Journal of Economic Perspectives: Vol. 26 No. 1 (Winter 2012)

Davis, Lucas W. 2012. "Prospects for Nuclear Power." Journal of Economic Perspectives, 26(1): 49-66.

DOI: 10.1257/jep.26.1.49

Nuclear power has long been controversial because of concerns about nuclear accidents, storage of spent fuel, and how the spread of nuclear power might raise risks of the proliferation of nuclear weapons. These concerns are real and important. However, emphasizing these concerns implicitly suggests that unless these issues are taken into account, nuclear power would otherwise be cost effective compared to other forms of electricity generation. This implication is unwarranted. Throughout the history of nuclear power, a key challenge has been the high cost of construction for nuclear plants. Construction costs are high enough that it becomes difficult to make an economic argument for nuclear even before incorporating these external factors. This is particularly true in countries like the United States where recent technological advances have dramatically increased the availability of natural gas. The chairman of one of the largest U.S. nuclear companies recently said that his company would not break ground on a new nuclear plant until the price of natural gas was more than double today's level and carbon emissions cost $25 per ton. This comment summarizes the current economics of nuclear power pretty well. Yes, there is a certain confluence of factors that could make nuclear power a viable economic option. Otherwise, a nuclear power renaissance seems unlikely.

Davis, Lucas W. (U CA, Berkeley)

L94: Electric Utilities
L98: Industry Studies: Utilities and Transportation: Government Policy
Q42: Alternative Energy Sources
Q48: Energy: Government Policy