Energy Reality Comes to Germany

Randy Fardal
Left wing activists claim that economically viable free-market sources of energy have subsidy costs that outweigh those of the utopian energy sources, wind and solar.  Among the claims is that nuclear power survives only because its industry gets lavish subsidies.

However, the leftist theoreticians will have difficulty explaining this recent development in the real world, where the rest of us live and work:

Germany's plan to accelerate its exit from nuclear power generation may raise electricity prices by as much as 30 percent.

If nuclear power isn't economically viable, shouldn't energy costs fall when it is eliminated?  If government subsidies cover the true cost of nuclear power, why won't the German taxpayers enjoy a windfall of cost savings when that spending is discontinued?  Despite all the leftist magical thinking, reality shows that nuclear power actually costs much less than its "green" alternatives.

Here in the US, it is correct to say that the nuclear power industry has been given plenty of taxpayer subsidies.  But the subsidies are not nearly as large as the leftists claim.  As far back as 1957, the (Democrat-created) Price-Anderson Act granted a subsidy worth about 2.5 cents per KWh to insure nuclear power plants.  But the insurance was converted to no-fault a decade later, and today's taxpayers are responsible only for damages beyond a liability cap of about $12B.

Critics complain that the cap is too low, but how much litigation exposure should a nuclear power plant have?  Should TEPCO be required to pay everyone in Japan a million dollars because the odds of getting cancer there may or may not have increased since the power company's recent radioactive discharge?  Contingency-fee lawyers and sympathetic juries probably think so.

In 2005, Congress passed a loan guarantee program pegged at 3.7 cents per KWh, but it also requires the industry to pay for it.  So far, only one such guarantee has been granted -- $8.33B by the Obama administration -- and there is little chance that taxpayers will have to cover a default on any loan made under the program.

And like the wind industry, nuclear power also gets a production tax credit.  However, it was adopted only six years ago, is only 1.8 cents per KWh, and applies only to the first six gigawatts of capacity built after 2005.  So far, no one has claimed it, while the wind industry thrives on much larger credits.

According to a 2007 EIA report, the wind industry gets 15 times as much in subsidies, credits, and other tax breaks compared to the nuclear power industry: 2.34 cents per KWh versus 0.16 cents per KWh.  Subsidies of only 0.16 cents per KWh probably do not even cover the hundreds of billions of dollars in costs artificially incurred by the nuclear power industry due to deliberately antagonistic government regulations, permits, and fees.  Meanwhile California and other governments are mandating that windmills be constructed.

Beyond their ideological animosity toward free enterprise, perhaps the real reason the left wing activists want to destroy nuclear power is because the plants produce plutonium that is an economical raw material for nuclear weapons.  Leftist utopians dream of a day when the world will live again in the glorious Dark Ages -- back when armies used catapults to launch diseased cows into enemy camps.  But until that happens, the real world has nuclear weapons, and if we don't build them, our enemies will use theirs to destroy the nuclear-free Santa Cruz and most everything else.  Good luck though, with your medieval windmills and weaponized cows.
Left wing activists claim that economically viable free-market sources of energy have subsidy costs that outweigh those of the utopian energy sources, wind and solar.  Among the claims is that nuclear power survives only because its industry gets lavish subsidies.

However, the leftist theoreticians will have difficulty explaining this recent development in the real world, where the rest of us live and work:

Germany's plan to accelerate its exit from nuclear power generation may raise electricity prices by as much as 30 percent.

If nuclear power isn't economically viable, shouldn't energy costs fall when it is eliminated?  If government subsidies cover the true cost of nuclear power, why won't the German taxpayers enjoy a windfall of cost savings when that spending is discontinued?  Despite all the leftist magical thinking, reality shows that nuclear power actually costs much less than its "green" alternatives.

Here in the US, it is correct to say that the nuclear power industry has been given plenty of taxpayer subsidies.  But the subsidies are not nearly as large as the leftists claim.  As far back as 1957, the (Democrat-created) Price-Anderson Act granted a subsidy worth about 2.5 cents per KWh to insure nuclear power plants.  But the insurance was converted to no-fault a decade later, and today's taxpayers are responsible only for damages beyond a liability cap of about $12B.

Critics complain that the cap is too low, but how much litigation exposure should a nuclear power plant have?  Should TEPCO be required to pay everyone in Japan a million dollars because the odds of getting cancer there may or may not have increased since the power company's recent radioactive discharge?  Contingency-fee lawyers and sympathetic juries probably think so.

In 2005, Congress passed a loan guarantee program pegged at 3.7 cents per KWh, but it also requires the industry to pay for it.  So far, only one such guarantee has been granted -- $8.33B by the Obama administration -- and there is little chance that taxpayers will have to cover a default on any loan made under the program.

And like the wind industry, nuclear power also gets a production tax credit.  However, it was adopted only six years ago, is only 1.8 cents per KWh, and applies only to the first six gigawatts of capacity built after 2005.  So far, no one has claimed it, while the wind industry thrives on much larger credits.

According to a 2007 EIA report, the wind industry gets 15 times as much in subsidies, credits, and other tax breaks compared to the nuclear power industry: 2.34 cents per KWh versus 0.16 cents per KWh.  Subsidies of only 0.16 cents per KWh probably do not even cover the hundreds of billions of dollars in costs artificially incurred by the nuclear power industry due to deliberately antagonistic government regulations, permits, and fees.  Meanwhile California and other governments are mandating that windmills be constructed.

Beyond their ideological animosity toward free enterprise, perhaps the real reason the left wing activists want to destroy nuclear power is because the plants produce plutonium that is an economical raw material for nuclear weapons.  Leftist utopians dream of a day when the world will live again in the glorious Dark Ages -- back when armies used catapults to launch diseased cows into enemy camps.  But until that happens, the real world has nuclear weapons, and if we don't build them, our enemies will use theirs to destroy the nuclear-free Santa Cruz and most everything else.  Good luck though, with your medieval windmills and weaponized cows.