by Juergen Baetz
April 21, 2011
from AssociatedPress Website



Frank Jordans in Geneva, Camille Rusticci in Paris, Yu Bing in Beijing, Jon Fahey in Washington, Jim Heintz in Moscow and Shino Yuasa in Tokyo

contributed to this report.




From the U.S. to Japan, it's illegal to drive a car without sufficient insurance, yet governments have chosen to run the world's 443 nuclear power plants with hardly any insurance coverage whatsoever.

Japan's Fukushima Dai-ichi nuclear disaster, which will leave taxpayers there

with a massive bill, highlights one of the industry's

key weaknesses - that nuclear power is a viable source for cheap energy only if plants go uninsured.

The plant's operator, Tepco, had no disaster insurance.

Governments that use nuclear energy are torn between the benefit of low-cost electricity and the risk of a nuclear catastrophe, which could total trillions of dollars and even bankrupt a country.

The bottom line is that it's a gamble:

Governments are hoping to dodge a one-time disaster while they accumulate small gains over the long-term.

Yet in financial terms, nuclear incidents can be so devastating that the cost of full insurance would be so high as to make nuclear energy more expensive than fossil fuels.

The cost of a worst-case nuclear accident at a German plant, for example, has been estimated to total as much as 7.6 trillion ($11 trillion), while the mandatory reactor insurance is only 2.5 billion ($3.65 billion).

"The 2.5 billion will be just enough to buy the stamps for the letters of condolence," said Olav Hohmeyer, an economist at the University of Flensburg who is also a member of the German government's environmental advisory body.

One estimate by a German think tank shows that coverage for every 1 trillion ($1.5 trillion) in estimated damages would theoretically cost annual insurance of 47 billion ($68.5 billion).

A similar situation exists for nuclear plants in the U.S., Japan, China, France and other countries.

FILE - In this March 30, 1979 file photo,

a cooling tower at the Three Mile Island nuclear power plant near Harrisburg, Pa.,

looms behind an abandoned playground. Japan's Fukushima disaster,

which will leave taxpayers there with a massive bill, brings to the fore one of the industry's key weaknesses,

 that nuclear power is a viable source for cheap energy only if it goes uninsured.

(AP Photo/Barry Thumma, file)


It is still unclear what the final cost will be for the Fukushima Dai-ichi plant, crippled by Japan's March 11 earthquake and tsunami.

Operator Tepco's shares have been battered, and analysts say Japan - which already has the highest debt level among the world's industrialized nations - might eventually have to nationalize the company and take on its massive liabilities.

"Around the globe, nuclear risks - be it damages to power plants or the liability risks resulting from radiation accidents - are covered by the state. The private insurance industry is barely liable," said Torsten Jeworrek, a board member at Munich Re, one of the world's biggest reinsurance companies.

In Switzerland, the obligatory insurance for nuclear plants is being raised from 1 to 1.8 billion Swiss francs ($2 billion), but a government agency estimates that a Chernobyl-style disaster might cost more than 4 trillion francs - about eight times the country's annual economic output.

A major nuclear accident is statistically extremely unlikely when human errors, natural disasters or terror attacks are excluded, but the world has already suffered three in just about thirty years:

Many countries back nuclear energy as a cleaner alternative to fossil fuels, even though right now there still is no solution for the permanent disposal of radioactive waste.

Governments could opt for a middle road, taking out more insurance to protect taxpayers from massive bills, but that would make nuclear energy cost more. Ultimately, the decision to keep insurance on nuclear plants to a minimum is a way of supporting the industry.

"Capping the insurance was a clear decision to provide a non-negligible subsidy to the technology," said Klaus Toepfer, a former German environment minister and longtime head of the U.N. Environment Program (UNEP), said.

The nuclear insurance in Germany costs utilities 12 million ($17 million) a year or 0.008 cents ($0.015 cents) per kilowatt hour of electricity, a tiny part of the final energy cost to customers of about 0.22 ($0.32 cents).

Increasing the liability coverage to, say, 100 billion ($146 billion) would lead to a premium of about 3.20 ($4.67) per kilowatt hour, according to Bettina Meyer of the Berlin think tank Green Budget Germany.

China, which is under international pressure to lower its use of coal and cut its carbon emissions, is betting on nuclear power to feed its rising energy demand. Yet it has an industry insurance pool covering damages only up to 300 million Yuan ($46 million) and another 800 million Yuan from the government to compensate victims, too little to cover damages in any meaningful way.

The situation is not much better among veteran users of nuclear energy.

In the U.S., where no new reactors have been planned and completed since the 1979 Three Mile Island accident, the necessary insurance for nuclear operators is capped at just $375 million per plant by law, with further claims funded by the utilities up to a maximum of $12.6 billion.

France, a country dotted with 58 reactors, only requires an insurance of 91 million ($133 million) from plant operators, with the government guaranteeing liabilities up to 228 million ($333 million). The figures were similar for Britain, Russia and the Czech Republic.

Damage estimates for a worst-case nuclear disaster differ widely because it is difficult to forecast the spillover effects of a meltdown - death and illness from radiation, compensation for lost work and the economic impact of massive evacuations for years.

The cost of a nuclear meltdown at the Indian Point reactors, located 24 miles (37 kilometers) north of New York City has been estimated at up to $416 billion in a study.


But that does not take into full account the impact on one of the world's great cities.

"A worst-case scenario could lead to the closure of New York City for years, as happened at Chernobyl... leading to almost unthinkable costs," University of Pennsylvania's Howard Kunreuther and Columbia University's Geoffrey Heal said in their 2009 study.

On Wednesday, following a brief visit to Ukraine's crippled Chernobyl reactor, U.N. Secretary-General Ban Ki-moon warned that the,

"unfortunate truth is that we are likely to see more such disasters."


"To many, nuclear energy looks to be a relatively clean and logical choice in an era of increasing resource scarcity. Yet the record requires us to ask painful questions: have we correctly calculated its risks and costs?" Ban said.

In Germany, where Chernobyl's radiation wave blew over in 1986, a 1992 study for the government, the latest official report available, found the total cost of health damages and other economic losses by a nuclear disaster could amount to 7.6 trillion ($11.1 trillion) in today's money.

"If you take all external costs into account, the conclusion is inevitable: Nuclear power is not economically viable," Hohmeyer said. "The risk is only bearable if you externalize it on the wider society."

The majority of Germans and its political parties have concluded that the potential damage outweighs the benefits, and the country now stands alone among industrialized nations in its determination to abandon nuclear power.

But Dieter Marx of Germany's Nuclear Forum, an industry lobby, says no industry has prices that reflect all of its risks, and insists that the risk of a meltdown was very low.

"Ultimately, it comes down to the question of how big a risk the society is ready to bear," he said.