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The author of Monday's letter to the editor raises an important question about whether the United States should continue to use nuclear power as the source of nearly 20% of its electricity. Unfortunately, while his claims that nuclear power is expensive and dirty have some good basis in economic fact, they do not address the problem of finding alternatives to nuclear power. Nuclear power has never lived up to its billing as the power source of the future, producing electricity that is "too cheap to meter," and few people think that any new nuclear power plants will be built any time soon. However, while it is largely correct to say that nuclear power is among the most expensive ways to generate electricity, to say this confuses the concepts of "variable costs" and "fixed costs." For an economist, variable costs are those costs that can be changed in a short period of time while fixed costs (or sunk costs) are those expenses over which we have no control and which we must pay regardless of any decisions we might make. For nuclear plants, the overwhelming proportion of the cost involved with generating electricity is the cost of building the plant itself, a fixed cost. Once the plant is built, the costs of fuel and the cost of operating the plant, the variable costs, are very low. Therefore, while the total costs of generating electricity from a nuclear plant, which are simply the fixed costs and variable costs put together, are around 8 cents per kilowatt-hour (KWH), once the plant is built, the variable cost of actually operating the plant is only around 2 cents per KWH. By contrast, the cheapest alternative method of producing electricity, a newest generation natural gas powered plant, has total costs of around 5 cents per KWH. For these plants the fixed cost of the plant itself is only about 1 cent per KWH but the variable costs of fuel and operating expenses are around 4 cents per KWH. The author is completely correct in asserting that the total cost of nuclear energy is higher than its alternatives, 8 cents/KWH versus 5 cents/KWH. However, the cost of electricity produced by already existing nuclear plants is much lower than the cost of producing electricity by building and operating new plants to replace these nuclear plants, 2 cents/KWH versus 5/cents per KWH. Other sources of power generation such as coal (6 cents/KWH), wind (6 cents/KWH), and solar (9 cents/KWH) are even more expensive to build and operate. Even when the environmental costs of nuclear energy are added into the mix, it is still more cost-effective to operate existing power plants than to build completely new electricity generators. (This is in part due to the fact that there are environmental costs associated with other types of generators as well.) The critics of nuclear power are absolutely right in saying that
nuclear power has turned out to be a relatively expensive way to generate
electricity, and certainly any new power plants built to replace aging
generators or to meet expanding demand for electricity will be powered by
natural gas or renewable energy sources. However, this does not mean that
there is not a role for our existing nuclear plants in meeting America's
energy needs. The decision to build nuclear plants was made 25 years ago
and the real choice to be made today is whether we continue to operate our
existing nuclear plants or replace them with newly constructed generating
facilities. The economically rational solution is to continue to use any
fully completed nuclear plants, like NSP's Prairie Island facility,
throughout their planned lifetime, and for this reason it is important
that America devise a sensible storage plan for nuclear waste.
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