The nuclear industry in the US may be at a dead end. It will take either radical political steps -probably going far beyond those taken thus far by the Reagan Administration -or dramatic improvements in the nation's economy to revitalize it.

The symptoms of commercial nuclear power's decline are widespread. There is the still unresolved problem of the cleanup of the stricken nuclear plant at Three Mile Island. No new domestic orders for nuclear plants have been placed in the last 3 years, while 25 have been cancelled. Nuclear equipment suppliers have begun to drop out of the market.

"This represents a significant defeat of national policy," suggests Graham Allison, dean of the Kennedy School of Government at Harvard, which recently completed a study on the nuclear industry. "Whether you are pro-or anti-nuclear, it is a matter of major importance."

Ironically, it is the "invisible hand of Adam Smith," or economic forces, more than the highly visible efforts of the anti-nuclear groups, that threatens the "Peaceful Atom" in America.

Whether the possible demise of nuclear power in the US is a matter for rejoicing or despair is a complex issue. In the US today there are 70 nuclear plants operating. These produce 11 to 12 percent of the nation's electricity. In addition, there are 77 plants under construction which represent an investment of $150 billion.

Supporters, such as the Atomic Industrial Forum and Edison Electric Institute , claim that continued growth of nuclear power is essential to prevent electricity shortages in the 1990s. Even at current three percent annual growth rates, electrical demand will almost double in two decades, these supporters say. Conservation and solar energy will reduce demand, but not enough to eliminate the need for new nuclear plants.

They maintain nuclear power can replace forcign oil and, help the national goal of energy independence. The risks of coal -air pollution, respiratory problems for miners, transportation accidents, and possible climatic effects -are far greater than the risk of radiation from uranium mines, nuclear reactors , and radioactive wastes, say nuclear supporters.

Critics argue that nuclear power is simply too dangerous. The consequences of a catastrophic accident at a nuclear plant are too deadly to accept. Vigorous energy conservation efforts can save as much fuel as additional nuclear plants and at a much lower cost, according to several studies, including one from Harvard University. Since only a small percentage of US power plants burn oil, new nuclear plants will not help the nation's oil import problem much. And with new technology, say these critics, coal can be burned more cleanly than in the past and will only be a transition fuel until renewable energy sources can be developed.

Nuclear power is also not popular with many people. Last month an Associated Press-NBC poll found for the first time that a majority of the American public think that no more nuclear power plants should be built here. Fully 56 percent of the respondents to this poll answered in the negative, while only 32 percent believed more commercial reactors should be constructed.

To understand the severity of nuclear power's current problems, consider the life of an electrical utilities director. Nuclear power represents what Dean Allison at Harvard University calls the "director's dilemma."

In a recent report, Allison and his colleagues argue that even if a new nuclear plant is needed and can produce electricity for 30 percent less than an equivalent coal-fired plant, today's utility directors will avoid the nuclear path. A nuclear power plant embodies political risks and financial uncertainties far beyond other energy sources, Allison explains.

A 1000 megawatt plant ordered today, at a likely cost of over $3 billion, will not begin producing power until 1993. During that time, there will likely be two to three new presidents, three to four state governors, and six to seven Congresses, state legislatures, Nuclear Regulatory Commissions, and public utility commissions. A pro-nuclear Ronald Reagan might be replaced by an anti-nuclear president who would totally reverse all the steps to help the industry that Mr. Reagan is taking.

Further, a prudent utility director must ask such questions as could another accident like Three Mile Island occur, shutting down the industry or leading to costly permit delays?

"If this simplification of the director's dilemma is roughly right -and we believe it is -commercial nuclear power in the United States has reached a dead end," says the report from Harvard political scientists at the Kennedy School of Government. "The absence of orders for new nuclear plants for the past three years, and the cancellation or postponement of 80 earlier orders, may not be just a prolonged hiatus. It may signal the end of new orders for nuclear power in the United States under the current system: for the decade ahead and perhaps beyond."

Nuclear power's financial problems extend back to the Arab oil embargo in 1973. After decades of steady and predictable growth, the embargo, with its resultant increases in energy costs, threw the first significant uncertainties into electric utility demand forecasts. As a result, utilities began postponing power plants. Nuclear plants, because of their long, 12-year completion times and high capital costs, were the utility managers' first choice for deferral.

Other factors began to confuse the picture. Rising fuel costs cut into utility profits. Consumer pressure on public utility commissions around the country kept down the rate increases that utilities requested. Double-digit inflation began driving up power plant costs. And skyrocketing interest rates made the highly capital intensive nuclear plants increasingly less attractive.

