Poor policy for gov't to own reactor
David Seymour, Special to The StarPhoenix
Published: Tuesday, June 24, 2008
Following is the viewpoint of the writer, Saskatchewan Policy Analyst for the Frontier Centre for Public Policy with offices in Winnipeg, Regina and Calgary.
In SaskPower must own nuclear reactor (SP, June 20), David McGrane made the case for the provincial investment in a major facility such as a nuclear reactor. That viewpoint item is a valuable contribution to the debate, because it shows what one needs to believe in order to support government ownership of such an asset.
The article argues that provincial ownership of a reactor would ensure that profits would stay in the province and that the facility would provide head office jobs vital for Saskatchewan's development.
Further, it assumes that governments are more likely to regulate their own activities in the service of environmental and social goals than they are to regulate private interests.
A closer examination of these arguments in favour of a Crown-owned reactor for these reasons implies some interesting beliefs.
The "profit remains in the province" argument runs that if the reactor is owned in Saskatchewan, any profits will stay here instead of leaking to outside investors. The important phrase here is "any profit," because in the normal run of things, profits are not guaranteed. A reactor would certainly yield revenue, but it won't necessarily be enough to cover the investment capital that must be sourced and repaid.
The capital must be diverted from other uses that also could be expected to generate some return. Therefore, whether the capital comes from taxpayers in Weyburn or traders on Wall Street, the investors will rightfully expect at least an average return. For the plant owner/operator to end up better off, the reactor would have to make a return that is above average, with the difference being their true economic profit.
So, the first thing one must believe is that people who work for government organizations generally pick above average investments.
Following that logic, government departments should start investing all over the globe and make even more money for the province.
Of course, there is no reason to think government agencies can consistently beat the market.
With the political constraints they face, they probably are at a disadvantage. However, if for argument's sake we assume they will break even on this investment, there are some other reasons why government ownership might serve the public good.
The argument for a Crown reactor also presumes that the presence of Crown head offices is required for the province to succeed economically. This reasoning runs along the lines that local ownership would create high profile executive positions; otherwise we will all be become "hewers of wood and drawers of water."
Putting aside the irritating inference for everyone who doesn't toil in a Crown Corporation office tower that they are making an inferior contribution to Saskatchewan's future, growth patterns within the province do not support this argument.
As the benefits of having Crown head offices go, Saskatoon and the rest of the province subsidize Regina. They pay Crown fees, but mostly miss out on the benefits of head offices.
If this sacrifice to the Queen city were paying off, we might expect to see the best economic growth occurring there. As it happens, all the indicators show that growth is brisker in Saskatoon. Even before the current provincial economic burst, Saskatoon was leading Regina in population and in population growth for some time.
We are now left with the "regulation" argument, which says that if the government owns the facility, it will be easier to achieve other goals such as greater use of renewable energy or equal opportunity employment. But regardless of whether the ownership is public or private, the government will have a regulatory role for prices, environmental impacts, labour laws, and anything else for which it can muster votes.
Regulation is about government acting on behalf of citizens to make companies do things they would not otherwise do. The regulation argument requires the belief that governments will regulate their own interests more eagerly than those of others. In practice, being the developer and the regulator at the same time creates a conflict of interest. If anything, we would expect the province to be a softer regulator of its own business interests than of private votes.
To illustrate, in 2002 a sewer and wastewater plant owned by the City of Winnipeg accidentally released 437 million litres of raw sewage into the Red River. After an awkward legal delay, the courts levied no penalty at all on the city.
It's a safe bet there would have been swift and harsh penalties had a private wastewater operator been responsible for the disaster. Similarly, there are very real environmental impact issues with waste storage from a nuclear plant. As owner and regulator of nuclear assets, the government would be conflicted in regulating itself.
The arguments for a government-owned reactor can be seductive, allowing SaskPower to kill many public policy birds with one big investment stone. Closer examination shows, though, that this proposition runs contrary to what we have observed about government, investment and economics.
It may well be SaskPower should build a reactor, but not the reasons examined here.
