May 10, 2007
Risky Business: The Outlook for Investing in Nuclear Power
by Anne Moore Odell
A new report scrutinizes the nuclear industry from an investor's perspective and finds a rotting
fantasy of cheap energy and huge returns.
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.
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
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%.
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.
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.”
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.
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
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.