Fukushima and Nuclear Power: Playing with Fire

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As we commemorate the first anniversary of the BP Oil Spill in the Gulf of Mexico, the insatiable human hunger for energy has caused the world to confront an even more devastating event -- the Fukushima nuclear power plant failures. Both of these disasters have many elements in common, but the one clear commonality is human miscalculation of the overwhelming power of nature.

Both events demonstrate that there is no such thing as a zero-defect human endeavor. No matter how well we plan and prepare, the failure rate will never reach zero. Eventually, an unexpected event or a failure will occur, and in the case of a nuclear power plant, the ensuing breakdown can be catastrophic.

Nuclear power, like other human technologies, owes much of its advancement to trial and error. Engineers may try to predict the outcome of new applications of technology based on previous experience. Yet, even with today's sophisticated computers and predictive modeling, engineering calculations frequently fail to anticipate catastrophic events of record-breaking proportions. Viewed as a current news event, Fukushima is a tragedy. Viewed through the lens of time, it will be seen as a tragedy that provided information to advance nuclear power technology.

Later this year, we will celebrate the 108th anniversary of powered flight. The space shuttle fleet represents the current high-point of manned flight even though it will be retired this month. The first orbital shuttle mission took place in 1981, almost 80 years after the Wright Brothers first flight. Five years later an explosion destroyed the Challenger, and in 2003, the Columbia disintegrated on re-entry into the earth's atmosphere. Decades of aviation and space engineering could not prevent the loss of 40 percent of the space-capable shuttle fleet in catastrophic accidents that killed their entire crews.

Nuclear power has had a much better safety record than the space shuttles. Nuclear power plants can be found throughout the world and the total amount of radiation they can produce is huge. According to the International Atomic Energy Agency, operation of the 443 currently active nuclear power reactors in 30 countries requires more than 68,000 tons of uranium. That amount of fissionable material represents both a current and long-term threat to humanity.

Since 1952 there have been only 33 reported accidents or incidents in 568 reactors that are now in operation or previously built and shut down. Only two of the 33 incidents were considered "major accidents". Percentage-wise, 6 percent of these nuclear reactors have had a serious incident or accident. If the number of safe days of operation were calculated against the total number of accidents, the margin of error for nuclear power plants would be infinitesimal.

In any other industry, nuclear power's safety record would be enviable. But nuclear power is not any other industry. Nuclear power represents a major new challenge to the inevitability of human failure. When a space shuttle fails, a handful of people die tragically, and the likelihood of bystander injury is very small. When a nuclear reactor fails, hundreds of people can suffer or die soon after the event, and thousands, or conceivably millions of bystanders can become sick or bear children with severe birth defects.

Nuclear Plants Safe, But Not Disaster-Proof

Our firm has engaged in financial analysis and commentary of biotechnology, pharmaceutical and medical device technologies for decades. Thus far, no universally accepted treatment option for radiation sickness and its ensuing healthcare complications has emerged. The effects of radiation exposure are so calamitous that we are compelled to turn our attention from medical treatment to prevention of this deadly disease.

Of the world's reactors, 104 are in the United states, representing 24 percent of the total. Less than a month after the Fukushima failures, Charles Pardee, chief operating officer of Exelon Generation, owner and operator of the largest fleet of U.S. nuclear reactors, and the third-largest nuclear power operator worldwide, testified to a Senate committee investigating the safety of U.S. nuclear plants. In describing the safety of Exelon's nuclear plants, he said: "These plants were designed and licensed to withstand a variety of natural disasters, including earthquakes, floods, tornados, and, where appropriate, tsunamis. Plants are designed to withstand potential disasters based on the most extreme event known in their geographic location, with significant margin added on to that extreme event."

Such confidence flies in the face of facts.

