The Cheap Energy Myth

An Interview with Amory Lovins

For this month's special issue on nuclear power, the Multinational Monitor talked with physicist Amory Lovins about alternatives to nuclear power and the U.S. energy outlook. Lovins, an energy expert and author of over a dozen books on energy alternatives, currently heads the Rocky Mountain Institute, an energy consulting group.

Multinational Monitor: Since 1978 no nuclear plants have been ordered in the United States. Do you think the U.S. nuclear industry will ever again supply reactors to the U.S. market?
Amory Lovins: Not only haven't we ordered any since 1978, but none that were ordered after 1973 have survived the over 100 cancellations. The reasons for this collapse are very fundamental, they're economic, not primarily regulatory or political. It's the same in the United States as in Canada, where there are no regulatory obstacles and the government builds reactors wherever it wants to without going through environmental impact statements or licensing hearings, and the basic safety documents are official secrets. It's also identical in West Germany, where the utilities are unregulated and charge whatever price they want to for their electricity. In the centrally planned economies, notably France and the Soviet Union, the [nuclear power] programs are in serious economic and logistical trouble.
Monitor: Is there any basis to the claim that without nuclear power the United States will be unable to ensure industrial growth in the future because it will be unable to meet its energy needs?
Lovins: From 1981 to 1984 in the United States we cancelled 65,000 megawatts of central capacity more than we ordered. In other words, net orders were minus 65 gigawatts.
But at the same time, we had at least 25 gigawatts of new commitments for co-generation, perhaps a fifth of it renewable and the rest fossil-fueled; and in addition, we had another 20 or so gigawatts for small, hydrowind power. So we made up more than two-thirds of what we lost on net orders for coal and nuclear plants with smaller, faster, cheaper sources that are much less financially risky. We far more than made up the other third by electrical savings. That potential is the really tough competitor for central stations.
For example, when everybody has high frequency, tuneable ballasts on their florescent lights, that will save on the order of 60 huge power plants at a cost of well under a cent per kilowatt hour. Compact fluorescent lamps will save an additional couple of dozen big power plants at a generally negative cost. Very efficient refrigerators and freezers will save respectively over 20 and over a dozen big power plants.
Monitor: How much can conservation reduce our energy needs?
Lovins: We can save enormous amounts of money, ultimately approaching $100 billion a year, by using electricity in an economically efficient way. Just 11 technologies applied to industrial motors and drive trains will ultimately save about 70,000 megawatts and about half a cent per kilowatt hour. We have barely scratched the surface of how much efficiency is available and worth buying. The important economic point about saving electricity, especially in the commercial and industrial sectors, is that it's cheaper to save it than to make it, even in existing coal or nuclear plants. So if you've just built a reactor, it's more expensive just to operate it-leaving aside its capital cost-than to save the same amount of electricity through modern technology-most of the best of which didn't exist a year ago.
What happened in California when the utilities offered to pay a "fair price" for privately generated power-namely a bit less than it would cost them to make the power themselves, is an example of how fast these technologies can enter the market.
The California utilities set up "no-hassle" standards for contracts for small power production. The total peak load in the state as of about 1984 was about 37 gigawatts, of which 10 could be met by hydro and geothermal capacity which the utilities owned and operated in state. So that left 27 peak gigawatts of demand to be met by thermal power plants. The state and its utilities have already acquired 16 gigawatts and by the end of this year will have finished acquiring an additional seven, for a total of 23 gigawatts.
By [1985], the utilities had received offers for over 21 gigawatts of small power production and had put 13 of those gigawatts under contract, that is, they are built or being built. New offers were coming at a rate of nine gigawatts a year.
A year ago, new contracts were suspended because of the sudden flood. It had taken a couple of years to go from a perceived power scarcity to a glut. And if they had not suspended new contracts a year ago, by now small power production offers would have displaced every thermo-nuclear power plant now serving California, all at less than their cost. This example shows that once you use the market to help you do the cheapest things first, far from not having enough electrical options, you find you have too many.
We found the same thing in Maine, where Central Maine Power Company offered to buy co-generation and other small power production from whoever could do it cheapest. They've already signed folks up who are going to provide at least 30 percent of the state's total electricity two years from now, and they've been turning away more offers because they can't use that much.
The same thing is true in Texas.
Monitor: Why then are utilities still attempting to revive the domestic nuclear industry?
Lovins: They see their careers and their enterprise going down the drain, and some of them are not very good at adapting to changed market conditions. I spend most of my time helping utilities and their suppliers to make more money at less risk, with least-cost investment strategies focusing on efficient use of electricity. That's the real competition nuclear power is up against.
This is especially important for developing countries. If you're building infrastructure, you can build it right the first time and rapidly become very competitive in the world market. If you don't do that, you're going to be used as a dumping ground for the obsolete and inefficient technologies which can no longer be sold elsewhere.
Monitor: Is there a bias in the Third World in favor of nuclear energy because it is seen as more advanced and more sophisticated than smaller less complicated technologies?
Lovins: Many developing countries have trained their technical elites at American universities, including nuclear engineering departments, and there they have acquired a taste for big, fancy, expensive technologies. But people are coming out of the woodwork who say wait a minute, that stuffs obsolete, and there's another set of alternatives that makes a lot more sense. That's especially true if you're a lot more interested in the welfare of people in the villages, where a majority of the people live.
