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The Choice of Fuel in Competitive Generation

Fortnightly Magazine - June 15 1995

is another subject. What seems most useful now is to work through the practical effects of competition as it might affect such likely victims as nuclear plants, and to discern what all this means for the specific areas where sunk costs would become unrecoverable in the face of competition.

The Nuclear Irony

We have all been brought up to believe (em and I think with some basis in history (em that competition is a wonderful stimulus to innovation. This is presumably what Joseph Schumpeter had in mind when he described capitalism as a process of creative destruction.8 His theory posits that a succession of waves of discovery of whole new ways of doing things creates the dynamism of competitive systems. The fact that the nuclear plant is the most radical innovation in electric generation (em at least since World War II (em is therefore a bit ironic. These plants now seem to have become the most obvious sources of loss and financial strain in the electric industry. Hardly the cutting edge of progress and change, many of the plants now vastly complicate any transition to a competitive mode.

Arguably the most spectacular and initially promising innovation in electric generation, nuclear generation was also fostered by a great deal of governmental encouragement and promotion. At one time, the peaceful uses of atomic energy occupied a very high priority in government and public thinking (em not only in the United States, but around the world. The nuclear power plant seemed an obvious and important avenue for hope for the future. As I recall, the late Shah of Iran favored it as a means of modernizing his country. I need not remind the reader of the promises of electricity "too cheap to meter," or the forecasts lauding the atom as a pollution-free substitute for coal.9

The Energy Reorganization Act of 1974 divorced the promotional aspects of nuclear power from its regulatory aspects and created the Nuclear Regulatory Commission (NRC).10 That legislation contained a provision for the study of "nuclear energy center sites," which were conceived as regional areas for locating a number of nuclear reactors and/or other nuclear fuel cycle facilities. (On a more bucolic note, these areas were sometimes referred to as "nuclear parks.") The study mandated by Congress extended to soliciting the views of officials and experts at all levels as well as those of "interested persons" and "citizens' groups."11 To facilitate the gathering of this information, the NRC convened several large conferences of interested citizens and responsible officials.

At that time, if memory serves, popular theory conceived a need for 800 nuclear power plants (em or possibly as many as 1600. A view that it would be better to build these plants in clusters of about

l0 or 25, possibly including reprocessing facilities and the like, also enjoyed some attention. Such a disposition promised to concentrate the safety and environmental problems in sites away from populous areas. The purpose of the conferences was to think through the problems of infrastructure, security, regulation, and other pertinent aspects of these proposed "nuclear parks." I