Japan is widely respected for its engineering expertise, social responsibility and dedicated workforce. Yet Japanese know-how failed to foresee or plan for the eventuality of a 9.0 earthquake and the ensuing tidal wave. In Fukushima, just as in Chernobyl, the severity of the event was mitigated by small groups of workers who volunteered to stay behind while others were evacuated.

In Japan, the workers who stayed behind to battle the breakdown became known as the Fukushima Fifty. They were the last line of defense at that site. We need to ask what would have happened if this selfless group of people had not been willing to put themselves in grave danger to protect others. And, we need to wonder if a similar group will emerge when another disaster occurs.

As gasoline in the U.S. approaches $4 a gallon, on its way to $5 or more, the power from nuclear reactors becomes more significant to the nation's energy resources. Nineteen percent of the electricity generated in the U.S. comes from nuclear power. As energy needs increase and old plants are decommissioned, new ones will be needed just to maintain the current level of production.

Downsizing or eliminating nuclear power generation from the U.S. energy mix at this time would be extremely costly and have a significant negative impact on the U.S. economy. Yet more than half of the U.S. power reactors have been in operation for 25 years or more, and there have been no new construction sites for nuclear power plants since 1977. With each year, the likelihood of a breakdown in these old reactors increases.

Totally safe nuclear power is unattainable. There will only be safer nuclear power. As Chernobyl and Fukushima have shown, severe nuclear power plant failures are international events and prevention of them must be addressed by an international body.

International Cooperation Needed

Before anything can happen to bring more order and improved standards to the international threat of nuclear reactor failure, involved nations must agree to agree. Like the European Union, which now includes 23 countries using a common currency, and others that wish to join, if nations perceive that cooperation is in their best interests they will cooperate.

Of the 29 countries with operating nuclear reactors today, 12 countries operate 10 or more reactors, constituting 72 percent of the total number of reactors. The top 12 reactor operators include the U.S., France, Japan, Russian Federation, Republic of Korea, India, United Kingdom, Canada, Germany, Ukraine, China and Sweden. Of the 33 documented accidents and incidents since 1952, 22 took place in eight of these countries.

These are nations with histories of international cooperation and accords. They could build on or evolve from existing agencies like the International Atomic Energy Agency, which operates under the United Nations, the Nuclear Energy Agency, which has 29 member countries, or the U.S. Nuclear Regulatory Commission. Rather than observing, assisting and advising, an international agency needs to be created that can establish safety standards, inspect nuclear sites, and if necessary enforce compliance.

Once established, this alliance of nuclear operating countries would be in a position to reach out to less well-developed nations and countries with fewer reactors. The alliance could bring other nuclear power players into its sphere to assure that their reactors are operating to world standards. It would not be out of the question to enforce compliance by withholding foreign aid or to imposing economic sanctions on nations with non-compliant nuclear reactors.

There are several historical examples of nations, even those hostile to one another, working together in their mutual interest. Usually those alliances occur during wars. In other instances the alliances address narrow specific interests, like the need to have a unified, international airline flight management system with a single, universal language that all pilots can understand and speak. Today, hundreds of planes are in the air at the same time around the globe. Without such an international system, chaos would reign and tragic airline collisions would be common occurrences.

It has already been demonstrated that an international nuclear regulatory system is crucial. There have already been three nuclear power near-misses -- Three Mile Island, Chernobyl and now Fukushima, where it is estimated that close to 80,000 people will be dislocated from their homes and farms. If we do not learn from these events that nuclear disasters know no boundaries, it is inevitable that an even greater disaster will occur.

Partial measures will not increase the safety level of nuclear power facilities. Only a coordinated, global effort will provide individual nations, and the world as a whole, with an improved ability to prevent and withstand nuclear emergencies. Without such resources, nuclear power is playing with fire. Eventually, someone will get burned very badly.

Steve Brozak is president of WBB Securities, an independent broker-dealer and investment bank specializing in biotechnology, medical devices and pharmaceutical research. Henry Bassman is a Managing Director at WBB Securities.