -> up.
552.63 -> And, in a way, if you think about it, there
is something very, very unusual about this:
556.72 -> That is to say, normally, as an economic sector
advances, production costs are reduced.
562.26 -> Companies become more and more efficient,
there is more and more competition, and the
565.35 -> whole process becomes cheaper.
566.769 -> However, the opposite has happened in nuclear
power plants.
569.44 -> The question is why?
570.63 -> Well, among other factors, the answer lies
in the fact that the construction of nuclear
574.93 -> power plants requires hundreds of small, medium
and large companies to provide a huge number
580.089 -> of different supplies.
581.13 -> Here we’re talking about everything from
logistics management to the supply of a wide
584.88 -> variety of semiconductors and construction
materials.
587.899 -> And let's be clear, over recent decades European
countries have not given enough support for
592.35 -> these suppliers to consolidate.
597.78 -> As the nuclear industry was practically forgotten
during the last thirty or so years, the companies
602.181 -> dedicated to its construction have been in
decline, have gone to other countries, or
606.601 -> have simply disappeared.
607.79 -> Take, for example, the following report from
the European Union:
611.16 -> (Original equipment manufacturers of nuclear
power plant structures, systems, and components
615.93 -> either no longer exist, have ceased to produce
(...) to the original design, or have discontinued
620.23 -> the nuclear quality assurance programs required
by the regulations.
623.83 -> European Commission report)
625.08 -> This same report also explains that the new
suppliers are rather small and unfamiliar
629.589 -> with the nuclear industry, and, given that
there is a lot of risk in the sector, as we
633.579 -> explained earlier, they demand extraordinarily
high prices for their services.
637.7 -> In short, we could say that the lack of investment
in the sector has destroyed the ecosystem
641.74 -> necessary to keep it afloat.
643.61 -> The lack of construction drags down the supply
chain, which makes building new plants increasingly
647.91 -> difficult and expensive, leading to cost overruns
and constant missed deadlines.
652.26 -> And that's the reason behind news stories
like this:
655.5 -> (21 December 2021: Finland opens its new nuclear
power plant 13 years late and with a cost
661.829 -> overrun of 11 billion.
663.619 -> – El Economista)
664.619 -> (EDF again delays the new Flamanville 3 nuclear
reactor until spring 2023 and raises the project's
670.029 -> cost to 12.7 billion.
671.1 -> – El Periódico de la Energía)
672.16 -> Now, does all this mean that we should give
up building new nuclear power plants, that
675.48 -> they are nothing more than a bottomless pit
of expenditure, and that there is no hope
679.279 -> for a new revival of atomic energy?
681.329 -> Well... no, not everything is as dark as it
seems.
684.31 -> Listen up!
685.399 -> (BIGGER IS NOT ALWAYS BETTER)
691.18 -> There are at least two mechanisms that can
lead to a nuclear renaissance.
694.82 -> The first is quite simple: that governments
support it, provide lines of financing and
698.959 -> ensure legal guarantees for investors.
701.36 -> This is something that is already being done,
for example, by countries such as Russia,
705.2 -> China and lately it seems that South Korea,
among other nations, is also doing it.
709.52 -> In fact, Russia, East Asia and the Middle
East have today become the great epicenters
714.05 -> of nuclear energy.
715.24 -> In this graph you can see how Asian countries
have been building nuclear reactors consistently
719.269 -> and efficiently for the last 50 years.
721.68 -> They build them in greater numbers and in
less time than countries in any other region
726.17 -> of the world.
727.17 -> So when the United Arab Emirates decided to
build four nuclear reactors to carry out their
731.25 -> plans, they called in South Korean industry.
733.63 -> But, beyond drumming up public support or
throwing oneself into the arms of Asian producers
737.93 -> – which would not be easy to justify in
Europe either – there is another alternative
741.839 -> to the nuclear renaissance that is already
taking place in countries such as the United
745.97 -> States, the United Kingdom and Canada.
747.959 -> This alternative is known as SMRs, which stands
for Small Modular Reactors.
754.98 -> Currently, there are more than 70 projects
related to this technology around the globe,
760.85 -> and although there is much disparity in the
various models proposed, they all agree on
764.81 -> one thing: SMRs are a kind of miniature nuclear
power plant, and their construction costs
769.55 -> can be up to 80% lower than those of conventional
nuclear power plants.
773.89 -> So what is the advantage of all this?
775.61 -> Basically that these types of reactors do
not require large investments, nor do they
779.87 -> require huge and complex construction periods,
nor are they so dependent on changes in interest
785.279 -> rates or public aid.
786.67 -> In short, SMRs are much easier to mass-produce
and much more capable of taking advantage
791.13 -> of economies of scale, as they can be manufactured
in a much more industrial and centralized
796.28 -> way, which also means they do not need as
many suppliers.
798.95 -> In short, they could give nuclear power the
boost that Europe so badly needs to meet its
803.329 -> energy and climate targets.
804.67 -> Of course, this will only be possible if the
different countries agree to introduce more
808.88 -> permissive legislation for this type of project
that guarantees sufficient legal certainty
813.47 -> so that investors are not afraid that the
governments in power will later sabotage their
818.089 -> projects.
819.089 -> But now it's your turn.
820.089 -> Do you think the West needs to build more
nuclear power plants?
822.87 -> To what extent should governments support
investment in this technology?
825.56 -> Will small modular reactors be the energy
revolution they promise to be?
829.649 -> You can leave me your answer in the comments.
831.899 -> And as always, don't forget that here, on
VisualEconomik, we release new videos every
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837.82 -> updates.
838.82 -> If you liked this video, LIKE it and see you
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841.269 -> All the best and see you next time.
Source: https://www.youtube.com/watch?v=MdIrpqnnf7Q