If you build a big power plant in India, you'll typically find that about 80 or 90 percent of its output goes to major industries, which may or may not be locallyowned, and to the urban rich, and perhaps only a tenth or so ever gets out to the countryside where there tends not to be much of a grid [the system of wires and cables used to transmit electric power from where it is generated at the power station to the end users], and there isn't the money to pay for electricity.
Most of the electricity that does get to the countryside goes to the few rich families in the village that can afford electricity and who have the devices to use it. So, you're lucky if one percent of the electricity goes to the people who are supposed to be benefiting from the whole process, whereas if you carry to a village on your back little motor controllers for the pumps and sewing machines and mills, or quadrupled-efficiency lightbulbs, you can roughly triple the electrical productivity of that village.
Monitor: Do developing countries have the necessary infrastructure to support nuclear power?
Lovins: Only a small handful of developing countries have the infrastructure to digest these big amounts of power without crashing the grid, and very few of them have the infrastructure, the people, the technical tradition to handle such a demanding technology which we're certainly having a lot of trouble handling ourselves. In fact, it costs the best part of half a million dollars to train a reactor operator or senior technician, and developing countries which have sent people like that to the United States or to Europe to receive that kind of training are very lucky to hold onto them more than two or three years when they get home, because they're hired away by countries that can afford to pay them better.
Monitor: What role has the Export-Import Bank played in spreading nuclear reactors to the Third World?
Lovins: The Export-Import Bank and Atoms for Peace are the only reasons that the whole thing got started. Initially they provided research reactors, training and materials. There has never been, to my knowledge, an unsubsidized, normal commercial sale of a reactor to a developing country. Groups that look carefully at the bottom line, like the World Bank, have, with one trivial exception, never financed a nuclear project because they don't think it's a good deal. In fact, I briefed the energy group at the World Bank last year and pointed out that instead of spending a couple of billion dollars a year on power plants and grids, they could achieve at least the same and probably greater benefits at one tenth the unit cost, by promoting electrical efficiency.
Monitor: Who benefits from the Eximbank's support of the export of nuclear reactors?
Lovins: The Eximbank is a convenient way to recycle dollars from essentially the Treasury via a developing country's treasury back into the coffers of the U.S. reactor vendors, and they think that's a very good idea.
Other industries [which do not receive such extensive subsidies] have less political clout in this administration: this president, after all, used to be a GE salesman.
I think another point many Americans don't appreciate is that subsidized exports, through the Eximbank, of products like reactors actually costs American jobs, even though it's said to protect them. What happens is, it will increase jobs in the nuclear industry at the expense of jobs everywhere else. The reason is that exchange rates float and seek competitive equilibrium, so if you subsidize the export of reactors, you change the value of the dollar. The practical effect is that you end up importing more Italian shoes and Japanese cars-thus costing more jobs in the shoe and car industry than you made up in the nuclear industry. There's practically nothing that has fewer jobs per dollar in it than a reactor.
Monitor: Do other countries provide public financing for Third World nuclear power projects?
Lovins: Other exporting countries have their own versions of the Eximbank; France and Canada are arguably more involved.
It's really sad to watch the gyrations that countries go through to try to sell reactors. We've seen Canada build a reactor in Argentina at a large loss; they have sporadic negotiations with countries like Rumania and Turkey to try to repeat the experience. The trouble is that countries like Rumania don't have much hard currency, so they offer to pay for the reactor in barter, things like shoes, which is not exactly what Canada wants to import more of.
Underlying all of this trade of course, is the fact that many countries want reactors for military as well as civilian reasons.
Monitor: How difficult is it to cross the line between reactors for energy use to reactors for military use?
Lovins: There are approximately 20 ways to make bombs, all of which are made possible by the materials, equipment, and skills which the reactor programs provide. In countries like India, Pakistan, Argentina at least until recently, Iran, Iraq, arguably Taiwan, for a time at least South Korea, it's absolutely clear that there was a strong military impetus behind the supposedly civilian program. That's very convenient for the suppliers, who can pretend it's civilian even though they probably know better.
I think that the market collapse of the nuclear enterprise therefore offers a wonderful opportunity to slow or stop proliferation.
In a world without nuclear power, the ingredients needed to make bombs by any other method would no longer be items of commerce. Of course, you could still get them on the black market, but they would be harder to get, more conspicuous to try to get and politically far costlier to be caught trying to get because for the first time, your purpose in wanting them would be unambiguously military. Neither you nor your supplier could pretend that you were just making electricity, and that would, I think, make proliferation prohibitively difficult.
Monitor: Do you think its wise from a national security perspective for the United States to allow U.S. companies to export nuclear reactors?
Lovins: I think it's absolutely fishbrained. There is almost nothing we could do more harmful to our own national security: after all, if Manhattan disappears in a bright flash eight o'clock tomorrow morning, whom are we supposed to retaliate against? Should we bomb Qaddafi on general principles?
This is something that our colleagues in the military are rightly concerned about. The spread of nuclear technology encourages the manufacture of bombs by countries or sub-national groups who can then deliver them by such means as tramp freighter, suitcase, oxcart, United Parcel Service; and anonymous attacks of that kind which don't leave a radar track showing where the warhead came from, cannot in principle be deterred. They undermine whatever basis there ever was for the whole doctrine of deterrence. That scares the Pentagon stiff, as it should.

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