Nuclear Energy: Bad Policy, Worse Business

[n2doc]

5/3/2011 4:16:05 PM
by Keith Goetzman

President Obama’s tenacity in clinging to nuclear power is astounding. With the Fukushima disaster still spewing radiation into the atmosphere and brutal budget cuts on the table, Obama wants to extend another $36 billion in taxpayer-guaranteed loans to the nuclear industry to build new plants—in addition to the $18.5 billion he has already offered.

Writes Nation environmental correspondent Mark Hertsgaard, “As health, education, and other social services are being sacrificed on the false altar of deficit reduction, $54.5 billion is a massive amount of money. Worse, Obama is shoveling money at nuclear energy at the very same time he has diverted funds from renewable energy.”

...


Even with Obama’s bully-pulpit backing, the phenomenally bad economics of building new plants are dogging the industry, reports the New York Times’ Matthew L. Wald. One expert tells Wald that he thinks nuclear plant construction will “go quiet” for two to five years, and Wald notes that “of the four nuclear reactor construction projects that the Energy Department identified in 2009 as the most deserving for the loans, two have lost major partners and seem unlikely to recover soon.”

Obama’s strategy is for U.S. taxpayers to take on the risk that energy investors are afraid to touch. Having already committed us to $18.5 billion, he wants to effectively triple our exposure.



Read more: http://www.utne.com/Wild-Green/Nuclear-Energy-Bad-Policy-Worse-Business.aspx

[FiveGoodMen]

1. K&R

[bananas]

2. These "loan guarantees" turn out to be actual loans - stealing money from colleges to pay for nukes

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=115x231521

February 17, 2010
Nuclear Loan Guarantees Aren’t Just Guarantees: They are Actual Taxpayer Loans

President Obama’s announcement yesterday of a “conditional” $8.3 billion loan “guarantee” to the Southern Company for construction of two nuclear reactors in Georgia obscured an important fact about the loan guarantee program: taxpayers are not just providing a guarantee, they also will be providing the actual loans.
...
The Federal Financing Bank (FFB) is a little-known government entity that more typically makes loans to universities, colleges, rural electric co-ops and other small-scale projects.
...
“This is not like Dad co-signing a loan for a child’s first car,” said Michael Mariotte, executive director of Nuclear Information and Resource Service. “The idea that these are just loan “guarantees” is fictitious: these are actual loans. Giant nuclear utilities will be raiding the federal treasury for money to build reactors, and they are expecting the taxpayers to bail them out if the project goes bad.”
...

[kristopher]

3. The question that has disappeared is "why are we doing this?"

When this program was launched it was to establish nuclear as a market player; to get the kinks out of the regulatory and financial systems with a couple of pump-priming projects that would lay the groundwork for fission to compete against renewables and carbon-capture technologies.

What happened to that? To my knowledge there is absolutely no remaining expectation that fission will move into the private sector and compete on a level playing field. Is there any evidence that a large scale deployment of new reactors can be accomplished in any way other than as a command & control economic project?

It is worth reposting this:

CBO estimate on nuclear loan guarantees

For this estimate, CBO assumes that the first nuclear plant built using a federal loan guarantee would have a capacity of 1,100 megawatts and have associated project costs of $2.5 billion. We expect that such a plant would be located at the site of an existing nuclear plant and would employ a reactor design certified by the NRC prior to construction. This plant would be the first to be licensed under the NRC’s new licensing procedures, which have been extensively revised over the past decade.

Based on current industry practices, CBO expects that any new nuclear construction project would be financed with 50 percent equity and 50 percent debt. The high equity participation reflects the current practice of purchasing energy assets using high equity stakes, 100 percent in some cases, used by companies likely to undertake a new nuclear construction project. Thus, we assume that the government loan guarantee would cover half the construction cost of a new plant, or $1.25 billion in 2011.

CBO considers the risk of default on such a loan guarantee to be very high—well above 50 percent. The key factor accounting for this risk is that we expect that the plant would be uneconomic to operate because of its high construction costs, relative to other electricity generation sources. In addition, this project would have significant technical risk because it would be the first of a new generation of nuclear plants, as well as project delay and interruption risk due to licensing and regulatory proceedings.

Note the price - in 2002 when this was written, $2.5 billion was to be only for the first plant. Future plants were, according to the assumptions provided by the nuclear industry to MIT, expected to have 40% lower costs as economy of scale resulted in savings.

In fact, since the report was written the estimated cost has risen to an average of about $8 billion.

What does that do to the “risk is that the plant would be uneconomic to operate because of its high construction costs, relative to other electricity generation sources”?

Did that risk diminish or increase when the price rises from $2.5 billion to $8 billion?