A tale of two industries

Frank Muller

A global contest is emerging between two industries representing different visions of our future. One was established by government and remains protected or state-owned in much of the world. It is fifty years old and has been through lean times in recent decades, especially where markets have been opened.

This industry has always enjoyed high level political access with well-funded government and international agencies representing its interests.

It is an industry where governments have often picked specific technologies, and non-market considerations lie behind the different choices made in different countries.

Now a major campaign is being waged for this industry's revival, which will require billions of dollars of further public subsidies. The industry is based on highly centralised technologies that fit well with central planning - its plants are huge and can more than a decade to build.

If private investors are to put up the money in today's uncertain markets, they will need guarantees that we will buy their product when the plants eventually come on line.

The competing industry is based on numerous smaller-scale, decentralised technologies that provide for the same consumer needs.

It is almost wholly privately-owned, ranging from small start-ups to major international corporations.

Its products and services fit more naturally into a market economy - they can be brought to market relatively quickly at varying scales in response to consumer demand.

Like its competitor, this industry was borne out of government-funded research and some parts of it benefit from public subsidies. However, it is a younger industry and the subsidies have been less and provided over fewer years.

They have been awarded more on a performance basis with the market playing a greater role in the choice of specific technologies. And most importantly, subsidies and market growth have led to dramatic cost reductions, which, if continued, will create an industry able to stand on its own feet. By contrast, the first industry has become more costly, not less.

Sounds like a classic left-right and old-new economic dispute - with the left yearning for the past and a greater government role and the right championing a future of free markets?

"So you might ask the next conservative pundit promoting a nuclear revival, what's happened to advocacy of free markets, small government and public security?"

Well, no.

The first industry is nuclear power. The second is sustainable energy - energy efficiency, renewable energy and low-emission distributed generation technologies. And the push for nuclear power's revival is mainly coming from the conservative side of politics.

The nuclear and sustainable energy industries are competing for public sympathy and, ultimately, for funding and favourable policies in the event that governments get serious about tackling the risk of dangerous climate change. Worldwide, electricity generation is responsible for around one third of the greenhouse gas emissions that are disrupting the climate system.

The two industries offer alternative pathways for meeting rapidly growing needs for electricity and the energy services it provides.

If it were a simple matter of public choice, the game would be over - poll after poll shows a community preference for sustainable energy. But the political contest is more even, pitting a powerful and long-established lobby against a still-emerging industry that is inherently diverse and decentralized.

Clearly, we need to explore a wide range of options for reducing greenhouse gas emissions. Governments will face hard choices, however, on how to allocate limited resources in this effort. Just keeping the nuclear option open will require big new subsidies - at the expense of sustainable energy and other options like cleaner coal technologies - with no guarantee of success.

Fifty years of poor experience does not inspire confidence that nuclear costs will come down, or that problems like nuclear weapons proliferation, waste disposal or safety will be solved.

Pursuing the two options simultaneously does not seem viable.

Nuclear power and sustainable energy involve future paths for electricity systems that diverge. Nuclear reinforces conventional grids dominated by central power stations and powerful supply-oriented institutions - a pattern that we have inherited from an era of more centralised economic decision making. The sustainable energy vision is for these grids to evolve into more decentralised customer-oriented networks. Investment would be directed to the lowest cost options for meeting customer needs, on either the supply or demand sides, rather into an inexorable expansion of supply.

Economics is not the only reason conservative support for reviving nuclear power is curious. Thoughtful advocates of a nuclear revival view a key pre-condition to be strengthening of international institutions such as the Nuclear Non-Proliferation Treaty (NPT) and the International Atomic Energy Agency's safeguards system and even international control of sensitive nuclear facilities.

From pre-war Iraq to the recent NPT Review Conference, however, the Bush Administration and its supporters sought to undermine these institutions. American agreement to international control of nuclear facilities seems unthinkable.

Nuclear critics have long argued that the industry poses a terrorist risk, either through the targeting of nuclear plants or the diversion of dangerous nuclear materials.

Since September 11, 2001, this concern has become mainstream. Conservatives sometimes claim to be the only ones prepared to make the tough decisions needed to protect us from terrorism. Why doesn't this include supporting energy choices that make us safer, rather than those that increase risks?

To make a difference on greenhouse, thousands of nuclear power plants would be needed worldwide, compared to hundreds today. This enlarged industry would touch the lives of vastly more people than now. Inevitably, military-style security measures would be extended to this key part of the civilian economy, with a loss of individual liberties that once might have troubled small government advocates. Perhaps we would all be prepared to make the sacrifice if there was no alternative for meeting our energy needs and keeping us safe. But there is.

One pundit recently advised readers to ask the next person expressing concern about greenhouse what they think about nuclear power.

So you might ask the next conservative pundit promoting a nuclear revival, what's happened to advocacy of free markets, small government and public security?

Frank Muller is an adjunct professor with the University of NSW's Institute of Environmental Studies. He is an international authority on climate change policy and has advised governments in Australia, the United States, Europe and the developing world, as well as the United Nations.