The implications of Fukushima

Abstract

The effects of the tragedy at Japan’s Fukushima power plant will continue to reverberate over the upcoming weeks, months, and years. And, as the writers in this symposium explain, the consequences of the disaster go beyond Japan—like Chernobyl and Three Mile Island, Fukushima will reshape nuclear agendas and policies in countries around the world. In this Global Forum, leading experts reflect on the current and future implications of Fukushima for their own countries—the United States, the European Union, and South Korea. Mark Cooper writes from the United States; Caroline Jorant (2011) from the European Union; and Soon Heung Chang (2011) from South Korea. In August, this forum will continue as a Roundtable at www.thebulletin.org.

Long before the accident at the Fukushima Daiichi nuclear power station on March 11, the fabric of the so-called nuclear renaissance in the United States began to fray. The original goal of bringing two new reactors online by 2010 was missed (Energy Information Administration, 2001); of more than two dozen projects that were considered, ¹ only two showed signs of progress—and even this progress was uncertain (Caldwell, 2011; Shane, 2010). In 2008, the Energy Information Administration projected almost 17 gigawatts of new nuclear power reactors by 2030 (Energy Information Administration, 2008); in its 2011 projections, it scaled back the 2030 projection to just five (Energy Information Administration, 2011).

Before the Fukushima disaster, a combination of economic factors had derailed the renaissance in the United States: First, the projected cost of a new reactor had tripled in less than a decade (quadrupled, if Wall Street estimates of cost are correct). ² Second, the great recession had slowed demand growth so dramatically that the need for new reactors had been pushed off by a half decade or more. ³ Third, energy alternatives—like efficiency, renewables, and natural gas—were increasingly more attractive and offered more power in small increments at stable or declining prices, proving to be better-suited for a slow-growth economy. ⁴ The failure of the United States to adopt climate change legislation meant that the cost of fossil fuels was not hit as harshly as the nuclear industry had hoped, thereby hurting the chance of making nuclear energy more attractive.

Safety as an economic issue

Fukushima will make matters even more difficult for the construction of new nuclear reactors in the United States. While safety is frequently seen as a public health or environmental issue, it is also an economic issue (Greenwald, 2011).

Though Fukushima continues to unfold, it seems likely that safety requirements will become more stringent. Over a dozen safety concerns that resonate in the United States have been raised in the preliminary analysis of Fukushima: that is, the design (event tolerance, cooling, venting, backup-system resilience, and redundancy), siting (reactor crowding, waste storage, and evacuation plans), and management process (planning, standard setting, inspection, and communications). Addressing these issues will increase costs directly due to the resources required to take greater precaution in at least four areas—“emergency planning zones, seismic activity, maintenance of spent-fuel pools, and containment buildings” ⁵ —and indirectly because they increase construction periods. After all, in the decade leading up to the Three Mile Island accident, increasing concerns about safety in the United States increased costs and lengthened construction periods. ⁶

Reviewing nuclear reactor safety after an accident reveals an endemic tendency to undervalue safety before an accident—namely, past violations of standards that did not result in enforcement actions (Onishi and Fackler, 2011) but instead in lowered standards to avoid increased expenses related to safety (Kageyama and Pritchard, 2011; Sullivan, 2011). Judging from the fact that the Nuclear Regulatory Commission is on the defensive to prove it is doing its job of ensuring safety (Behr, 2011; Jaczko, 2011) and that there is international pressure on nations to cooperate and ensure safety (Baker, 2011), the effort to further streamline regulation in the United States—which nuclear advocates argue is necessary to make nuclear power more affordable—will likely encounter stiffer resistance after Fukushima.

Fukushima makes it clear that the magnitude of a nuclear accident can quickly become so large that no private company can bear the liability (Reynolds, 2011). The costs are socialized, which means the public pays the price. The government either assumes the liability (which puts the cost on taxpayers) or imposes artificial liability caps (which means the public bears the cost without compensation for the harm). The potential cost of Fukushima has even affected the credit rating of the Japanese government ( International Business Times, 2011; NewsOnJapan, 2011). In the United States, the Price-Anderson Act limits liability and creates an industry-wide insurance pool, shielding the individual utilities from full liability.

The future of nuclear power in the United States

Though the Price-Anderson Act subsidizes the potential liability of reactors once they are built, the US industry also needs a subsidy to fund construction. Before the Fukushima accident, a combination of economic risk factors made it impossible to fund the construction of nuclear reactors in capital markets, rendering nuclear construction entirely dependent on subsidies from federal or local governments and advanced cost recovery (Construction Work in Progress) from ratepayers (Cooper, 2011a). The initial reaction by financial analysts in the United States and around the globe indicates that Fukushima will raise the cost of capital for nuclear power (Chatterjee, 2011; Dow Jones, 2011; Tracy and Malik, 2011).

It is not only the market that is sending loud alarm signals about nuclear power. Fukushima will make matters worse for the US nuclear industry because major accidents compel policy makers, regulators, and financial analysts to reexamine all aspects of nuclear power. From the point of view of technology risk assessment, nuclear reactor accidents are not only rare, unpredictable, and difficult to assess, but they are also severe, immediate, persistent, unfamiliar, difficult to control, and irreversible (Stirling, 1999). They shift public opinion sharply against nuclear power. ⁷ Facing such severe risks, contemporary risk management analysis advises “precaution” (Stirling, 2007), “truncating exposure” (Taleb, 2010), or avoiding the danger altogether (Mills, 2010).

The Fukushima accident has particular relevance for the US nuclear industry for several reasons: First, the accident occurred at a plant owned by a private-sector company, Tokyo Electric Power Company (TEPCO), which is the largest utility in Asia and the fourth-largest in the world. ⁸ Since the overwhelming majority of the current and proposed reactors in the United States are owned by private-sector companies, the travails of TEPCO in coping with the accident are relevant. Second, the accident occurred in a nation—like the United States—with a reputation for discipline, scientific knowledge, and engineering prowess. And, finally, there is a great deal of overlap between US and Japanese reactor design: One-quarter of existing US reactors have the same technology as the reactors at Fukushima, and the majority of new reactors proposed in the United States in the past decade use other Japanese technologies. ⁹ If Japan scales back its nuclear plans dramatically (Inajima and Okada, 2011), how will the United States import Japanese technologies that Japan itself has abandoned?

Policy makers, regulators, and financial analysts, acting responsibly, must ask a lot of hard questions in the upcoming weeks, months, and years (Buergin and Parkin, 2011; Reguly, 2011; Reuters, 2011). Only time will tell, but Fukushima, coming atop the severe economic problems in the industry, may convince a large segment of the public (Eddy, 2011) and decision makers that the 30-year freeze on ordering new reactors in the United States was the best course because nuclear power is just not worth the risk.