Why does Amory Lovins say that the market is deciding against nukes?

One of the things that not many people seem to realize is that we had just enough deregulation in this country to scare the pants off investors who formerly treated utilities as stocks you could safely put in widows’ and orphans’ portfolios.

Even with the largess being showered on nukes in the Energy Policy Act of 2005 (EP Act 2005), there hasn’t been quite the stampede to license new nukes that many hoped for. The feds are obviously ready to shovel money at the problem, but the utilities are nervous about state regulators and whether they’ll stay on the reservation.

Outside of a few areas in the south, where there is fairly strong support for the existing nukes, companies looking to build a new one are terrified that the consumer backlash will kill them in the marketplace.

The utilities know that there has been such an incredible extravagance of wasteful electricity consumption built into the system today that there is huge potential for demand collapse if people got mad and decided to get even by going on a shopping spree with their local alternative energy contractor or, in the few states that allow it, by going to an AES (alternative electric supplier).

For that reason, I guess that where there is retail electric competition you will not see any nukes built, period.

I would also guess that outside those few areas in the South, even utilities not in a deregulated or partially deregulated market are not going to make the bet on nukes, simply because it would be too easy today for opponents to kill the project by destabilizing the utility with aggressive conservation and efficiency.

Demand for energy efficiency, conservation, and the currently lightly used green rate programs would explode the minute a utility outside of the South announced a nuke, and it would be fairly easy today to organize a boycott against any large industrial customers who agree to buy the plant’s output.

What investors want before making the big $2 billion bet is a guarantee that customers can’t leave the utility and take their demand to a competing generator who makes electricity from pig poop or wind or cogeneration or what-have-you (or decide to spend wildly on efficiency and conservation — buying “negawatts”).

But these technologies may be too far along to keep in the bottle; people aren’t particularly motivated to choose them today, but that could change in a real hurry if the folks regulating Springfield Power and Light decide to let Mr. Burns build another nuke.

Moreover, since the currently waning deregulation frenzy, utilities have lost their main argument for stranded cost protections: they could at least argue with a straight face in the 1970s that it never occurred to them that they would NOT be the one supplying the demand they built the plant to serve.

But we’re virgins no more on that score — it seems really unlikely that a utility in America could argue with a straight face that its customers should be forced to pay for an unpopular investment in a nuke if they vote with their demand by going elsewhere (either to an alternative supplier or to aggressive “negawatt” consumption).

I think, and I think utility finance types worry — that there are a number of people who would only need a small push to become rabid opponents of their local investor-owned utility. Once radicalized, the economics are not normal for these people any more, as the non-economic factors begin to play a larger and larger role. Thus they make dangerous opponents, because they don’t act “rationally” according to the utility models.

In the end, the projected power costs for different methods of making electricity all assume that, to the customer, a kWh is a kWh is a kWh, which is likely not true (even though many anti-nuke folks rely on nuclear power now, often unbeknownst to them).

I think that a number of utility companies could find themselves in a very Iraq-like setting in trying to get a nuke built: in complete control of the administrative apparatus and able to win any set piece (legal) battle, but losing the war to the insurgents anyway.

The sad part is that this same level of ferocious resistance is not seen in the wars against coal plants — thus, TXU has only to threaten to build 17 new ones, and it comes out smelling like a rose when it “compromises” that down to 3. Truly a Pyrrhic victory for environmentalists.