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The Nuclear Breakthrough That Wasnt

The Atlantic has an article on the history of nuclear power in the US - The Nuclear Breakthrough That Wasnt.

The New York Times ran a story about Johnsons speech on page one under the headline, "Johnson Reports a Breakthrough in Atomic Power." They followed up with a series of stories, as did the other major newspapers. Word of a breakthrough in the cost of nuclear power was big news because everyone had been waiting for economically feasible nuclear power for a decade. After the heavy promotion of the early nuclear power days--exemplified by Walt Disneys classic nuclear cartoon, Our Friend the Atom--nuclear power had stalled out with just a few demonstration plants in operation. The coal lobby smelled blood. In March of 1964 the coal industry assailed nuclear power, saying Congress needed to remove "the sheltering umbrella of Government subsidies."

General Electric and Westinghouse, who had helped build Americas military and civilian nuclear program, were getting antsy that their knowledge would go to waste. "Our people understood this was a game of massive stakes, and that if we didnt force the utility industry to put those stations on line, wed end up with nothing," as John Gitterick, a GE vice president, later told Fortune. It was this corporate desire to capture rents on a technology that only a few companies could provide that generated the "economic breakthrough" of Johnsons speech.

As soon as the words left Johnsons mouth, scientists at national laboratories around the country knew what he was talking about, even though he was a few months late with the announcement. When a Chicago Tribune reporter called Stephen Lawrowski, associate director of Argonne National Laboratory, the scientist told him that the president must have been talking about the guaranteed price that General Electric had offered Jersey Central Light and Power for the Oyster Creek plant. That announcement had "caused a flurry" in scientific circles because the price GE was charging for the plant--$68 million for the 515-megawatt plant--made the plant economically competitive with fossil fuels. [Editors note: Oyster Creek was a boiling water reactor with the same basic design and containment vessel as the Fukushima reactor in Japan.]

Yet the scientists knew from the available evidence that nuclear power was far from economically competitive in mid-1964. However, instead of setting the Tribune reporter straight, Lawrowski simply punted, saying "The New Jersey plant is a significant milestone in nuclear power progress because it has affected thinking not only in America but also in Europe."

The price was a door-buster, a loss-leader, an advertisement for a nuclear age that had not actually yet arrived. The so-called "turnkey" plants, as they later became known, probably cost Westinghouse and General Electric over $1 billion combine, though they did not say that at the time.

Coal officials told the Wall Street Journal that GE had "priced the Oyster Creek plant at less than cost." A GE executive denied that, claiming the company would "make a slight profit unless we run into some unforeseen difficulties." British and Russian engineers also called the estimates into question--and French officials unsuccessfully tried to get details out of GE. But American news accounts, though they reported those foreign doubts, always made sure to note the bias that national competition could introduce into other countries expert opinion. None questioned the U.S. expert corps own Cold War sympathies.

Newspaper reporters, with the help of sources within the nuclear industries, came up with stories to explain how prices could have fallen so far, so fast. But like a trend piece about raising chickens in Manhattan, they were little more than anecdotes strung together by plausibility and the publics desire to believe. Although they reported doubts about the breakthrough, they were often run deep inside the paper whereas the optimistic pieces led the sections of the paper. Even the most skeptical piece, a September 1964 article by Washington Post reporter Howard Simons, noting that "not all experts accept General Electrics figures," only questioned the figures within 12 percent. In reality, nuclear power would end up costing not $104 or $1,040 per kilowatt of capacity but more than $3,750 per kilowatt by the mid-1980s.

Perhaps Lewis Strauss, then-chairman of the AEC, overstated the case when he told a crowd of science writers in 1954 that "Our children will enjoy in their homes electrical energy too cheap to meter," but his optimism was obviously widely shared within the nuclear establishment. The countrys political leaders were more than willing to believe and promote these technical promises. It was a wonderfully convenient solution to an America battling Communist agitation across the world.

And besides, nuclear proponents said energy usage would soar and they had nice graphs to back it up. Their vision was expansive, expensive, and rather brilliant. Technical reports came out purporting to show energy "needs" for Americans in the future that were spectacularly high. In 1960 the AEC, which had as its mandate to promote the commercialization of nuclear power, projected that Americans would use 170 quadrillion BTUs in 2000. In reality, that year Americans used about 99 million quads of energy. And we still do. Imagine adding 70 percent more power plants, cars, and buildings to our current energy infrastructure. Its nearly unthinkable.

Yet from the early 1950s until the energy crises of the 1970s, politicians accepted as gospel truth nuclear proponents overblown visions of Americas energy needs emanating from the nations national laboratories and the AEC. Legislators continually delivered high-levels of steady funding to nuclear research.

Of course, the political relationship ran both ways. The AEC knew what the government needed and the government knew what the AEC needed. In both cases, the answer was: Dont stop believing!

Despite the occasional call for the free market to work, the opposite happened. For example, nuclear power plant operators are indemnified by the U.S. government for catastrophic disasters (the Price-Anderson Act), thereby lowering their insurance rates. They were given preferential access to markets for borrowing money. There was plenty of informal and regulatory help to go with the R&D and commercialization boosts. In effect, the government socially engineered the cost structure of the industry so nuclear could compete with coal, which got to dump all its extra costs, such as air and water pollution, into the environment.

But even then, convincing utilities that they needed to go nuclear wasnt easy until General Electric hit on the genius idea of guaranteeing a fixed price to risk-averse utilities, effectively subsidizing the cost of the construction. And Oyster Creek was born. If they could just build a ton of plants, they could learn and scale and standardize: Costs would drop. Westinghouse matched GEs pricing, and what came to be known as the "turnkey" plants were built. In the bandwagon market that followed until 1973, utilities ordered more than two hundred nuclear reactors. Nuclear power had arrived.

But the turnkey plant prices did not reflect the actual costs of building a nuclear power plant. As the years wore on, that nuclear power was not as cheap as coal and other fossil fuels became increasingly clear: The prestige of the nuclear authorities began to fall; nuclear whistleblowers came forward; environmental risks were reassessed, perhaps too stringently; the protest movements of the 1960s turned their attention to nuclear power and all the centralization of power it represented. It turned out that Americans were ready to extend democracy to technocratic decision making, and they did not like what they saw from the nuclear industry.