Nuclear vs. Clean Renewables
There are plenty of examples of seemingly intelligent people making arguments for the continued implementation of nuclear power plants around the world. Examples include the Obama Administration (it's the campaign finance issue again), of course the CEO of global nuclear power contractor GE Jeff Immelt, and formerly anti-nuclear environmentalists who switched sides.

But well-informed consensus thinking suggests that nuclear power doesn't make sense from a financing, safety, and climate change perspective.

Financing Challenges
 

The cost of building a new nuclear reactor has increased sharply in recent years, while at the same time costs associated with solar photovoltaic systems have decreased sharply. As a result, the two technologies have reached a cross-over point, as described in a paper titled "Solar and Nuclear Costs - The Historic Crossover," authored by John O. Blackburn, a professor of economics at Duke University, and Sam Cunningham, a graduate of the school. They suggest that from a cost perspective, solar is now the more attractive option. (1) 

A November 2009 report by Citigroup Global Markets termed the construction risks, power price risks, and operational risks associated with building a nuclear reactor to be "so large and variable that individually they could each bring even the largest utility to its knees." (2)

Moody's, a credit rating agency chiefly concerned with rating the quality of bond issuers (such as those seeking capital for the construction of nuclear reactors), cited similar concerns in 2009. "Historically, most nuclear-building utilities suffered ratings downgrades - and sometimes several - while building these facilities. Political and policy conditions are spurring applications for new nuclear power generation for the first time in years. Nevertheless, most utilities now seeking to build nuclear generation do not appear to be adjusting their financial policies, a credit negative." (2)
 

And if that wasn't enough, it turns out that nuclear power plants are not financially feasible without significant government subsidies. Mark Cooper, a senior fellow for economic analysis at Vermont Law School's Institute for Energy and Environment, explained that the nuclear industry's current confidence was based, at least partially, on the supportive cushion provided by loan guarantees and work-in-progress financing. "With such financing the utility is making a one-way bet, allowing it to make a profit even when the project fails," he said. "The people bear the risks and costs; the nuclear utilities take the profits. Without loan guarantees and guaranteed construction work in progress, these reactors will simply not be built, because the capital markets will not finance them." (2)
 

Safety Concerns
Nuclear power is dangerous. History has shown that accidents do happen, as demonstrated by the disasters at Chernobyl, Three Mile Island, and of course most recently Fukushima. An article in an MIT publication describes an unfortunate fact: "Human factors and the effectiveness of people determine success or failure at every stage, from the design of a plant and its equipment, through manufacture, construction, installation and calibration, to testing, maintenance, repair, and management." (3)

An average reactor contains the equivalent long-lived radioactivity of at least 1,000 Hiroshima bombs. An accident can be catastrophic, causing the release of tremendous amounts of radioactivity, and few communities have adequate emergency plans in place. Radioactive hydrogen and carbon, produced in great quantities, can be incorporated into protein, carbohydrate and fat molecules throughout the body. Fetuses and children are especially susceptible to radiation injury because of the rapid and abundant cell division in their bodies during growth.

Climate Change
One common misconception is that nuclear power plants are a "cleaner" alternative to coal fired power plants, and as a result the development of nuclear power plants should be encouraged. This is simply flawed thinking. According to a fact sheet published by the Nuclear Information and Resource Service, both coal and nuclear:

• result in unavoidable by-product wastes that threaten the long term sustainability of life.
• need vast amounts of water for cooling much of which is not returned to the source.
• release vast heat (thermal pollution).
• require mining and all the impacts that come with extraction of resources.
• have a large carbon foot-print from fuel production and distribution.
• use steam to generate power, therefore about 2/3 of the fuel used is wasted.

According to Rocky Mountain Institute chief scientist Amory Lovins, "if you buy more nuclear plants, you're going to get about two to ten times less climate solution per dollar, and you'll get it about twenty to forty times slower, than if you buy instead the cheaper, faster stuff that is walloping nuclear and coal and gas, all kinds of central plans, in the marketplace." (4)

There are numerous other compelling new studies demonstrating that with good strategies and policies, it is possible to bring us to 100% renewable energy by mid-century. (World Wildlife Fund (5), Institute for Policy Research & Development (6)).

