Investing in Nuclear Power - The Outlook

The Outlook for Investing in Nuclear Power

A new report scrutinizes the nuclear industry from an investor’s perspective and finds a rotting fantasy of cheap energy and huge returns.

SocialFunds.com - The question is no longer if humans have contributed to global warming by releasing CO2 into the atmosphere, but what we can do to stop more damage from occurring. As governments, businesses and concerned citizens from every corner of the planet think about global warming and growing demand for energy, solutions to these problems abound. As people consider currently available energy sources, the role nuclear power should play is being hotly debated.

An influential coalition of socially responsible investors and environmental, health, and public interest organizations recently released the report Why a Future for the Nuclear Industry is Risky that strongly comes down against the inclusion of nuclear power in the future energy equation. The report argues that nuclear power is not a good investment for people interested either in a healthy return or a healthy planet.

The report is based on presentations by Peter Bradford and David Schlissel, both of whom have extensive experience in the technical and governmental aspects of the nuclear power industry. Report sponsors include Friends of the Earth,, Interfaith Center on Corporate Responsibility (ICCR), North Carolina Waste Awareness and Reduction Network (NC WARN), Nuclear Information and Resource Service (NIRS), Public Citizen, Southern Alliance for Clean Energy (SACE), and U.S. Public Interest Research Group (PIRG).

According to the report, new nuclear power plants would be bad investments: “New nuclear power plants will not be cost competitive with other electricity generating alternatives.” Instead, pointing to renewable energy sources such as wind, the report states that in 2005 investment in renewable energy capacity was almost $40 billion and is continuing to grow.

US nuclear power plants will likely be phased out by mid-century, said Leslie H. Lowe, Program Director at ICCR. US nuclear power plants are part of an aging infrastructure and although the government has re-licensed many nuclear plants for the next twenty years, at the end of these twenty years, the plants will not be operational.

Not all investors agree with the report’s conclusions on the role of nuclear power. Bill Page, Vice President of State Street Global Advisors (SSGA) and Head of SSGA’s environmental, social and governance team, sees nuclear energy as one of the pieces of the energy solution pie.

The findings of the UK’s Stern Report, the Intergovernmental Panel on Climate Change (IPCC), and the “Wedge” theory from Princeton, authored by Robert Socolow and others as described in the paperp, “Solving the Climate Problem: Technologies Available to Curb CO2 emissions” all point out the need for a change in the way energy is currently being produced. Page thinks that new nuclear research and construction could definitely help the CO2 crisis.

“Carbon legislation is forthcoming and this legislation is going to create opportunities for forward looking companies. The companies that have been preparing for climate changes, not just preaching, but actually preparing, are going to do very well,” Page said. “We can either spend a little money now, or a lot of money later. With carbon, there is mitigation and adaptation. The bottom line is we can’t do those things with renewables alone. If we are going to mitigate carbon, we need to sustain a wide portfolio,” Page added.

According to Lowe, “SRI investors for years have known there is huge risk in new nuclear power. There have been utility companies that have been running nuclear plants successfully, but there have been issues as well, like releases of hot water and faulty alarms.”

One reason why nuclear power is considered cost prohibitive, according to the report, is the expense of building new nuclear power plants, despite the large subsidies provided in the Energy Policy Act of 2005 (EPACT 2005). Building new nuclear power plants also takes a long time, and no new nuclear power plants have been built in the US for almost thirty years. The report suggests that future plants could run into some of the same difficulties that previously built plants did, such as running over initial cost estimates by more than 200%.

“Nuclear power is not a market solution,” Lowe said. “We could not have nuclear power without government subsidies. Plant liability is capped by the government and with the Price-Anderson Act, the public is on the hook.” The Price-Anderson Nuclear Industries Indemnity Act was first passed in 1957 and renewed several times since then. It installed a no fault insurance system for nuclear power plants with any claims above $10 billion to be picked up by the federal government.

The report states, “in the last 50 years, nuclear energy subsidies have totaled close to $145 billion and amount to more taxpayer dollars for R&D than for all other energy sectors combined.”

Page thinks that it is not construction cost alone that has keep new nuclear plants from being built in the US. He names other factors including a long permitting process and organizations that work to keep reactors out of their back yards. He points to France and other European countries that are successfully building plants and embracing new technologies.

To meet projected global energy needs, there would have to be between 1000-2000 new nuclear reactors built, Lowe told Socialfunds.com. However, if these plants were constructed, the supply of fuel grade uranium would be exhausted within five years.

“When you look at the full life cycle of a nuclear power plant, nuclear power is not a ‘nimble solution,’” Lowe said.

The inherent danger of a radioactive event is also important for investors to consider. Negative public opinion in the wake of an accident or attack would likely hamper new plant construction. The report quotes the S&P rating service’s findings that “an electric utility with a nuclear exposure has weaker credit than one without and can expect to pay more on the margin for credit. Federal support of construction costs will do little to change that reality. Therefore, were a utility to embark on a new or expanded nuclear endeavor, Standard & Poor’s would likely revisit its rating on the utility.”

Another argument that this report debunks is that nuclear power will reduce US dependence on energy supplies from abroad. Nuclear power cannot replace importing of oil by the US the report states because only 3% of electricity in the US comes from petroleum.

The report identifies spent nuclear waste as another problem that needs to be addressed before more power plants are built. Yucca Mountain storage faculties are 20 years behind schedule with a target opening date of 2017. The Global Nuclear Energy Partnership (GNEP), the Bush administration’s plan to allow the reprocessing of spent nuclear fuel, still faces technical and political hurdles. The report says that reprocessing would increase the opportunity for fissile materials to land in the wrong hands and be used in building a nuclear bomb.

Investment in US solar-based companies doubled between 2004 and 2005 to $150 million, the report notes. In 2005, it was largely private risk capital that financed micro-power that provided 32% of additional global output. The report concludes that “investors focusing on actual market behavior must conclude that nuclear power is not preferred.”

Lowe told Socialfunds.com that we are living in a time of transition, with people asking for more energy-efficient appliances and cleaner energy. Electricity sources are becoming decentralized compared to centralized power sources like nuclear power reactors. Lowe is hopeful that people today faced with rising energy costs and rising temperatures will modify their behaviors, as they did the 1970s when concern over peak oil and rising fuel prices led to many changes in power consumption.

by Anne Moore Odell

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