Friday, February 19, 2010

The Nuclear Renaissance

One of the issues that I have posted about on numerous occasions in energy independence, and it is one of the issues that I am most passionate about. My interest in energy independence does not having anything to do with global warming, pollution, or saving the environment, and it does not mean eliminating fossil fuels or going completely "green". The fact that we are overly dependent on one source of energy (which happens to be oil) and the fact that it comes from foreign governments (some of which are quite hostile to the West) should be reason enough.

Being tied to one supplier is never a good thing; anyone with a remote understanding of the basic business principles knows that. If something happens to that supplier and their ability to provide that material is affected, the business dependent on that supplier is going to have serious problems. That fact is made worse when you consider the national security implications of being heavily dependent on a fuel source that is imported from countries with unstable governments (Niger) and hostile government factions (pretty much every Middle Eastern oil exporter). To put it simply, the United States needs to diversify and expand its energy infrastructure, and that includes everything from more domestic oil drilling to building more wind and solar farms to building new nuclear power plants.

In all of the recent talk around moving away from coal and oil, you do not hear too much talk around nuclear energy; most of the discussions has been around building new wind farms and solar collector arrays. I am sure most people know that there has not been a new nuclear power plant built in the US in over 30 years (though there have been individual reactors installed since then); as of right now, there are 104 nuclear reactors in operation in the US. Did you know that 20% of the energy currently generated in the US comes from those 104 reactors? That is quite impressive, especially when you consider the number of coal power plants in operation - about 600 coal plants and they produce 54% of the energy.

When you do the math, you should easily see that nuclear power is much more efficient - each nuclear reactor is averaging about 0.2% of the country's total energy, compared to 0.09% for each coal plant. In other words, the nuclear reactors are twice as efficient. Those figures should be more impressive when you consider that most of those nuclear reactors are over 20 years old and woefully inefficient compared to current reactor designs. When you also consider the fact that nuclear power does not generate any particulate emissions like burning coal, it should be any easy sell to make. Hopefully, this is a sign of things to come:

President Obama today said that safe, new nuclear power plants are a "necessity" as he announced more than $8 billion in federal loan guarantees to build the first nuclear power plant in three decades.

Mr. Obama’s announced plans to break ground on two new nuclear reactors at a Southern Company plant in Burke, Georgia – which he said will create thousands of construction jobs in the next year – with 800 permanent, well-paying jobs in years to come.

Even though this is not part of the stimulus package, this would have been an excellent use of stimulus dollars. I am pretty much against massive government spending programs, but if one had to be enacted, I would rather see 787 billion dollars invested in bringing new nuclear power plants online as opposed to giving raises to unionized teachers in Washington state. Even if we did not build a single new power plant, modernizing the existing 100+ reactors would go a long way towards boosting energy output. Maintenance and operating improvement have already resulted in huge efficiency increases:

A significant achievement of the US nuclear power industry over the last 20 years has been the increase in operating efficiency with improved maintenance. All this is reflected in increased output even since 1990, from 577 billion kilowatt hours to 809 billion kWh, a 40% improvement despite little increase in installed capacity, and equivalent to 29 new 1,000 MWe reactors.

The public is still somewhat mixed on the issue, but I suspect a good bit of that uncertainty comes from uneven news reporting and a general lack of information. For instance, more people die in coal mine accidents every year (5000+) than have ever died in all nuclear reactor accidents over the last 50 years. However, the perception is that nuclear reactors are more dangerous, and this is probably the "airplane crash effect" - despite the fact driving a car is orders of magnitude more dangerous than flying on an airplane, an airplane crash is a sensational news story, and it tends to stick in peoples' minds.

Nuclear energy is an important part of the energy portfolio of the United States, and it is on piece that we have direct and total control over. The main barrier to nuclear energy is the amount of money and time it takes to get a new reactor online (billions of dollars and 10+ years, in some cases), but when you consider how many billions of dollars we spend on importing other fuel sources each year, the cost pales in comparison.

Let the nuclear renaissance begin.

Tuesday, February 16, 2010

Iran Ups the Ante

If we had to score the year 2009 as it relates to Iran's standoff [with most of the world] in regards to its nuclear program, there is no doubt that Iran came out ahead. No matter what Iran did, there seemed to be no meaningful repercussions. They (the Iranian Government) used negotiations as a ploy to earn themselves more time to conduct their work, and they did it multiple times during the year. They never had any intention of giving up their work, and yet, there were no consequences for their actions. Even when they revealed that they were doing nuclear enrichment at a secret military installation, no punishment was levied.