At the same time, rising energy prices caused the rate of growth of electrical demand to fall faster than planned power plants could be cancelled or delayed. The amount of electricity which all units in a system can deliver grew in 1980 because of this decreased demand.

Projecting this trend into the future, the brokerage firm of Merrill Lynch, Pierce, Fenner, & Smith estimates that there will be adequate electrical generating capacity at the end of the decade, even if 18 more nuclear plants are cancelled. On the basis of three percent annual growth of electricity demands, however, the Atomic Industrial Forum (AIF) calculates that utilities should be ordering 40 new large power plants per year to meet the electrical demand likely in the 1990s. They argue there is much uncertainty in the growth of electrical demand. If the economy improves and conservation incentives are not put into place, the three percent growth rate is liable to rise, and the US could run out of power.

The accident at Three Mile Island two and a half years ago has also dampened the future of nuclear energy. While no one was hurt, the reactor's owner, General Public Utilities (GPU), pegs the total cost of the accident at $4 billion, including $1 billion to clean-up the contaminated reactor, $1.6 billion in replacement power costs (being passed through to customers), $430 million to put the reactor back in service, $900 million in lost revenues, and $40 million in increased cost of borrowing.

At the time, the industry, through an insurance pool, had only insured itself for $300 million per accident for property damage. According to the Edison Electric Institute, nuclear plant owners should have a $1 billion property insurance plan in effect soon, but at a cost of over $1 million per reactor site per year with retrospective premiums of seven times this amount should another accident occur. "And it's still not enough to cover all the costs," points out Verner H. Condon, vice-president and chief financial officer of General Public Utilities, owner of the Three Mile Island nuclear power plant,

Not surprisingly, the accident at Three Mile Island (TMI) in Pennsylvania has had a chilling effect on the financial fortunes of nuclear power. According to Merrill Lynch, nuclear utility stocks fell four to five percent relative to nonnuclear offerings following TMI. This difference remains today.

There is some hope in pro-nuclear circles: the Reagan administration gives unreserved support to the nuclear option. In an early October address on the subject, the President characterized nuclear power as a "safe, economical, and environmentally acceptable energy source."

Pro-nuclear supporters are pleased with Mr. Reagan's accolades and his plans to streamline the licensing of new nuclear plants, allow reprocessing of spent nuclear fuel, move aggressively on solving the nuclear waste disposal problem, and revitalize the breeder reactor program. But even the staunchest industry supporters acknowledge that this does not address fundamental financial problems. "Necessary, but not sufficient" is how Ted Stern, executive vice president of Nuclear Energy Systems at Westinghouse, characterizes it.

A number of observers have concluded that -short of a national consensus on nuclear power and a return to single digit inflation -only a major federal bail-out will save the ailing industry. And, of course, this runs counter to the President's basic philosophy.

This conflict is apparent in the administration's handling of the Three Mile Island clean-up. Pennsylvania Governor Richard L. Thornburgh has proposed that the federal government, the nuclear industry, General Public Utilities, Pennsylvania, and neighboring New Jersey share the cost of cleaning up the contaminated reactor. His plan would have the federal government pick up $190 million, one quarter of the remaining cost.

Last month Energy Secretary James Edwards announced that the administration would ask Congress for $120 million for TMI. Later his deputy, Shelby T. Brewer, stated that this amount was for "research and development" and would not offset the costs of clean-up.

No one in the industry is yet sure whether the administration is simply labeling this research and development so it doesn't have to admit to a bail-out , or whether it means exactly what has been said. Either way, many nuclear proponents are disappointed that the Reagan administration has not taken a clear lead in the clean-up, something they think necessary to get the industry back on its feet.

The industry gives the Reagan administration highest marks in the area of regulatory reform.

"We applaud the new spirit at the Nuclear Regulatory Commission," says Carl Goldstein of Atomic Industrial Forum, referring to efforts to streamline and reduce regulatory requirements. This is important, according to industry sources , because regulatory delay has added substantially to the time it takes to build a nuclear plant and regulatory uncertainty has added to the financial risk of going nuclear.

Even nuclear opponents such as Henry Kendall of the Union of Concerned Scientists agree that two years could be shaved off current construction times. In a recent speech, Energy Secretary Edwards stated that the administration goal is to reduce the average 12 year construction time by six years. This would require drastic changes in licensing procedure, including amendments to the Atomic Energy Act. The industry wants "one step licensing" instead of the current process which takes two steps. Nuclear critics oppose these sweeping changes as an attempt to "short circuit" the licensing process.

