Thursday, March 24, 2011

What's the expected value of nuclear power?

When there are only a few possible outcomes, economists calculate "expected value" by multiplying the probability of each outcome by the chance of it happening and adding them up. With nuclear power, that calculation has changed a bit, since the estimated probability of a catastrophe has increased. However, it has only changed a tiny bit: out of all the hours that nuclear power plants have been running, an extremely small share of them have involved problems. Yes, the difficulty associated with such a problem has increased, so the "expected value" has dropped a bit, but the calculation hasn't changed a whole lot.

On the other hand, popular opinion has changed rather drastically. People are understandably more nervous about nuclear plants in general and nuclear waste in particular, since the holding ponds for spent fuel are one of the most dangerous parts of the current problem in Fukushima. The specter raised recently of being unable to use tap water, while always a part of life for Mexicans, is a scary one for us in the US. The Obama administration had supported an increase in nuclear power, but that drive has been just as ill-fated as their advocacy of increased drilling in the Gulf. Going forward, what exactly will the nation's energy strategy be? These days that's even a tougher question than usual.

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