If I was Iran, I would be pretty emboldened at this point. They made it through all of 2009 virtually unscathed by the United Nations or anyone else, for that matter. There is only so much the United States and other Western European nations can do their on their own (i.e., limited financial sanctions), and any meaningful action in the UN Security Council is going to require the assistance of both Russia and China. Luckily for Iran, China is not too eager to impose punishing sanctions, because they are heavily dependent on Iran's oil for their growing economy.

Thus, Iran has an ally in the Security Council that shields them from actual punishment, and that has contributed to their consistent defiance of the world body. Despite all of that, the equilibrium Iran has found between avoiding punishment and encouraging additional countries to push for stronger sanctions is precarious at best; the situation is not tenable indefinitely. Sooner or later, Iran is going to do something that is going to tip that balance against themselves, and when they do, punishment should finally be levied. Their announcement this week that they had produced uranium that was much more highly-enriched should start to shift that balance:

President Mahmoud Ahmadinejad claimed Thursday that Iran has produced its first batch of uranium enriched to a higher level, saying his country will not be bullied by the West into curtailing its nuclear program a day after the U.S. imposed new sanctions.

Iran said Tuesday it had begun enriching uranium to 20 percent purity to power a research reactor for production of medical isotopes, up from 3.5 percent previously. But the international community has demanded a halt to all enrichment activity because the same process is used to produce weapons-grade material if it is enriched to a level of 90 percent.

Experts say that from 20 percent enrichment, Iran could make a quick leap to weapons-grade uranium.

China, Russia, and other countries that were friendly towards Iran could explain away others' concerns when Iran was only enriching uranium to 3.5%. However, that excuse should no longer hold much sway. There is no reason that Iran needs to do this research on their own, especially when they have been given multiple options to get all the higher-enriched uranium they need through numerous proposed economic incentive packages. When it comes to Iran's intentions, the distance between "peaceful" and "weapon" on the nuclear scale just got much shorter, and the world knows it.

Even Russia, who has traditionally supported Iran's right to enrich uranium, might be close to exhausting their patience. Much like China's relationship with North Korea, it is likely that Russia is tired of having to constantly defend Iran's actions against an increasingly weary world stage. Of course, until Russia actually stops opposing tougher sanctions in the Security Council, we will never know for sure, but Israeli Prime Minister Benjamin Netanyahu is seizing the opportunity to push for just that:

Israeli Prime Minister Benjamin Netanyahu will push for "crippling sanctions" against Iran over its nuclear program in Moscow on Monday with Russian President Dmitry Medvedev.

Russia, which has commercial ties to Tehran, has in the past rejected sanctions that would target the Iranian energy sector. But after Iran announced it was enriching uranium to 20 percent purity, Russia indicated it would not oppose tougher sanctions.

Talking the talk and walking the walk are two different things, and until new sanctions on Iran are actually discussed and debated in the Security Council, I am hesitant to take Russia at its word. Saying you are "not opposed" to tougher sanctions is not quite the same as saying you think there should be tougher sanctions, and historically, Russia (and China) have been the roadblocks to really turning the screws on the Iranian government. However, one can hope that this might finally be the turning point in getting some meaningful pressure applied to Tehran.

If that is not enough to change the course of action, then how about this:

A soon-to-be completed U.S. assessment of Iran's nuclear program is expected to conclude that the government has resumed limited work on a nuclear weapon, according to a U.S. official.

The official says Iran is now focused on research of a program as opposed to full-blown development of a nuclear warhead: "The emphasis is on the 'R,' not the 'D.' "

The clock is ticking, and it has been for a couple years.

Friday, February 12, 2010

Cash for Appliances Program

Have you noticed the spate of "Cash for ..." programs that have been popping up recently? The Obama Administration is so eager to give away the taxpayers' money that instead of calling these programs bailouts, grants, or some other fancy moniker, they have just resorted to simple names that describe exactly what is going on ... "Cash for Clunkers", "Cash for Caulkers", and now, "Cash for Appliances". It is direct and to the point, and I like that kind of brutal honesty.