Examples of our managers' policies
Many of the mutual funds and managers used in our client portfolios have long held policies that exclude nuclear investments. For example, Calvert's Signature-Domestic and Signature-International Equity criteria do not permit investment in companies that own or operate nuclear power plants or have substantial contracts to supply key components in the nuclear power process.

Domini Social Investments is another mutual fund family that will not invest in companies that are significant owners of or operators of nuclear power plants. 

Similarly, the High Impact Investments folio will not invest in companies directly involved with nuclear, ethanol, fracking-natural gas, and coal.
 

What Now?
It's not much in the commercial news (NBC is owned by GE after all), but tens of thousands of citizens have been participating in anti-nuclear protests in Japan and elsewhere lately. We remain optimistic that citizens will increasingly push for clean renewable energy and efficiency, and eventually be heard by their elected officials. We are in an era of rapidly improving technology around clean renewable energy that is being demanded in the marketplace.

In order to solve our energy needs and the climate crisis, government policies will continue to be developed to favor clean renewables, with increasing private sector investment to follow. In the meantime, our managers continue to actively invest in the leading companies working to solve some of the greatest challenges in our world today.

(1) NCWARN (July 2010). Solar and Nuclear Costs - The Historic Crossover, retrieved from -http://www.ncwarn.org/wp-content/uploads/2010/07/NCW-SolarReport_final1.pdf.

(2) Diana S. Powers (July 26, 2010), Nuclear Energy Loses Cost Advantage, retrieved from -http://www.nytimes.com/2010/07/27/business/global/27iht-renuke.html?_r=1&pagewanted=1

(3) Human Error in Nuclear Power Plants, Technology Review, Feb.1980, p.28.

(4) Democracy Now!, Amory Lovins (July 16, 2008). Expanding Nuclear Power Makes Climate Change Worse. retrieved from -http://www.democracynow.org/2008/7/16/amory_lovins_expanding_nuclear_power_makes

(5) IPRD (March 25, 2011). Report: A Solar Transition is Possible, retrieved from -http://iprd.org.uk/?p=6877.

(6) World WIldlife Fund (n.d.). The Energy Report 100% Renewable Energy by 2050. retrieved from -http://wwf.panda.org/what_we_do/footprint/climate_carbon_energy/energy_solutions/renewable_energy/sustainable_energy_report/

*photo by HeyRocker available under a CC by 2.0 license.

On the one-year anniversary of the Deepwater Horizon oil disaster in the Gulf of Mexico, an international coalition of leading investors recommended to vote against or abstain from the BP accounts and reports and members of BP's Safety, Ethics and Environmental Assurance Committee (SEEAC) at the UK company's upcoming annual general meeting.

While identifying some risks and challenges, BP's recently released annual report provides shareholders with an insufficient level of detail to determine how the company's safety and risk management function has been strengthened; how it is being evaluated, managed, and mitigated; how the board will oversee it; and how progress is to be assessed and measured.

Investors from across Europe and the U.S. have announced they will vote against or abstain from BP's annual report in response to BP's failure to address these issues. This news follows the release of voting recommendations from major proxy voting agencies that voice similar concerns and urge abstentions or votes against BP's annual accounts and reports and/or BP's remuneration proposal and key board positions, particularly members of the SEEAC.

Investors have also raised concerns over BP's lack of information on transitioning to a low-carbon economy, which the annual report states is central to the company's long-term strategy. The company has not provided detailed information about this transition or explained what initiatives it will undertake to begin moving towards this goal. BP's new oil exploration venture with Russian-based Rosneft seems to contradict its own board-defined strategy.

"BP must be more forthcoming with investors not only on offshore risk management, but about its plans and preparedness for transitioning to a low-carbon economy," said Mindy S. Lubber, president of Ceres, and director of the $9.5 trillion Investor Network on Climate Risk.

To read an in-depth analysis of the BP Annual Report related to disclosure associated with safety and risk, board oversight, climate change and the Gulf, please visit: http://bit.ly/gB5Y26

*photo by ideum available under a CC BY-SA 2.0 license.