RENAISSANCE OR REQUIEM: IS NUCLEAR ENERGY COST EFFECTIVE IN A POST-FUKUSHIMA WORLD?

I. INTRODUCTION The Fukushima disaster of March 11, 2011, has hastened reconsideration of the future role of nuclear energy power production. Some nations have announced plans to slow or stop the use of nuclear energy. Italy, for example, has abandoned plans to reactivate old nuclear energy power plants, while Germany plans to deactivate existing nuclear energy power plants at an earlier date than before Fukushima (Cala 2011; Dinkloh and Steitz 2011). In the United States, the disaster has tempered the push for a nuclear renaissance. Missing in many of these discussions is the alternative to nuclear power. To the extent that the near-term alternative to nuclear will be an increase in fossil fuels, nuclear energy's future role must compare the futures of nuclear energy and its associated risks to increased use of fossil fuels and the associated emissions. In particular, there is widespread concern about fossil fuel emissions of C[O.sub.2] and other greenhouse gases that are widely believed to be contributing to climate change. The objective of this article is to evaluate the lessons from Fukushima from a societal efficiency standpoint so as to determine the future viability of nuclear energy as compared with the alternative of reducing our reliance on nuclear energy. We correct for perceived market failures that currently result in underpricing both nuclear energy and fossil fuels. It will be years before there is enough information on what happened at Fukushima to fully respond to the event. But the information to date suggests that aspects of the Japanese relationships among industry, regulators, and the electric utility contributed significantly to the catastrophic events, as opposed to it simply being an "Act of God." We show that there are cost-effective changes that are worth making to prevent or at least mitigate events of this type. While we focus on the United States, the approach is applicable to other countries. In Section II of the article, we consider the technologies available that would reduce the damages from an event such as Fukushima and whether these technologies are cost effective. In Section III, we consider the need for institutional change in order that electric utilities have the proper incentives to implement those changes. In Japan, there have been widespread reports that Tokyo Electric Power Company (TEPCO), the operator of Fukushima, had an above-average number of safety violations before the disaster, but that regulators rarely challenged industry decisions. While the U.S. Nuclear Regulatory Commission (NRC) claims to operate vigilantly, its origins in the 1950s as a promoter of nuclear energy rather than as a regulator raises similar concerns that the regulator may have been captured by the industry. In particular, we focus in Section III on correcting the price of nuclear energy to correct for two specific U.S. policies to promote the use of nuclear energy: the Price-Anderson Act, passed in 1957 to limit liability in the event of a nuclear accident and the U.S. Department of Energy loan subsidies that were introduced in the 2005 Energy Policy Act (EPAct). Just as the NRC was created to promote nuclear energy, Price-Anderson was seen at the time of passage as necessary to jumpstart the nascent industry. At the current time, the U.S. government loan guarantees are again aimed at jumpstarting an industry that has not begun construction on a new plant since the Three Mile Island accident in 1979. We close the section with a discussion of the failure to agree on a permanent storage facility for nuclear energy, but find that because the cost of such a repository is already included in nuclear plant operating costs, this political failure does not require an adjustment to the cost of nuclear energy. In Section IV, we examine the implications of evaluating the external costs of nuclear energy. We adjust the cost of fossil fuel alternatives to reflect societal concerns about climate change. …