(
www.fcpp.org)
© The StarPhoenix (Saskatoon) 2008
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Nuclear industry spins new mythology
Paul Hanley, The StarPhoenix
Published: Tuesday, June 24, 2008
The nuclear myth of the 1950s and '60s was atomic power would be "too cheap to meter." That didn't pan out, so the nuclear industry is spinning a new mythology, also designed to win popular support.
At a meeting of the Regina Chamber of Commerce last week, Hugh MacDiarmid, president and CEO of Atomic Energy of Canada, described nuclear power as "environmentally sustainable." At the same time, Premier Brad Wall stated that Saskatchewan would not proceed with the nuclear option "unless we can demonstrate, obviously, environmental sustainability."
If sustainability is the basis upon which we decide for or against the nuclear option, we can stop the debate right now. The claim of nuclear "sustainability" is perhaps the most egregious case of green washing (i.e. lying about environmental performance) ever.
According to the Canadian Oxford Dictionary, "sustainable" refers to a development "that conserves an ecological balance by avoiding depletion of natural resources." The undeniable fact is that nuclear depends on the depletion of a natural resource -- uranium. Uranium, like, oil, coal or natural gas, is not an unlimited resource; it is non-renewable. Therefore, like fossil fuels, nuclear power is not sustainable.
A second myth is that nuclear is now gaining worldwide acceptance, that it is experiencing a kind of renaissance. The reality is quite different.
Global nuclear capacity stands at 372,000 megawatts, but its growth rate is lower than any other energy source. Growth was just 0.5 per cent in 2007, compared to 27 per cent for wind energy.
In total, global nuclear power capacity grew by less than 2,000 megawatts in 2007, a figure equivalent to just one-tenth of the new wind power installed globally that year.
By the end of 2007, reports the Worldwatch Institute, 34 nuclear reactors were being built worldwide. Twelve have been under construction for 20 years or more. Meanwhile, more than 124 reactors have been retired by the commercial nuclear industry since 1964, reducing capacity by 36,800 megawatts.
A recent Time magazine article, Is Nuclear Viable?, reports that the American nuclear industry is so unattractive that it is unable to attract private investment. While the red-hot renewable industry, including wind and solar, attracted $71 billion in private investment last year, the nuclear industry attracted nothing.
"Wall Street has spoken -- nuclear power isn't worth it," said energy analyst Amory Lovins, author of the study The Nuclear Illusion. Even with multibillion-dollar government subsidies, private investors are still not interested.
Capital costs are too high. Construction delays and cost overruns continue to be the norm for the nuclear industry. Cost estimates for identical Westinghouse-designed nuclear plants more than doubled in 2007, to $12-$18 billion, raising questions about the plants' economic viability and doubts as to how many electric utilities would be willing to add liabilities of that scale to their balance sheet. The U.S. credit rating agency Moody's has cautioned that many utilities are underestimating the cost of new plants and that nuclear investment could damage their credit ratings.
It is no wonder then that the United States saw no nuclear construction starts for the 29th straight year in 2007.
Meanwhile in Japan, a 6.8-magnitude earthquake struck the largest nuclear complex in the world in 2007. It shut down the Kashiwazaki-Kariwa nuclear plant's seven reactors, which account for 8,000 megawatts of Japan's nuclear capacity. The quake was 21/2 more powerful than the reactors were designed to withstand, reports Worldwatch, raising questions about whether they should ever be returned to service.
According to Amory Lovins, reducing carbon emissions would be cheaper and safer if nuclear was rejected in favour of alternatives that are sustainable. "The bottom line is that nuclear buys two to 10 times less climate protection than its competitors."
Investing in the nuclear option in Saskatchewan would suck up all the capital that would be spent more cost-effectively on renewable energy, efficiency and conservation.
Nuclear Myth Busting is the topic of a free public lecture, Wednesday at 7:30 p.m. at the public library downtown. The guest speaker is Jim Harding, author of Canada's Deadly Secret: Saskatchewan uranium and the global nuclear system.
© The StarPhoenix (Saskatoon) 2008
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