How can NRC-style regulation be so expensive?

Figure 1. CAPEX for 1 GW plant. Nominal cost up 32 times. Real cost up 13 times, 1972 to 1983 completion date.\cite{crowley-1982}

People find it difficult to believe that Navy/NRC style regulation can increase the cost of anything by multiples, by factors of five or ten. The thinking is: sure regulatory inefficiencies can increase costs by 25% or maybe even 50%, but not much more. And such cost increases may be acceptable in return for more "safety".

I had the nearly unique advantage of working for the US Navy before being exposed to the productivity and quality of a Korean shipyard. I saw the order of magnitude differences in both, up close and personal. It was easy for me to accept factors of five and ten differences in cost and quality. They were staring me in the face.

But I've never been able to articulate why. What causes these differences? People want concrete examples. Show me the regulation that generate these costs. I can't because there is no single regulation. I talk about deaths by a thousand cuts. I ask why EPC contractors can throw coal plants up for $1500/kW turnkey on budget and schedule; but the same people turn into blundering idiots when asked to do a nuclear plant. I blather on about how ALARA inevitably forces costs up to those of the alternate sources of power. But that does not really get to the heart of the matter.

It comes down to how efficiently humans respond to the incentives they are faced with. In a truly competitive market, the incentive is build cheaper/better or die. In the Navy/NRC style system, the incentive is avoid any problem for which you can be blamed. It's this difference in incentives that results in totally different results.

Thanks to Nick Touran, I became aware of a 1982 paper that does a better job of articulating this than I have.\cite{crowley-1982} If you haven't checked out Touran's web site, whatisnuclear.com, you should do so immediately. Clear accurate technical descriptions, combined with fascinating glimpses into nuclear power history.

Nick does not focus on the regulatory issue; but the paper by Crowley and Griffith does. The authors are talking about the factor of 32 increase in nominal CAPEX for a 1 GW plant between 1972 and 1983, Figure 1. Based on the CPI, this is a real cost increase of a factor of 13. During this period, technical progress should have resulted in a real cost decrease. Did I say a factor of five or ten?

Crowley and Griffith tried to figure what caused this staggering increase. They visited plants, talked to utility guys, engineers, and consultants. Here's what they found in their words.

The conversations focused on construction efficiency and the reasons for construction material and craft man-hour increases.

The increases are not caused directly by the regulations. Rather, they result from interaction of NRC and industry staffs in an effort to obtain the goals of "zero risk" and "zero defects" in an adversarial and legalistic regulatory environment. The pursuit of "zero risk" means that all failure modes have the same importance regardless of probability of occurrence. The pursuit of "zero defects" encourages continuous expansion of the number of alternatives that must be analyzed and continuous refinements of the requirements. The legal need for "evidence" encourages development of complex analyses rather than simple ones. It also submerges the fact that all engineering analyses are really approximations to actual phenomenon because such subjective positions are difficult to defend in court.

The advantage which "precedent" has in the legal environment encourages the adoption of unrealistic and expensive approaches because it is easier than suffering the uncertainty associated with trying to have a new approach accepted. The continuation of this situation for a decade has resulted in the tradition that if a method is more complex, more difficult and more time consuming, it must be safer!

The classic division of authority and responsibilities between engineer, manufacturer, and constructor has been distorted by fear of losing a decision in a regulatory or judicial hearing which would cause political damage to the regulatory agency or financial damage to the utility. Consequently, there has been an ever increasing reliance on academic analytical techniques rather than experienced judgement. The concept of "good engineering practice" is discouraged during construction. analysts and designers on both regulatory and industrial staffs inexperienced in the realities of hardware and construction practices are making impractical design decisions which have been exceedingly damaging to nuclear industry economics.

...

The economic viability of the nuclear option in the United States is threatened by uncontrolled regulatory and institutional factors as opposed to insolvable technical issues. Pursuit of the unattainable goals of zero risk and legal proof of perfection has had a paralyzing effect on effective engineering and construction management. Ironically, this pursuit is not only causing the evolution of less than satisfactory design and construction approaches, it may also be degrading safety margins both by diverting attention from more important considerations and by accumulation of complexities which stretch the capability of man and machine to perform reliably and effectively.

These guys have a way with words. But they don't offer a solution. I do. Build nuclear plants like the Korean yards build ships, not like the US Navy builds ships. That means we must use the regulatory system that fosters Korean yard productivity and quality. It's called Underwriter Certification.