Energy From Thorium Discussion Forum

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PostPosted: Jun 01, 2014 9:27 am 
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Lindsay wrote:
Maybe there is some scope for a government underwrite to reduce the cost of financing, but government underwriting of any kind usually leads to inequities and distortions that increase cost and price overall.


'Usually' is way too strong. There is a very long list of investments made by the US government that have hugely benefited the American economy ... the US Highway system, Tennessee Valley Authority, Heavy Forges (I won't post my article again on Alcoa's 50,000-ton forging press ... developed by the government after WWII).

The point is that there is now a fetish that the government can only do harm (starting with Reagan, or perhaps a little earlier). It's repeated so often that everyone just assumes it's true now (humans have a very short memory).

Lindsay wrote:
Look at all the government support for renewables, do we believe that they are a cost-effective investment decision for society as a whole (probably not).


Right. So, that is a counter example. The government has made a choice here, and it's the wrong one. It does have the support of the public (generally), so it's not surprising.

Your comment about unnecessary costs is very true. The general high degree of risk-aversion we have now, along with the historic fear of nuclear (its association with nuclear weapons), make this doubly painful.

These are the reasons I think we are going to end up following China. The state is supporting nuclear, and they aren't afraid of their own shadows (they are more afraid of not providing people with electricity and clean air).


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PostPosted: Jun 01, 2014 10:38 am 
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Most of the times government programmes cause unacceptable distortions are when they 'work with the market' or whatnot rather than just a typical state programme of 'we want reactors'.
Renewable esque subsidies to get what they want to happen have to be so enormous to satisfy the 'venture capitalists' that it puts the price through the roof.

Renewable electricity would be less of a nightmare if it was just a huge programme to churn out vast numbers of identical wind turbines as cheaply as possible. (Although it would still be a very bad idea).

The challenge for any state in the future is to print fifty or more nuclear reactors (in the case of the US a lot more but still its the same order of magnitude). The price of those reactors is not even a significant portion of the entire economy of those states and is thus unlikely to cause serious structural distortions on the long timescales that we are talking about.

And I agree with SteveK9 - in the west there is now this fetish about how the state is an evil that exists to be smashed - and I do note that this set in about the time that the position of the west as the economically dominant power started to erode, along with the living standards of most people in it.


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PostPosted: Jun 01, 2014 10:55 am 
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Location: Calgary, Alberta
Thanks Steve, I am no hard core idealogue myself. For what it is worth I don't see that as a completely done deal, 'private capital good, government investment bad' The potential for government to set sound policy, create technology transfer programmes and invest in core infrastructure is a very important one, but as a general trend if private capital can do a thing they normally do it more efficiently than government agencies do. We can all point to examples of that and governments destroying value by making silly policy decisions like shutting down a an entire industry for unclear or poorly considered reasons.

The biggest contribution that governments can make IMO is in setting sound consistent policy, appropriate regulatory oversight and promoting open access to infrastructure and resources so that competition can drive innovation and limit costs to consumers. Easy to say, but much harder to do.

One thing that I've always liked in this area, government could make a funding pool available for NPP's for new plant construction for say 50% of the the total cost with a finance rate the same as government money, but make it obligatory for those savings to come through into contract electricity price. Much better to do that than subsidise every MWh produced for 30 years.

Edit: Added Hinkley C reference to earlier post, details are £89.50/MWh contract price via CFD, US$150/MWh for 35 years, inflation indexed upwards, OUCH!


Last edited by Lindsay on Jun 01, 2014 1:22 pm, edited 2 times in total.

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PostPosted: Jun 01, 2014 11:19 am 
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Problem is private capital does not want to help maintain the infrastructure of society - it wants to make money by any means at its disposal.
Unless the rates of return are higher than they can find elsewhere they simply won't do it.
Electricity is sufficiently important to our society that the most important thing is it be delivered as cheaply as possible in as large a quantity as demanded.

How would you require that the subsidy come through in contact savings?
The plant operators will do everything in their power to charge as much for the electricity as they can and since they will still have at least a billion dollars of their own money invested it implies that this is the sort of business that is large enough to cause regulatory capture in their favour.


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PostPosted: Jun 01, 2014 11:24 am 
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E Ireland wrote:
Most of the times government programmes cause unacceptable distortions are when they 'work with the market' or whatnot rather than just a typical state programme of 'we want reactors'.

Renewable esque subsidies to get what they want to happen have to be so enormous to satisfy the 'venture capitalists' that it puts the price through the roof.

Agree that's usually where the worst outcomes occur. We are well off topic now, but my favourite approach is to have a government buying desk for new capacity only (say 33% of the required new capacity) that says "For the next 5 years we will contract the supply of X TWh/year at no more than 85% LF carbon free electricity every single year and revise our programme every year for the year 5 years from the review date. New Contracts will be evaluated on a competitive tender basis based on price of energy delivered, and meeting all stated safety and environmental requirements established by law.

If in any given year a particularly low contract price is available, the programme reserves the right to double the volume purchased in that year and halve the volume purchased in subsequent years to balance total purchases over time.

Any plant capability above the contracted value is available for sale to market and at the end of the first 5 year term there will be no further government support or payments for any previously contracted new capacity. i.e. those plants will become merchant or portfolio power plants operating the the normal wholesale electricity market"

While not ideal, any subsidies only exist for 5 years, the most critical period from a NPV/investment standpoint, the whole programme gets reviewed and updated every year, there is a strong competitive element between different projects that should ensure sharp pricing, and any new capacity ultimately ends up adding capacity to a competitive market over time helping to cap high prices and promote increased competition between producers.


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