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Modest Thoughts About a Nuclear Renaissance

Professor Ferdinand E. Banks
April 12th, 2012

For many years I have enjoyed thinking that I know everything I need and want to know about the economics of nuclear energy. But recently I published an article called ‘In the head of U.S. Energy Secretary Chu’ in the important forum Energy Pulse, and the discussion of my article (and nuclear energy in general) was so thorough and stimulating that I decided to extend some of the materials in my analysis, and also the work I am presently doing on this topic. By “work” I am particularly concerned with my articles on nuclear, as well as my forthcoming energy economics textbook (2012).

In addition I want to call attention to an article in a new journal that has just been launched by the International Association of Energy Economics (IAEE), and which is called ‘The Economics of Energy and Environmental Policy’. I see no reason to conceal that the reaction by students to the few lectures I gave on environmental economics at Griffith University (in Brisbane Australia) soured me on all printed matter having the word ‘Environmental’ in the title, but in a ‘mini-survey’ in the aforementioned journal (2012), MIT economists Paul L. Joscow and John E. Parsons say that “talk is cheap”, and furthermore talk about a nuclear renaissance is mostly “hype and hope”.

For what it is worth, they are absolutely correct, however this makes little or no difference in the overall scheme of things, because as long as voters (and influential non-voters) prefer more income to less income, their language and behaviour will eventually make it clear to their political masters that existing nuclear reactors must be retained, while new reactors must be constructed, and possibly at a quickened pace.

When I use the expression ‘political masters’ in a lecture, I often focus on the persons giving the orders in China. The thing that both scholars and anti-scholars fail to understand is that the goal in China is not merely to construct and/or operate individual reactors in response to an expected increase in the demand for electricity, which appears to be the case in much of the world, but to install and exploit a very large nuclear industry, in which the lessons that some of us absorbed in our study of economic theory can by applied in a highly efficient manner. As noted by Joscow and Parsons, China has 26 reactors under construction, and I was recently informed that they have at least a hundred reactors in the planning stages.

The Chinese are already constructing the most inexpensive reactors in the world, and it is not likely but certain that similar equipment can be constructed elsewhere. Chancellor Angela Merkel in Germany, and the Socialist candidate for president in France, can huff and puff to their heart’s content about abandoning nuclear, but neither German nor French voters can be expected to show a sustained enthusiasm for the attack on their standard of living that a nuclear retreat would set in motion, particularly if the price of nuclear-based electricity were lower than alternatives.

In some of my replies to comments on my Energy Pulse article, I often used derogatory terms when referring the persons who provided my main critic (the California environmentalist Tam Hunt) with data or gossip. I would like to use this opportunity to explain why I took that approach. Those ‘researchers’ and pseudo-researchers have concluded that the cost of electricity provided by large reactors in the United States (U.S.) is nine cents per kilowatt hour (= 9 cents/kWh). Normally I would have no problem with this, because it is identical with a result I obtained when preparing the short course in energy economics that I was asked to present in Spain. But when I saw that the figure provided for wind was 6 cents/kWh, and moreover it was claimed that wind could be employed to generate the electric ‘base load’, I realized that I was mistaken. I was mistaken because the ladies and gentlemen responsible for these numbers are irresponsible or foolish or both. Subsequently, employing the ‘raw data’ provided Mr Hunt, I believe it possible to demonstrate that the (kWh) cost of nuclear-based electricity in state-of-the-art installations is lower than 9 cents/hour.

Here I want to say that calculating the cost of nuclear facilities is as much an art as a science, by which I mean that a sophisticated knowledge of economics is more valuable than the physics that dominates much of the discussion about nuclear energy. For instance, according to Charles D. Ferguson – an engineer and physicist – and president of the Federation of American Scientists (in Washington DC), the capital cost of a large nuclear reactor with a power rating of 1000 megawatts ranges from four billion (U.S.) dollars to nine billion, depending on reactor design (2011).

In terms of the economics that I study and teach, this contention cannot possibly be correct. Four billion dollars does not sound accurate to me, but if it is – or is close to accurate – then according to orthodox economic theory the sellers of reactors costing a great deal more than that amount would descend into bankruptcy, although it may be later rather than sooner. Some of us are prepared to argue that energy may be as important to the United States at the present time as aircraft were doing the Second World War, and (with certain scandalous exceptions) manufacturers of fighters and bombers who were unable to match the performance of the superb planes that became available about l944 were soon told to find something else to produce.


At the Singapore Energy Week, where I gave a short lecture on nuclear energy, following which I made a few remarks in what could charitably be described as a debate, I was unable to complete my contribution before the environmentalist Jeremy Leggett rushed toward my chair, and with outrage in his voice accused me of spreading falsehoods about the time needed to construct a reactor. As usual, five years was the number I presented the audience, while he stated that ‘they’ insisted that this activity required ten years. He also served notice that I had disgraced my university with what he felt was a bogus assertion, and later notified an itinerant charlatan that my status at the university (or Uppsala) should be investigated.

