Adler, et al., reported in 2020 that although burning fossil fuels has environmental consequences, many countries have switched away from nuclear power in favor of fossil-fuel fired electricity production after incidents at Three Mile Island, Chernobyl, and Fukushima , Fact Check: The TMI and Fukushima incidents neither killed nor injured killed anyone (more). Chernobyl was a case of bad Russian management of the meltdown and design of reactor (more)]. This study estimates the substitution between nuclear and fossil-fuel fired electricity generation in the United States. Using an event-study framework, they leverage nuclear plant openings from 1970 to 1995 and forced nuclear plant outages from 1999 to 2014. Plant openings (nuclear outages) reduce (increase) monthly net coal-fired generation by approximately 200 GWh, implying a considerable reduction (increase) in emissions. The authors found that the substitution between nuclear and coal is not one-to-one, as has been assumed in prior literature. After establishing these stylized facts, the authors explored the potential underlying forces driving the observed substitution between coal and nuclear.
The authors examined how fossil-fuel fired electricity production responded to the openings of nuclear power plants in the United States in the 1970s and 1980s. We find that nuclear power plant openings result in a roughly 200 GWh reduction in coal-fired generation per month on average, conditional on demand. This amounts to a cumulative reduction in coal-fired generation of 2 TWh over the first 12 months after the nuclear plant was opened. This decrease in coal-fired generation implies nearly 2 million metric tons less CO2 emissions within the first year of a nuclear power plant coming online. A nuclear power plant addition, on average, also results in 5,200 (2,200) fewer metric tons of SO2 (NOx) in the first year. Comfortingly, our estimates of the substitution between coal-fired and nuclear generation remain quite similar in magnitude when examining the impact of forced outages at nuclear plants during 1999-2014. Finally, we demonstrate that the opening of a nuclear plant also results in less investment in coal-fired generation capacity, indicating that utilities respond to new nuclear capacity both on the intensive margin (i.e., operating their coal plants relatively less) and extensive margin (i.e., building relatively less coal-fired capacity).
The authors then examined the underlying forces behind the observed substitution between coal and nuclear power generation by quantifying their private and external costs. Nuclear power generation has lower fuel prices in comparison to coal, but faces higher operations and maintenance costs that are likely driven by the increased regulatory scrutiny after the Three Mile Island reactor accident. Overall, nuclear plants face slightly lower O&M costs (including fuel) than coal plants. But coal plants still have substantial external air pollution costs (i.e. in addition to the reductions in emissions due to existing environmental regulations) that we estimate to be on the order of $115-$165/MWh. Despite the differences in the social costs of coal and nuclear on the intensive margin, we hypothesize that the shift away from nuclear power is due to additional external costs on both the intensive and extensive margins driven by public, political, or regulatory pressures concerning risk perception of nuclear power generation – be it a reactor accident, concerns about the disposal of spent fuel, proliferation risk, or others.
The authors concluded that policymakers should consider the benefit of nuclear power generation as a low-carbon source of electricity. In particular, the addition of nuclear power plants displaces dirty fossil fuels such as coal. If nuclear plants are forced into retirement, it is likely that coal or natural gas will fill the resulting electricity generation gap. However, there are risks attributable to nuclear generation that are not applicable to other generation sources, such as the risk of a reactor accident or spent fuel concerns. These risks are almost surely perceived to be large, given that nuclear and coal have similar operating costs and the external costs of coal-fired production are large. Combined with the high capital costs of nuclear power driven in part by TMI, this explains why no new nuclear power plants have been built that were not previously under construction at the time of the TMI reactor accident almost 40 years ago.
It also suggests that utilities are unlikely to invest more in nuclear generation given current environmental and nuclear policy moving forward. Put another way, a substantial amount of regulatory pressure on fossil fuels (in the form of an emissions tax, regional emissions standards, etc.) would be needed to incentivize utilities to shift towards increased nuclear generation, [including the arrival of SMRs in the foreseeable future].
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