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The High Cost of Nuclear Jobs

Backers see job creation, but I see high costs for ratepayers.

“The project workforce has reached an all-time high with approximately 9,000 workers now on site. With more than 800 permanent jobs available once the units begin operating, Vogtle 3 & 4 is currently the largest jobs-producing construction project in the state of Georgia.”  — Georgia Power, Press Release, February 11, 2020.

I understand why Georgia Power is emphasizing the jobs created by the Vogtle nuclear power plant project. Many policymakers, and perhaps even some utility commissioners, view these jobs as a significant benefit. I’m happy for the workers who are employed on this impressive project.

But when I see 9,000 workers on site, and 800 permanent jobs, I don’t see job creation. I see high costs for ratepayers. Electricity bills are already going up to pay for Vogtle.

These higher electricity rates hurt households, particularly lower-income households for whom bills are a larger share of the household budget. Higher electric rates also hurt small- and medium-sized companies and lead energy-intensive companies to move elsewhere.

The broader point is that counting jobs created in one sector misses the overall impact. Promoting labor-intensive energy sources makes energy more expensive if they aren’t cost effective, which leads to lost jobs in other sectors. Energy is an input into almost everything, so making it more expensive hurts the economy and reduces growth.

vogtle3

Not the Time for Economic Stimulus

During a recession, many economists will argue for short-term Keynesian-style economic stimulus. There are times when this makes sense, but now is not one of those times. Despite the recent volatility in the stock market and virus-related uncertainty, the United States is not in a recession. Friday’s job report showed a national unemployment rate of only 3.5%. In Georgia, it is even lower.

What this means is that Vogtle is not creating many jobs. If it weren’t for the Vogtle project, the vast majority of these talented people would be working elsewhere in the economy. They would be somewhere else, doing some other job, creating value in another industry. When we employ workers in one place, we give up the gains we would have enjoyed from them working elsewhere. This is the opportunity cost of labor, and during good economic times, the opportunity cost is high.

There is also a fundamental mismatch between multi-year projects like this and fiscal stimulus. For fiscal stimulus you need jobs that can be quickly deployed at the right moment, and then pulled back when the economy starts to recover. Nuclear projects aren’t like that.

Unusually Labor-Intensive

Perhaps I’m being unfair in singling out nuclear. There is a tendency across energy sectors to talk about job creation. Not coincidentally, job creation tends to be discussed more often in relatively labor-intensive sectors (like rooftop solar and weatherization), than in less labor-intensive sectors (like grid-scale renewables).

But the labor costs for nuclear are striking. The sheer scale and complexity of the Vogtle project requires an unusually large labor force, many of them highly-skilled, highly-specialized engineers. These high labor costs are one of the reasons why it costs so much to build a nuclear power plant.

Perhaps even more striking are the ongoing labor costs. Georgia Power anticipates 800 permanent jobs at Vogtle once the new units are operational. A natural gas combined cycle plant of similar generation capacity would employ less than 100. That is a big difference. Nuclear power is not only capital-intensive, but it is also labor-intensive.

carbonbrief2
This figure comes from a 2018 report by CarbonBrief. I appreciate Zeke Hausfather taking the time to answer my questions. These levelized costs for new generation are roughly in line with the latest estimates from the EIA.

What About The Future?

Can we view the Vogtle project as an investment in human capital? Will the skills learned on the job at Vogtle position U.S. workers on the vanguard of a growing market? Could this investment be a way of moving the entire economy to a different equilibrium path?

Maybe, but I doubt it. The Bureau of Labor Statistics doesn’t see bright prospects for U.S. nuclear engineers. There are dozens of nuclear reactors currently under construction worldwide, but only Vogtle 3 & 4 in the United States, and it’s not clear whether U.S. workers and U.S. firms will be able to leverage their experience at Vogtle to join these international projects.

It seems more likely that the primary legacy of Vogtle will be higher electricity rates. Ratepayers will be paying for this $25+ billion project for a very long time. Higher electricity rates will raise the cost of doing business for everyone, leading to fewer jobs throughout the economy. Just because it is harder to point to these jobs in a press release doesn’t mean they are any less real.

vogtle3&4_caption

Keep up with Energy Institute blogs, research, and events on Twitter @energyathaas.

Suggested citation: Davis, Lucas. “The High Cost of Nuclear Jobs” Energy Institute Blog, UC Berkeley, March 9, 2020, https://energyathaas.wordpress.com/2020/03/09/the-high-cost-of-nuclear-jobs/

 

 

Lucas Davis View All

Lucas Davis is the Jeffrey A. Jacobs Distinguished Professor in Business and Technology at the Haas School of Business at the University of California, Berkeley. He is Faculty Director of the Energy Institute at Haas, a coeditor at the American Economic Journal: Economic Policy, and a Faculty Research Fellow at the National Bureau of Economic Research. He received a BA from Amherst College and a PhD in Economics from the University of Wisconsin. Prior to joining Haas in 2009, he was an assistant professor of Economics at the University of Michigan. His research focuses on energy and environmental markets, and in particular, on electricity and natural gas regulation, pricing in competitive and non-competitive markets, and the economic and business impacts of environmental policy.

