Nuclear Power and the Bottomless Bank
Envisioning a Nuclear Future—Funded by Taxpayer Dollars
Congress and the Obama administration are on a course to provide the nation’s nuclear industry an unprecedented financial package—one that could dwarf the combined expenditures of last year’s bailout programs. And the legislative package comes with restrictions that would block the Nuclear Regulatory Commission (NRC) from completely examining untried nuclear power systems.
The extensive support for the development of nuclear power is incorporated in the Clean Energy Jobs and American Power Act moving separately through the Environment and Public Works and the Energy and Natural Resources committees. The House version of the bill passed in June.
If enacted, the legislation would create a special "bank" affiliated with the Department of Energy (DOE) called the Clean Energy Deployment Administration (CEDA), which could potentially provide underwriting for 187 new nuclear power projects—at an estimated cost of $10 to $14 billion each—and assume responsibility for cost overruns and delays.
If the Senate version is approved, there would be unlimited funding for nuclear power projects throughout the country, instead of just in the three states (Florida, Georgia and South Carolina) that allow utilities to bill consumers in advance for the cost of constructing nuclear power plants. Federal investment in nuclear energy would replace that from the Wall Street investment community, which has been loathe to invest in these expensive capital projects.
That reticence, says energy analyst Jim Hempstead of Moody’s Investors Service, stems from the fact that these plants tie up a large percent of a utility’s capital and have a high probability of default. Moody"s, therefore, downgrades the ratings of companies beginning nuclear projects. "History has not been a friend to the sector," says Hempstead. "None of these designs have been approved and there is a significant amount of execution risk."
But forcing taxpayers to fund nuclear plants is "very bad public policy," says Peter Bradford, a former NRC commissioner and former member of the New York State Public Service commission. "It means the entities best positioned to control costs and risks—mainly construction managers and the private financial system—don’t have to worry about those risks." What’s more, he adds: "It exposes taxpayers to very large potential losses when you consider that nearly half of the nuclear plants that received construction permits were cancelled before they came on line."
Specifically, CEDA would take over the loan guarantee authority currently vested in the DOE, which is budgeted at $18.5 billion for nuclear plants underwriting. DOE Secretary Steven Chu told the Senate Committee that the current allocation should underwrite the development of four nuclear power plants.
The Senate bills, however, start the new funding at $100 billion—a figure the Nuclear Energy Institute, the industry’s lobbying arm, calls "a minimum acceptable additional loan volume."
In theory, CEDA would be used to underwrite the development of a variety of technologies having difficulty obtaining funding on Wall Street. To that end, the House version of the bill states no more than 30% of the funds can go to any one energy source. The Senate versions, however, remove that restriction.
"This is pretty breathtaking," says Ellen Vancko, nuclear energy and climate change project manager for the Union of Concerned Scientists. "On top of the loan guarantees, they are looking for investment tax credits, production tax credits, worker training tax credits, changes to the IRS codes for nuclear decommissioning funds and the inclusion of nuclear energy in the nation’s renewable energy standards. That’s pretty ambitious.
"If all these risks get shifted from the private sector to the public sector, then why don’t we just nationalize the nuclear industry like the French?"
In addition to financial support, the industry is pushing for provisions that would bar NRC engineers from examining the capabilities of new reactor systems. In practice, the NRC tests each major system designed for a new reactor, and then tests its interaction with previously certified systems. This helps uncover unforeseen glitches as complex electrical and pressurized systems interact. But under proposals in the bills designed to streamline the approval process, once a system is approved it could not be subject to a new test. Public hearings on nuclear safety issues, under the bills, would become informal and non-binding instead of an integral part of the license review process.
Between the trillion dollars in construction loan guarantees and the regulatory restrictions, says Vancko, it’s celebration time for the nuclear industry. "If they can eliminate the public and tie the hands of the regulators and get the taxpayers to pick up the bill, they should be able to move along quite nicely," she says.
ROGER WITHERSPOON is an environmental journalist, educator and author specializing in energy issues and the founder of the Association of Black Journalists.