For many environmentalists, nuclear power is anathema. The disasters in Chernobyl and Fukushima, and the near-disaster at Three Mile Island, have tarnished the reputation of this technology, as has the connection to nuclear proliferation and the problems of long-term storage of radioactive waste. Some countries have even started phasing out nuclear power altogether. After Fukushima, Germany has shut down 8 out of its 17 reactors and has committed to phasing out the remaining 9 reactors by the end of 2022. Other European countries are also distancing themselves from nuclear power. Is nuclear power on its last legs? Should it be? Is nuclear power irreconcilable with environmentalism?

The three major nuclear accidents have done much to tarnish the public perception of nuclear power. Fears about nuclear accidents are very high despite the fact that conventional fuel sources are much more risky. During the early 2000s, China reported more than 5,000 deaths from coal mining every year. Fortunately, this number has started dropping in the last few years but still hovers over 1,000 deaths per year. In addition, the World Bank estimates that exposure to particulates from burning coal is linked to 750,000 premature deaths in China every year. Despite these horrific statistics, coal mining continues to expand, not only in China. There is perception bias. Single large-scale accidents such as Fukushima receive much more attention than the many small-scale accidents. Flying is much safer than driving, yet many more people have fears of flying than fears of driving.

Even after Fukushima, nuclear power deserves a careful second look. Mark Lynas has written a very readable non-technical book that summarizes the potential of new types of nuclear technology. In Nuclear 2.0: Why A Green Future Needs Nuclear Power, he argues that nuclear power is the most important large-scale commercial technology to combat climate change. If we are serious about driving down greenhouse gas emissions, we still need energy from another source. While renewable energy sources (sun, wind) are making tremendous progress, these technologies are not yet scaling up sufficiently, and in the right places. Carbon-free nuclear power can help get us to necessary carbon reductions quicker. As an economist, I may hasten to add: at what cost? And an engineer would add: and how safely?

First: technology. There are three main issues to consider: safety, proliferation, and storage. Nuclear technology has made enormous progress since the development of the first generation of light-water reactors. Passive safety features have become the norm. In Fukushima, where power failure (and failure of back-up generators) led to a failure of the cooling system and then to a partial core melt-down. Passive safety systems do not require power. There are designed to function entirely without power, making sure that reactors cannot overheat even when cooling systems fail. Concerns about proliferation and storage are linked to the nuclear fuel that is common today: uranium. Unfortunately, uranium can also be enriched for building nuclear weapons, and the radioactivity from nuclear waste of spent uranium lingers for thousands of years. One technology, Canada's heavy-water CANDU design, can work with natural uranium and does not requires enrichment. But there is also another type of nuclear fuel—thorium—that could replace uranium. Thorium cannot be used for nuclear weapons, and nuclear waste from thorium has fewer long-lived transuranic byproducts. Thorium technology has not been actively developed, and as a result it is not yet a commercially-viable technology. Other types of fourth-generation nuclear designs are much more likely to be commecially viable in the short term, including variations of the CANDU design.

This brings us to the economics of nuclear power. Few nuclear reactors have been built within their original cost estimates. Cost overruns, many due to delays and regulatory changes, have been the norm. As most nuclear reactors are unique designs, there are few if any economies of scale. The closest a country has come to any substantial economies of scale in design is France, which operates 59 nuclear power plants France, by the way, has also one of the lowest electricity costs in the European Union, according to the OECD; industrial users in France pay about 20% less than their German counterparts. Nevertheless, cost remains the main obstacle to greater use of nuclear power. The answer to the cost challenge probably lies in mass production of smaller units of nuclear reactors, rather than few but large reactors. These smaller units can still be stacked together into an array. Managing many small units rather than few large units can also help with seasonal changes in electricity demand. Smart design strategies can make nuclear power more economical than it is currently.

How does nuclear energy compare to other forms of power economically? Perhaps one of the most reliable comparisons comes from the United States Energy Information Administration, which has compiled detailed calculations of Levelized Costs of Electricity (LCE). The estimated cost for new generation resources in the year 2019 comes to 64.4 $/MWh for advanced combined cycle natural-gas fired power plants. Adding carbon capture and storage brings the LCE to 91.3 $/MWh. Advanced nuclear is 96.1 $/MWh. Wind energy is calculated as 80.3 $/MWh, and Hydro at 84.5 $/MWh. In short, nuclear is not much more expensive than other sources.

What makes nuclear power relatively more expensive than other sources is the high cost of financing the large capital expenditure. Not unlike hydro dams, nuclear power power plants require large up-front investments that need to be financed. The method of financing matters, whether it is through debt, equity, or through governments. Construction delays can increase that cost significantly. It is clear that nuclear power can only succeed economically if (1) nuclear reactors can be made smaller and more modular so that they can be produced with economies of scale; (2) technological improvements (passive safety features) reduce the cost and complexity of designs; and (3) the long-term cost of handling nuclear waste can be avoided by switching from uranium to thorium. It will be an uphill battle for nuclear.

Research by Mark Jacobson and Cristina Archer points to the possibility that wind power alone could satisfy the world's energy needs. While that is theoretically possible, the required land use is enormous and becomes progressively expensive as one moves to less-ideal wind locations. For rapidly-growing countries like China and India, wind alone will not suffice. Unsurprisingly, these countries are giving nuclear energy a serioius look. Nuclear energy is not a panacea for climate change, but it can be a vital part of the portfolio of solutions. For countries with ample supply of natural gas, combined-cycle gas turbines with carbon capture and storage are another low-cost opportunity to move away from coal quickly.

Electricity generation requires a portfolio approach—a mix of base-load power plants and peak-load power plants. As the share of intermittent energy sources (wind and solar) grows, we also need new forms of grid-scale storage (see my blog on flow batteries) and we need to provide complementary generating capacity— power plants that can be ramped up and down quickly to provide back-up. Gas-turbine plants and hydro are particularly useful for load balancing, while nuclear power can fit into this portfolio as a base-load provider. It may be interesting to observe that wider user of intermittent power and wider use of nuclear power will require expansion of the existing electric grid. Load balancing over larger grids increases the share of base load and spreads the fluctuations introduced by more intermittent sources.

Nuclear power will remain a divisive topic, as the above two campaign buttons from Germany suggest ("nuclear power? yes please" and "nuclear power? no thanks"). Nuclear consensus appears unattainable as the camps are neatly divided into "yes" and "no". Germany's exit from nuclear power appears somewhat premature. While shutting down old, obsolete or risky plants makes eminent sense, shutting down newer and safer plants early appears like a costly mistake—one that is compounded by the need to fill the gap with more coal-burning power plants. Despite a significant increase in renewable energy in Germany, reaching almost 30% of electricity generation, greenhouse gas emissions in Germany held relatively steady in the last few years and rose slightly in 2013.

Germany's exit from nuclear power will be overshadowed by China's massive entry into nuclear power. As of September 2014, mainland China had 21 nuclear reactors in operation, 27 under construction, and several more about to start construction. It is expected that China's output of nuclear power will increase more than four-fold from 12 GWe at the end of 2012 to to at least 58 GWe by 2020, and to about 150 GWe by 2030, according to the Wold Nuclear Association. If China can radically reduce its emissions of greenhouse gases from coal-fired power plants due to the expansion of nuclear power, the country will become the pioneer of nuclear environmentalism.