158. Memorandum From Philip A. Odeen of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)1
- Prospects for Nuclear Energy as an Energy Source
You asked if the slow growth projected for nuclear energy as a domestic energy source (e.g., 15 percent of total demand in 1985) was “inevitable.” (Tab A)2
Our use of nuclear power could be increased somewhat by 1985 (to about 20 percent of total consumption). This would reduce energy imports but would not significantly change our position of major dependence on foreign energy sources. Moreover, nuclear power would be significantly more costly than alternative energy sources—particularly oil from Middle East. There are major technical problems associated with sharply increasing our production of nuclear power—especially in the short term. For example:
- —Nuclear power plants take a long time to build (five to eight years);
- —The contribution of nuclear power to our overall energy needs is limited because nuclear power can be used only to generate electricity. Electricity accounts for about 60 percent of total energy consumption and could not be used to power cars, etc., without major costs;
- —Nuclear power plants are expensive to build and conversion of existing power plants from fossil fuels to nuclear power requires the construction of entirely new power plants. Thus, the use of nuclear energy is largely planned to supply the growth of new energy demand. It would be too costly to convert existing power plants to nuclear energy for operating power generating plants;
- —Environmental concerns have cut into the growth of nuclear power by slowing the processing of applications for generating plant sites. Despite the development of what the industry believes are adequate safeguards, the public still fears radioactive spills—a possibility which cannot be ruled out no matter how good the safeguards. Thermal (heat) pollution is also a major concern.
Despite these problems the contribution which nuclear power could make to our overall energy needs could be increased in the early 1980s if we are willing to pay the increased cost.
Thus, the prospects for nuclear energy principally depend upon the price we are willing to pay to satisfy future energy needs. This, of course, is also true for other domestic energy sources such as oil shale, tar sands, etc. Our (overly simplified) alternatives are to (a) opt to supply our energy needs principally from domestic sources at a higher cost; or, (b) enjoy a lower price for energy by continuing to buy cheaper overseas oil and accepting the drain on our balance of payments.
Are Projections of Energy Demand Overstated?
An important fact you should know is that the projections of energy demand for the 1980s are quite soft. The increased price we will pay for energy in the 1980s will have some impact on energy demand—a factor not sufficiently taken into account by current projections. Projections of future energy consumption may, therefore, significantly overstate the seriousness of our problems—in particular, the quantity of oil we will import from the Middle East at increased prices.
The key question is how sensitive the demand for energy will be to changes in price, e.g. to what degree will increases in price have as a dampening effect on total demand?
Estimating this impact (known as elasticity in economic terms) is very difficult to determine, but it must be done before we will have a good grasp of the magnitude of the energy problem. Rand has some work underway on this question which we will follow closely.