136 thoughts on “The High Cost of Nuclear Jobs Leave a comment

  1. How much of this is paying the piper for gutting our nuclear industry over the last few decades thanks to the short sighted and anti-science views of people like Jerry Brown and groups like Greenpeace? If we had stay investment in nuclear power, if we had been growing our skull in building and running plants over the last few decades, things would probably be much cheaper. In the United States we lost at least a generation on the learning/cost curve.

    • A response from a different Robert.

      While I agree that the excessive cost of Vogtle plant are directly related to the US having lost the talent needed to construct a nuclear plant, the history of cost overruns that occurred in there late 1970s and 1980s, combined with the anti-nuclear propaganda scare tactics of the environmentalists, produced that loss of talent. And back then climate change was not a well-known threat. The rejection of nuclear power was a rational response given its history.

      But circumstances have changed and I think we should be investing in the R&D needed to produce a new generation of smaller, cheaper, safer reactors. Our knowledge base for doing this has greatly advanced over the past 30 years.

    • “SMRs may work and be economic, but that is far from proven yet.”

      Well that’s that’s of course true, but says very little. We all know the future is uncertain. So what?

    • “SMRs may work and be economic, but that is far from proven yet.”

      Well that’s of course true, but says very little. We all know the future is uncertain. So what?

      • We also know that the nuclear power industry has a very poor record on delivering on “promise.” We should be very skeptical until this round of promises is proven.

        • “We also know that the nuclear power industry has a very poor record on delivering on “promise.” We should be very skeptical until this round of promises is proven.”

          What round of promises?

          Nothing wrong with being skeptical but it should not stand in the way of moving forward and investing in carefully designed R&D.

          As the proverb goes, “To err is human, to forgive divine.”

          • “I know that you have been around long enough to have seen all of these promises, starting with “too cheap to meter” in the 1950s. But let’s start a bit more recently with Diablo Canyon’s original cost estimate of $500M turning out to be over $6B and end with the promise that Vogtle would cost less than $4,000/kW but ending up at more than $12,000/kW.”

            Richard, please…

            What do the examples you cited have to do with investing in R&D to develop a new generation of nuclear reactors? You are making the logical error of assuming the future will look exactly like the past. Surely you are not extrapolating a 1950s statement to today.

            And there are good reasons why Diablo Canyon and Vogtle had large cost overruns. The Diablo Canyon generation of plants were still being designed while they were under construction. Vogtle suffered from a workforce that had to relearn how to build a nuclear plant. Neither of these problems will apply to a SMR that are small enough to be fabricated on a factory production line.

            Obviously you have closed your mind to the opportunities that new SMRs offer. The good news is that your opinion will have no effect on progress to develop these new reactors.

            Have a nice day.

          • The nuclear industry has made numerous promises that R&D will lead to cost reductions. I already pointed out the issue with SMR. I closely reviewed these claims for the 2009 CEC Cost of Generation report. The problems of cost overruns have extended well beyond Vogtle around the world. I have posted here several studies showing how the cost of nuclear has increased rather than decreases as would be expected through learning by doing.

            I’m open to whether SMRs will perform. But I am pointing out that the nuclear industry has failed repeatedly to deliver on these promises over many decades. Why should this one be any different? What has changed so dramatically to reverse a universal failure by this industry? The burden isn’t on the skeptics to support their case–it’s already well proven; it’s on the proponents to show that this time is different.

          • And let’s not forget that the SMR has been promised to be “right around the corner” for two decades (and discussed on an earlier blog commentary). The better aphorisms are “fool me once, shame on you; fool me twice, shame on me,” and “time to put up or shut up.”

  2. “But when I see 9,000 workers on site, and 800 permanent jobs, I don’t see job creation. I see high costs for ratepayers. Electricity bills are already going up to pay for Vogtle.”

    Lucas, of course nuclear plants are expensive – they’re an investment in the future. Georgia Power is requesting rate hikes to cover $2.2 billion in increased costs to finish Vogtle, that will add an average of $16/mo to Georgian’s electricity bills, for a period of three years. Then, Georgians will have 2140 MW more watts of clean electricity – day and night, windy or calm, for at least 80 years. Power that doesn’t require a labyrinth of added transmission, or fossil fuel gas backup.

    That assumes, of course, renewables activists and their allies in Big Gas don’t succeed in getting it shut down prematurely – a big assumption. But the idea wind and solar, especially in Georgia, will ever match the carbon-free, reliable generation at Vogtle is a fantasy.

    By any standard, Vogtle is a bargain.

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