Investigations are completely unimportant to me, and I am willing to confess to any and all personal and professional shortcomings except bad teaching, bad lecturing, bad research, and a failure to mention the many guest professorships I have received. But information has reached me (and countless others) through the business grapevine that 1000 MW reactors have been made available in China – from ground break to grid power – in slightly less than 5 years, and the cost of a kilowatt of power may be as low as 1600 dollars. Anne Lauvergeon, the former director of the French nuclear giant Areva, and sometimes called ‘The Queen of Nukes’, once referred to all this as “worrying”, although more worrying to me are the attempts to dismiss this impressive achievement.

The tragedy in Fukushima has resulted in a palpable slowing down of what some observers call the nuclear renaissance. By some observers I include myself, and while I do not use the expressions renaissance (or ‘revival’) as freely at the present time as I did a few years ago, I have no doubt that it will become viable once again. Until that time I would like to see colleagues and students busying themselves with closely monitoring and attempting to comprehend an ongoing nuclear game involving the ‘smart’ and the not-so-smart, the ‘haves’ and the have-nots, and the ruled and the ‘rulers’.

Regardless of what they say or do, a majority of the smart and the rulers still believe in nuclear energy: they know as well as I do that it is indispensable, especially if renewables and alternatives are to achieve their optimal proficiency. They also know that it is not judicious to broadcast this conviction in all social contexts. Though perhaps meaning well, they understand that a principal issue here is political power, and not just the heat and light required for town houses, or the elegant chateau in which you and yours enjoy your annual skiing holiday. My favourite reference here is the behaviour of the former student of physics and chemistry Angela Merkel, who believes that she has latched onto a political gravy train by adopting a bizarre anti-nuclear agenda instead of the pro-nuclear stance that she publicly assumed only 7 or 8 months earlier.

What we are dealing with here is a game whose rules were described to Jacob Bronowski by supposedly the best brain of the 20th century – the mathematician John von Neumann – during a taxi ride in London during World War II. According to von Neumann, “Real life consists of bluffing, of little tactics of deception, of asking yourself what is the other man going to think I mean to do. And that is what games are about in my theory.” Apparently the great man forgot to mention threats, lies and the relentless spreading of misunderstandings disguised as scientific truths, however according to the book by William Poundstone (1993), these were often on the tip of his tongue.

According to Tam Hunt, my humble work on nuclear deserves to be ignored because of my failure to provide numerical evidence that nuclear is as economical as I am in the habit of advertising. Admittedly, I am tempted to regard Hunt’s criticism as a provocation or a challenge, however since I live in Sweden, and have a vague insight into its economic history, that is unnecessary. The Swedish government panicked after the first oil price shock, and without consulting voters, industrialists, scientists, or visitors to the discos and student clubs in Uppsala and Stockholm, created the conditions to rush through the construction of 12 nuclear facilities in just 13 years. This is not the place to go into details, but those facilities played a major role in making the electric price to Swedish households and especially industries among the lowest in the world.

I seem to remember hearing from the excellent Mr Hunt that large subsidies were involved in this program. I am prepared to claim that no subsidies were involved for taxpayers as a group because of the benefits that inexpensive electricity provided for the Swedish macroeconomy, and in addition the social welfare in this country.


In my talk at the Singapore Energy Week, I make the unpopular statement that where technological progress is concerned, nuclear was superior to other energy options.

I did not elaborate on this, but fundamentally two issues are involved. The first is the reputed presence of at least three times as much fissionable thorium in the crust of the earth as uranium. This might be one of the reasons that some economists believe that nuclear is a ‘backstop’ against the depletion and/or drastic price escalation of items like natural gas and coal, as well as uranium. More important is the progress likely to be made by breeder technology during the present decade.

A nuclear physicist that I have often communicated with, Michael Dittmar (at ‘Cern’ in Geneva), has another opinion, but I am afraid that this outcome cannot be avoided. “Afraid” because I have my doubts as to whether the large amount of plutonium that will be produced can be managed in an optimal manner. I therefore hope that that movers and shakers are thinking about this as they go about correcting the mistakes that they have or will make in providing the energy all of us deserve.


Banks, Ferdinand E. (2012). Energy and Economic Theory. London, Singapore and

New York: World Scientific Publishing Company. (Forthcoming

Joscow, Paul L. and John E. Parsons (2012). ‘The guture of nuclear power after

Fukushima’. Economics of Energy & Environmental Policy. (March).

Ferguson, Charles D. (2011). ‘Do not phase out nuclear power – yet’. Nature, (May)

Professor Ferdinand E. Banks
April 12th, 2012

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