The Cowless Commission Atomic Power Cost Estimates: A Reply

Abstract

M R. WALTER ISARD'S An Addendum on Cowles Commission Estimates, in August I949 issue of this REVIEW, contains three criticisms of a Cowles Commission study of economic aspects of atomic power.' i. The Adjustment of Thomas Estimate:2 Our adjustment of this estimate is discussed in full detail in forthcoming Cowles Commission book on economic aspects of atomic power. However, major source of difference between our results and those of Mr. Isard is quite easily indicated. The Thomas report arrives at following conclusions on cost of atomic power: (a) that at a ioo per cent rate of capacity use, atomic power will cost 8 mills per kw-hr; and (b) that at a ioO per cent rate of capacity use, power produced in an ordinary plant burning coal will also cost 8 mills, when coal costs $io.oo per ton. It is this comparison between two costs, rather than absolute atomic cost figure shown in Thomas report, which we consider significant. Both Mr. Isard and Cowles Commission concluded that a conventional power plant of most advanced design burning coal at $io.oo per ton and operating at a ioo per cent rate of capacity use can generate electricity at about 6 mills per kw-hr rather than at 8 mills, as estimated in Thomas report. This indicates that both revised certain of accounting and engineering data used in making Thomas thermal cost estimate.3 The major difference between us is that I believe this revision should also apply to those elements of cost of atomic power which represent equipment or operations or accounting practices similar to those in an ordinary thermal plant 4 (see Table i). 2. The Mini'mum Cost Estimate: For certain purposes in our analysis, a rough approximation of lowest conceivable cost for atomic power was used; it is described in my article as the estimate below which atomic costs are not expected to fall. This limit is helpful in answering question: What effects could atomic power have under most favorable assumptions concerning its cost? We take lowest conceivable cost for atomic power to be that cost which would exist if investment per kilowatt of capacity in atomic power should be same as in ordinary thermal electricity. Mr. Isard describes this as pure hypothesis. Of course it is, but it serves a particular purpose and is not a capricious choice. It rests on fact that, according to all authoritative reports, process for generating electricity from heat of nuclear fission is expected to resemble in important respects production process used in generat'Mr. Isard's discussion is an addendum to Comparisons of Cost for Atomic and Conventional Steam Stations by Walter Isard and John B. Lansing, this REVIEW, XXXI (I949), Pp. 2I7-26. The addendum was prompted by a recent article of mine which summarizes, prior to publication of our complete report, some of our major findings about possible effects of atomic power on selected energy-consuming industries (Atomic in Selected Industries, Harvard Business Review, July I949). This article did not explain derivation of our power cost figures because of limitations of space, but stated that a complete explanation would appear in our final report. One typographical error should be noted. In beginning of second paragraph quoted from my article in Isard's addendum, word appropriate has been incorrectly substituted for word approximate. 2The Thomas estimates are found in report entitled Nuclear Power in The International Control of Atomic Energy, Department of State Publication 266I, p. I26. This report was prepared under direction of Dr. C. A. Thomas of Monsanto Chemical Company. 3This does not reflect on accuracy of Thomas thermal cost estimate, because there is considerable leeway in choice of these factors. We introduced very favorable assumptions in making our conventional thermal power cost estimates. 4In adjusting Thomas atomic cost estimate, we determined, first, how factors we used in estimating cost of thermal power differed from those used by Thomas. We then adjusted those elements in Thomas atomic cost estimate which we judged to be related to factors used by Thomas in making his thermal cost estimate. In proceeding in this way, we have followed usual practice of using accounting and engineering factors taken from conventional thermal power plant experience as benchmark values in estimating cost of atomic power.