February 22, 2010
The passion surrounding nuclear power is engaging Washington as two issues have reentered the public domain: increasing loan guarantees to new projects and the casting aside of a permanent storage facility for nuclear waste.
While the nuclear industry has gotten a second wind, it is still getting sideswiped by opponents. As such, it may be too soon to pronounce its official revival. But the reality is that the energy source has earned bipartisan support. The Bush administration saw it as a way to increase the nation's energy independence while Obama's team mostly views it as a potential tool to combat climate change.
Under the 2005 Energy Act, Congress authorized loan guarantees and then instructed the U.S. Department of Energy to devise the program. At the time, $18.5 billion had been allocated for such purposes. Now, that level has increased to $54.5 billion -- with the first two totaling $8.3 billion for reactors to be built in Georgia.
"Coupled with the solid bipartisan support for nuclear energy that exists in Congress, the Administration's initiative will make a meaningful difference in bringing about development of the nuclear energy facilities that our nation needs to meet rising electricity demand and increasingly stringent environmental requirements," says Marvin Fertel, president and chief executive of the Nuclear Energy Institute and a panelist at the upcoming EnergyBiz Leadership Forum.
The active nuclear applications for 22 new reactors pending with regulators would be in addition to the 104 reactors that are currently operating in the United States. But no such reactors have been ordered here since the 1970s. Since then, the financial risks have been high as lenders fear project delays and excessive capital costs.
Backers of the loan guarantees emphasize that they are not taxpayer handouts but rather a form of insurance that will entice Wall Street bankers to invest in their enterprises. Understandably, financial institutions see an opportunity to lend billions to new deals -- a potential that remains elusive with the current set of regulatory and financial risks.
Opponents of those guarantees, conversely, say that nuclear plants are expensive and uncompetitive and have a proven track record of cost overruns. If they are unable to receive private financing then taxpayers should not become a backstop.
"With hundreds of billions in bailouts already on the shoulders of U.S. taxpayers, the country cannot afford to move forward with a program that could easily become the black hole for hundreds of billions more," writes the National Taxpayers Union and other conservative groups to the president.
The one thing that both sides can agree on is that the capital costs associated with constructing nuclear power plants are tremendous. According to Moody's Investor Services, the number is akin to $9 billion per reactor -- a lot more than a conventional fossil-fired plant or a renewable energy facility.
Gaining Ground
The Union of Concerned Scientists fears that the huge increases in loan guarantees will sop up money that could go to other, greener energy forms. It's particularly concerned about escalating construction costs, which it says will lead to ever-rising electric rates.
The group is also highlighting previous failures in the nuclear sector, saying that taxpayers and ratepayers once paid an estimated $40 billion in costs for abandoned nuclear plants. Ratepayers also shelled out, it adds, $200 billion in today's dollars to compensate for earlier cost overruns by the industry. Close oversight is essential, emphasizing that the Energy Department estimated in 2002 it would cost $3 billion for a new reactor and by 2008 it increased that estimate to $9 billion.
Higher construction costs, though, are not the exclusive domain of one power sector. The rising cost of steel, concrete and copper that are used to build everything from windmills to combined-cycle natural gas plants to nuclear facilities are infectious. According to Cambridge Energy Research Associates, a power plant that cost $1 billion in 2000 would run on average $2.17 billion today.
While the thirst for power is now stalled, the government is projecting energy demand to be 23 percent greater in 20 years than it is now. According to the Energy Information Administration, the nation needs about 50,000 megawatts by 2014 and 258,000 megawatts by 2030. That will cost about $412 billion through 2030.
Nuclear power is positioning itself to be part of the long-term solution. Clearly, with the focus on curbing greenhouse gases and becoming energy independent, the movement to resurrect the nuclear industry is gaining ground.
But just as the Obama administration awarded the sector substantially more in loan guarantees it simultaneously ended the possibility that Yucca Mountain in Nevada would become a permanent resting place for spent fuel. Instead, the industry must continue to store such material in above-ground dry cask storage. Long-term, though, it must choose among expanding existing sites, finding a permanent place or discovering a scientific breakthrough to allow the spent fuel to be recycled.
"The industry does not support the termination of this (Yucca) program but believes that, if it is going to happen, it should occur in an orderly manner to permit the licensing process to be restarted if ever warranted," says Fertel.
The move to end Yucca Mountain had been expected. The decision to increase the level of loan guarantees had not. While the industry considers both matters central to its future, its more immediate objective is to show that new plants can be both safe and economical. Its day will come, to the dismay of some, although the waiting period is likely to be longer than the industry would hope.
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