Imagine you invented a machine that revolutionized travel. You know your invention could cut local and long distance travel time substantially and vastly improve the ability for business to deliver freight efficiently. The invention would add trillions to global GDP. If released, your invention would no doubt be universally used and admired. However, based on the initial safety assessments, analysts predict that if used widely your invention would cause the deaths of 30,000 Americans per year and countless more around the globe. Would you still release it?
If not, imagine a world without cars.
It turns out that car accidents are among the leading causes of death in the US, and yet few of us would give up the luxury, convenience, and autonomy of owning an automobile. We've decided the benefits are worth the risk.
Now, the bigger question: why isn't this same measure used when judging nuclear energy?
A partial meltdown at Japan’s Fukushima Dai-ichi plant as a result of the largest recorded earthquake to hit Japan has set off a renewed bout of nuclear hysteria. Uranium stocks are selling off, foreign ports are being closed to Japanese goods, and iodine tablets are selling out along the West Coast. Germany took abrupt action after the first Fukushima leaks were reported, with Chancellor Angela Merkel ordering the immediate shutdown of all nuclear plants built before 1980 and a moratorium on new plant construction.
While it is true many people in the immediate vicinity of Fukushima face radiation sickness or even death, especially those brave workers staying behind to stop the leaks, it is important for investors to rise above this global panic. First off it is important to keep in mind how unusual and horrific the events in Japan actually were. The aging Fukushima plant was exposed to the twin disasters of a 9.0 magnitude earthquake and a once in a century tsunami. Although there are very few places in the world where such a scenario is even possible, alarmists are applying the concern globally, even to plants thousands of miles from an ocean or a seismic fault line.
It is also important to recall that even with the latest disaster there have only been three or four nuclear events worth mentioning in the 60-odd year history of commercial nuclear energy. Although there may very well be deaths associated with the Japanese meltdown in the months and years to come, the only reactor incident to cause civilian deaths to date was Chernobyl, a poorly run facility in the bankrupt late-Soviet Union (amazingly built with no containment vessel). Three Mile Island, the only other major incident before Fukushima, exposed surrounding residents to radiation equivalent to a chest X-ray and wasn’t shown to even increase their risk of cancer.
In comparison, other forms of energy generation have led to significant deaths and environmental risks. The burning of fossil fuels pumps greenhouse gasses into the atmosphere. Coal mines collapse, trapping and killing miners. Oil tankers and offshore derricks spill petroleum into the ocean. But these risks are more tolerated than nuclear concerns. The difference lies in the fear of radiation.
Perhaps due to its invisibility, or its mysterious and often long-delayed effects, or perhaps as a relic of Cold War propaganda, the threat of radiation exposure provokes an irrational, emotional response. As a result, nuclear power is often held guilty until proven innocent.
But radiation is not nearly as pernicious or outright dangerous as the media leads us to believe. In the US, by EPA regulations, nuclear plants are expected to annually release radiation less than what any passenger receives on one flight from LA to New York (a route I travel quite often). Living in a brick or concrete building for a year will give you twice the dose of that flight. A chest X-ray will give you over 80 times the dose of your brick-walled apartment. A nuclear plant worker is allowed 10 times the dose from a medical X-ray scan per year. Still, the worker would have to receive double his maximum yearly dose to have a measurable increase in cancer risk – and 4 times that dose in a day to show any signs of radiation sickness.
The risk is truly minuscule, especially when we consider the alternatives. As much as President Obama likes to talk about “renewable energy” and “green initiatives,” the reality is that there is no clean source that can provide energy nearly as inexpensively as our current sources. This means that a switch to entirely “green” sources, including wind, solar, and hydro, would cause the average American’s standard of living to drop by an order of magnitude. So, the viable alternatives to nuclear energy are limited to coal, oil, and natural gas. Each of these poses significantly more health and environmental dangers than nuclear.
Coal is the worst offender. Ironically, the average coal plant releases 100 times more annual radiation than a comparable nuclear plant. This comes from the airborne release of fly ash, the byproduct of coal combustion. Fly ash contains radioactive uranium, thorium, radium, and other elements – along with toxic heavy metals like mercury, lead, and arsenic. These substances tend not to burn, so they are highly concentrated in the ash that is released into the atmosphere and groundwater. Coal plants are the leading cause of mercury contamination in US fish, of which a quarter are now believed to be unsafe for consumption. Even the non-toxic particulates coming out of coal plants cause lung disease far from their source.
Oil and natural gas are lesser offenders, but still far dirtier than nuclear. Both release nitrogen oxides and sulfur dioxide which can come down to the Earth as acid rain. Oil combustion releases heavy metals, particulates, and leaves a toxic sludge that must be disposed. Natural gas is the cleanest of the three, but still produces carbon monoxide and several greenhouse gases.
These conventional fuels have proven to be more harmful to human health and environmental well-being than nuclear, but they are not held to the same safety standard at any level of production – from mining of ore to power generation to disposal of wastes.
Meanwhile, generating nuclear power is currently half as expensive as burning fossil fuels. Uranium is abundantly available and known deposits could sustain current production levels for the next century.
It seems the greatest risk in nuclear power is a massive PR problem. Most people I see on the beach near my home in Los Angeles don't seem to mind soaking up solar radiation, AKA sunlight, day after day – even though tanning causes 1.5 million skin cancers in the US every year. Like with their cars, people get that you can't do anything worthwhile without taking a risk. Apply sunscreen, fasten your seatbelt, and move on with your life, right? Only with nuclear power does it seem any risk is too much.
As the costs mount for ‘strategic’ wars to secure Middle Eastern oil and the world seeks cleaner fuels to power homes, businesses, and perhaps even fleets of electric cars, politicians and the public are going to be forced to face their fear of nuclear power. As the French are known to say about their nuclear program: “no oil, no gas, no coal, no choice.” Eventually, reason prevails, and the truth is that nuclear power is hands down the best option available for powering the 21st century.
The Fukushima meltdown may mark a high point in anti-nuclear hysteria. As a result, investors should not treat nuclear-related stocks as if they were… radioactive.
John Downs is an Investment Advisor Representative in the Los Angeles office of Euro Pacific Capital.
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