The letter below, which was endorsed by 72 US NGOs, was sent to the Japanese Government on August 11, while Kevin Kamps of Beyond Nuclear was visiting Japan. Also, on August 4 Kevin visited the Japan Bank of International Coopeation (JBIC) and Nippon Export Investment and Insurance (NEXI) to explain the risks involved in investing in new nuclear construction projects in the United States.
Philip White (Nuke Info Tokyo Editor)
August 11, 2010
Prime Minister Naoto Kan
Minister of Finance Yoshihiko Noda
Minister of Economy, Trade and Industry Masayuki Naoshima
We are writing to share with you the financial risks involved with new atomic reactor projects proposed in the United States. The environment for nuclear construction in the US is highly uncertain - much more so than in the rest of the world. The US has immense renewable energy resources that are truly unparalleled around the world and a larger potential for efficiency gains than in any other industrialized nation. As a consequence of these fundamental marketplace and technology risks, investment in new reactors in the US will remain extremely risky, even if climate legislation is enacted that raises the price of fossil fuels.
Electricity demand has plummeted in the U.S. due to the two-year economic recession. The large projected increases in electricity demand made just a few years ago - which served as the basis for many new reactor proposals - are now highly unlikely to be reached for another decade or more.
At the same time, the US has a host of lower-cost alternatives to meet the need for electricity, even in a carbon-constrained environment. The U.S. has abundant renewable energy resources that are significantly cheaper than new reactors. Estimated costs for constructing new reactors in the U.S. have quadrupled since 2001, while the cost of renewable technologies continues to decrease. Currently, the estimated cost for electricity from a new reactor is 12 cents to 20 cents per kilowatt-hour, compared to 3 cents per kilowatt-hour for efficiency, while several plentiful renewable resources including wind and biomass fall in the range of 5 to 10 cents. Moreover, there is growing confidence in the availability of alternatives. Recent estimates of the natural gas resources have increased dramatically and the price has tumbled and is expected to remain low. Cogeneration opportunities are abundant in the U.S. industrial sector.
Meanwhile, the US uses far more electricity per capita than other industrialized nations, leaving a lot of potential for efficiency to further dampen electricity demand. Climate policy, which may put a price on carbon emissions, will also likely create a very substantial mandate for efficiency technology and renewable energy that will dramatically shrink the need for new, nonrenewable, large baseload generating capacity. It is not only renewable electricity standards and energy efficiency resource standards that will have this effect, but also building codes, appliance efficiency standards, and increases in funding for weatherization retrofitting of buildings.
In addition to the supply- and demand-side risks in the US, significant problems with new reactor designs have meant that none have received final certification from the U.S. Nuclear Regulatory Commission (NRC). Until their reactor designs are certified, no proposed new reactors can receive an NRC combined construction and operating license (COL). Design problems are likely to delay licensing and further increase the costs.
Moody's Investors Service have called new reactors a "bet the farm" investment. Credit rating agencies have downgraded some US utilities proposing to build new reactors. In 2003, the Congressional Budget Office (CBO) estimated the likelihood of default for loans made to nuclear reactor developers to be "very high - well above 50 percent." CBO has not developed a more recent estimate, but the necessary conditions for new reactors have only deteriorated further since then.
Due to Japanese corporate involvement in many of the proposed US reactor projects, it might appear that they would make good investments. The reality, however, is that the projects involving Japanese companies have suffered the same delays, design problems and financial difficulties as other proposed nuclear projects. With decreased U.S. electricity demand, an abundant supply of cheaper alternatives and ongoing design problems, investment in new reactors in the U.S. is simply as bad a deal for Japanese investors as it is for American investors.
Just as we have warned American taxpayers and elected officials about these very serious financial risks, we also urge you to very carefully consider these risks before deciding to invest in new atomic reactors in the United States.
If you have any questions, please don't hesitate to contact Kevin Kamps at Beyond Nuclear, (301) 270-2209 extension 1, as well as Michele Boyd at Physicians for Social Responsibility, (202) 667-4260.
Sincerely,
PDF file with letter, signatures and background information (188 KB)
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