Nuclear Regulation's Perverse Incentives

One of my go-to guys on nuclear energy is Jack Devanney, now retired after forty years managing nuclear projects and wrestling with nuclear regulators. Here’s his latest insight:

“When we build a nuclear plant, we give an omnipotent regulator monopoly control over the project. The regulator sees no benefit from the low CO2, near zero pollution electricity produced by the plant, but he owns any problems. To escape that responsibility, he relies on rigid procedures and voluminous paperwork, which documents that all procedures have been followed religiously. So whatever happens, it's not his fault.”

“By stifling technical progress, squashing competition, demoralizing workers, diverting management, and diluting responsibility, this perverse set of incentives often results in shoddy quality. The solution to the resulting problems and screw ups is still more rigidly prescribed procedures, more detailed paperwork, more time consuming sign offs and approvals, and the downward spiral continues. Such a system always results in additional costs and delays. If unchecked, those costs explode and the delays become interminable, as happened at [the two new Vogtle plants in Georgia] and elsewhere. This is not a problem for the regulator; and it's his incentives that control the project.”

Devanney’s point applies in many types of government regulated activities. The regulator has to overregulate to protect his own position, no matter how senseless or costly the outcome.


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