Nuclear energy competition enhances safety, profitability?

September 12, 2014

After the widespread deregulation of U.S. energy in the late 1990s, in which half of American nuclear plants entered wholesale electricity markets for the first time, there were public fears that the new profit-mentality would degrade safety standards. These fears seem to be unfounded, Catherine Hausman writes in "Despite previous worries, evidence suggests that nuclear safety is no worse following U.S. electricity deregulation," published on the London School of Economics' American policy and politics blog.

In fact, suggests Hausman, electricity deregulation has led to a decline in unsafe incidents even as it led to a rise in profitability. "Merchant generators," as the new profit-oriented nuclear plants are called, have actually seen fewer unsafe events in all categories, including fires and employee radiation exposure, says Hausman.

In Hausman's analysis, this is because the competitive market actually provides strong incentives to observe safety regulations. Since nuclear plants earn so much more operating profit than lower-efficiency fossil plants, they stand to lose much more in the event of a plant shutdown. "I hypothesize that, as a result, merchant generators have improved management and maintenance practices leading to improved outcomes for both generation and safety records," Hausman writes. "Utility operators, in contrast, may have faced muted incentives because of their cost-plus pricing regulation."

Of course, the industry still needs rigorous safety standards; Hausman points out that her analysis is premised on "a strong regulator that is able to shut down plants deemed unsafe." Moreover, the underlying economics of nuclear power still needs research; as Hausman writes, it "could be of tremendous use for policy-makers."