I am being somewhat facetious in that first paragraph. Out of all the trillions of dollars that have been spent trying to "stimulate" the economy, some of the homeowner tax credits have been the best example of encouraging stimulus. The tax credit for homeowners to make energy efficient improvements (up to 30% of the cost of the project, up to a maximum of 1,500$ per household) was the best use of stimulus dollars, because it actually meets the definition of economic stimulus. Furthermore, it has the added benefit of reducing energy consumption in the United States, and you know how bullish I am on working towards energy independence.

In my opinion, the main drawback of that program has been how restrictive the limitations have been. Whereas we are pouring millions upon millions of dollars into gimmicky and flashy spending programs to make glamorous headlines that brag about how many "jobs" they have created, the homeowner energy tax credits were limited to only 1500$ per home - not per person, but per home - over the combined years of 2009 and 2010. A single home improvement project will wipe out that entire credit for most people; it did for us when we replaced our windows. The sad thing is that I have additional energy efficiency improvements I would make if I had additional tax credits available to me. They are things that I will likely do eventually, anyway, but if the goal was to stimulate me into doing them, the tax credits would definitely accomplish that.

As for "Cash for Caulkers", that is still just a thought at this point, and may never become a reality. However, even if it does, the red tape associated with it is likely to bog it down and make it far less effective than it could have been. Cash for Clunkers was a colossal waste of money that really served no purpose at all other than to throw the struggling automakers a financial bone without riling up the public too much. In addition, us taxpayers paid over 2000$ more for each of those tax rebates then they were really worth, and that was due to excessive red tape and government bureaucracy.

Now that the trip down memory lane has concluded, there is a new kid on the block, and his name is "Cash for Appliances". This program falls under the umbrella of Obama's 787 billion dollar stimulus plan, and only 300 million dollars has been allocated for it. (Compare that to the over 3 billion that was allocated for the Cash for Clunkers gimmick). Additionally, this Cash for Appliances program is going to be much more complicated than Cash for Clunkers or the Energy Star tax rebate program was, because the program is not standardized. Instead of drafting a simple set of rules, the program leaves it up to the states to set their own guidelines:

The $300 million 'Cash for Appliances' program, first announced last year, is funded by the government's American Recovery and Reinvestment Act and is similar to other federal programs like Cash for Caulkers and Cash for Clunkers.

Under the program, consumers are eligible to receive rebates on new, energy-efficient appliances such as refrigerators or washing machines. The rebates vary by state, type of appliance, and level of efficiency.

What better way to make sure your program is successful then to make sure the rules are complicated, varied based on location, and not based on anything easy to calculate. For instance, most states are giving rebates on household appliances, like fridges, dishwashers, air conditioners, clothes washers, etc. However, each state is giving different rebates on different appliances, and those rebates might even be based on different energy efficiency ratings; an appliance that might qualify in one state may not in another.

In addition, some states, like Pennsylvania, are not giving any rebates on small household appliances; in order to get a rebate, you have to replace something like a furnace or boiler system. Basically, in order to get a couple hundred dollars in rebate money, you have to spend thousands of dollars doing a major home improvement project. Not exactly the model for success, if you ask me, especially since the federal Energy Star tax rebate program basically covers the same improvements, and it gives you at least 1,500$ in rebates. Tacking on a couple extra hundred dollars to a preexisting rebate is not stimulating anything new.

As if that were not enough, each state is getting a different slice of the financial pie, and I have no idea how the money was divvied up. California and West Virginia got the biggest share of the available money (35 and 23 million dollars, respectively), and Oklahoma only got 1.9 million dollars. Kansas, which started their program back in January, only had 2.7 million dollars available to spend, and they exhausted it in weeks. The scale of the program (and the amount of money allocated to it), is just not enough to really have a large impact:

While the program is still rolling out in most states, Kansas blew through its $2.7 million budget for the appliance program relatively quickly. The state, which already had a list of applicants under an existing program, closed its program in late January after being open for just over one month.

The program should help boost spending on efficient products in the short term, said Matt Golden, head of nonprofit trade group Efficiency First. However, to meet the nation's energy needs in the future, he said the government will have to focus on services, rather than products.

"It's moving the market towards more efficient appliances, which is good," he said. "But it lacks the scale to be a long term solution."

Much like the Energy Star tax credit program, I think this is a good use of stimulus dollars (especially compared to some of the other gimmicks out there), but it was just not designed and executed properly for maximum impact.