Whether such reforms would yield the benefits the industry claims is uncertain. Several studies have concluded that labor and material problems have contributed more to construction delays.

"The current two-step licensing process is a concession to the way the utilities operate," explains Victor Gilinsky, a member of the Nuclear Regulatory Commission. "When a utility comes in for a construction permit, they only have a plant design 25 to 30 percent completed. When we've had the complete plans, we've issued a license in 6 months."

Reactor manufacturers generally confirm Gilinsky's observation. They acknowledge that the utilities, used to custom designed power plants, have been the biggest obstacle to standardized designs. Standard designs are necessary to drastically reduce construction times and costs. But the current financial situation has made the utilities finally accept the idea, they add.

An essential ingredient in a nuclear power comeback would be a remedy for the financial weakness of the utilities. There are a number of proposals circulating in Congress designed to do this. All are controversial. Several would involve federal incursions into traditionally state-controlled areas of utility regulation.

These proposals include: guaranteeing utility investors a high enough "minimum return on investment" to attract sufficient capital for power plant construction; allowing utilities to charge their customers for construction work in progress; and giving utilities special tax breaks.

There are also proposals for a federally mandated and insured property insurance to cover costs of accidents at nuclear power facilities. Congressional proponents are pushing through bills which could override local opposition to the siting of nuclear waste disposal facilities, through the concept of eminent domain.

"Unless these things are done, it may come to the [nationalization] of the industry," warns William A. Brandfon of Sergeant & Lundy, a engineering firm.

Harvey Rosenfield of Ralph Nader's Public Citizen group argues: "The nuclear industry is like a patient being kept alive by artifical life support. We are trying to pull the plug, or, at least, keep the Reagan administration from giving it mouth-to-mouth resuscitation as well."

In an October 28 speech to utility industry representatives, Secretary Edwards gave the most definitive statement to date of the administration's intentions. "The Reagan administration is committed to creating the economic conditions that will let the nation's utilities start 'the cure.'" he said. "We're also unshakeably committed to revitalizing the free market by getting the government out of business' way. Bailing out the electric utility industry is not on our schedule."

Beside the utility directors, the US reactor vendors -Westinghouse, General Electric, Combustion Engineering, and Babcock & Wilcox -are vital actors in this technological drama. They are the repositories of knowledge about the technology. And their ability to stay in business is a critical factor in the question of nuclear power's future.

"It's the 11th hour," warns A. Phillip Bray, vice-president and general manager of GE's Nuclear Power System's Division. If nothing changes in the next few years, the industry may be stopped cold inadvertantly, he says.

While conceding that times are tough, other officials say that things are not quite that bad. They are still working on a considerable backlog of orders. All the manufacturers have a substantial, growing business in servicing and refueling existing reactors. Ironically, the ever increasing requirements placed on the industry by the NRC have created a great deal of work for them as well.

All the manufacturers are looking for other similar work to help them through lean times. Westinghouse has consolidated its nuclear operations so that its break-even point is 4 reactors per year, rather than 10. Combustion Engineering has turned to nuclear US Navy jobs for its bread and butter.

Both GE and Westinghouse are counting on overseas orders as well. Here the Reagan administration has hurt rather than helped by cutting the budget of the US Export-Import Bank. US reactor vendors have already lost a number of contracts because of the subsidized financing that other countries have extended to those who buy from their nuclear manufacturers, rather than the US.

Facing even more risk than the vendors are the companies which supply specialty equipment, such as pumps and valves. To make parts for nuclear reactors, these suppliers must conform to rigorous and expensive quality assurance requirements. One indication of the money involved is the cost of a nuclear valve ($8000) compared to a commercial valve ($600).

"A number of companies have dropped out already." says Ken Williamson of Pacific Valves and chairman of the Nuclear Valve Committee of the Valve Manufacturers Association. "If there is no indication of a revival by 1986 or 1987. then no valve or component manufacturers will be able to stay in the business. I doubt if there will be more than one vendor as well."

A. David Rossin, a career nuclear engineer and director of the utility industry's Nuclear Safety Analysis Center adds: "The industry's infrastructure has been badly hurt. We lost twenty years in the last four."

If US utilities do not begin ordering new nuclear plants within the next five years, the ability of US manufacturers to make nuclear steam systems could be seriously affected.

Whether the US nuclear industry continues to deteriorate and finally fails, or whether future efforts revive it, one thing has become clear: the grandiose dreams of the early days of the Atomic Age -cheap nuclear power and an entire society powered by the tremendous energies hidden within the atom -have faded because of the hard realities of the 1980s.

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