Nuclear Projects Looking for a Savior
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It was just a few hours ago when I wrote that I thought I’d be delving into the topic of nuclear energy a little more soon. Well, soon is now.
This post is about two nuclear reactors that are an urgent matter to some (in the nuclear industry and politics) and also, potentially, the source of a very big bill for U.S. taxpayers.
On July 30 (Friday), the Nuclear Information and Resource Service (NIRS) wrote:
Less than ten days ago, the Senate rejected a House-passed emergency supplemental funding bill that included $9 Billion in new loans for nuclear reactor construction. Now, Senator Kay Bailey Hutchison R-Texas) is trying to attach that $9 Billion to any bill that might get through the Senate. She offered it to a bill to assist small businesses (never mind that no nuclear utility qualifies as a small business), but Senate Majority Leader Harry Reid refused to let this amendment (and dozens of others) take up valuable Senate floor time.
Now we have growing concern that Sen. Hutchison, or another nuclear proponent, may try to attach it to Senator Reid’s modest energy bill, which is expected to be considered on the floor of the Senate next week and which currently contains no support for nuclear power.
What’s all the haste about? Two nuclear projects — UniStar Nuclear’s Calvert Cliffs-3 in Maryland and NRG’s South Texas two-unit reactor proposal — are in serious trouble and need a guarantee from the public sector (i.e. taxpayers) to bail them out if things get worse.
UniStar Nuclear’s Calvert Cliffs-3 in Maryland
Earlier this week, one UniStar partner, Maryland’s Constellation Energy, said it needs a loan guarantee by the end of summer or it might end the project; while the other partner, Electricite de France, yesterday took a $1 Billion+ write-off of its investment in UniStar. These developments come on top of growing concern over serious safety deficiencies in the Areva EPR reactor design chosen for the project.
Yes, safety concerns about the technology come up and the massive companies building the project want loan guarantees to make sure they don’t have to worry about anything if things go wrong.
NRG’s South Texas Nuclear Project
NRG’s South Texas project has been in trouble for many months. Its main partner, the City of San Antonio, essentially dropped out of the project. Its investment has been only partially replaced by a group that is primarily the Japanese company Toshiba. NRG also has warned it needs a loan guarantee quickly or it will give up.
Again, a nuclear project needs a massive loan guarantee or the risk of the project isn’t worth it.
Taxpayers to the Rescue?
The Department of Energy, which has been exceptionally supportive of nuclear energy of late, is now under pressure to save both of these projects, but it only has $10 billion to give out in nuclear loans.
$9 billion more would help them from having to decide which failing nuclear project to save.
Recall this from my post earlier today: “From 1943 to 1999 the U.S. government paid nearly $151 billion, in 1999 dollars, in subsidies for wind, solar and nuclear power, Marshall Goldberg of the Renewable Energy Policy Project, a research organization in Washington, wrote in a July 2000 report. Of this total, 96.3 percent went to nuclear power.” (emphasis added)
NIRS nails the ridiculousness of this (but also the easy practicality for these nuclear power players). Couldn’t word it better:
Why U.S. taxpayers should support giant foreign corporations (Electricite de France is the world’s largest electric utility, for example), especially ones that already have written off their investments in these projects or will simply drop out if the taxpayers don’t pick up their tab now, is beyond us. Neither project even has a license to build a new reactor, and neither will have one for at least two more years. Make no mistake: these nuclear loans are taxpayer bailouts for nuclear power projects that cannot and will not succeed on their own. Not because companies like Electricite de France and Toshiba can’t afford to build nuclear reactors, but because they don’t want to use their own money to do so. They want us to take their risks.
If you want to do something to address this matter (if don’t want your taxes to go up to pay for these unnecessary and over-hyped nuclear projects, or would rather that $9 billion go into something that benefits you more), you can write your Senators easily (just by adding your zip-code) and share this info with your friends on NIRS’ website.
I encourage you to do so.
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Photo Credit: James Marvin Phelps (mandj98) via flickr
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Well, I would encourage anyone reading this to remember that the NIRS is an anit-nuclear group and is therefore not a valid source for unbiased information.
Your posts on nuclear power show a lack of research and misunderstanding of the issues at hand.
@MG: Just bcs NIRS is anti-nuclear doesn’t mean they don’t have good reasons for being so, and good research (done by others) to back up their reasons.
Time to wake up
1. All the new Nuclear builds were built on the presumption of acquiring loan guarantees. Construction hasn’t started and won’t start till loan guarantees are handed out. It transfers risk from the investors to the taxpayer, but unless the project goes bust the taxpayers won’t pay a cent.
2. Renewable technology gets similar loan guarantees.
3. Loan guarantees have nothing to do with safety. They are designed to reduce premiums by lowering risk, hence lowering cost which allows Nuclear to become viable. Risk, as in construction delays. Most safety ‘issues’ raised with both the AP-1000 and EPR designs need to be corrected before any plants enter construction so it’s a non-issue.
3. RE: Subsidies – what you said it at odds with other sources such as: i. ‘A half century of US federal government energy incentives’ – Roger H. Bezdek* and Robert M. Wendling. ii. ‘Federal Financial Interventions and Subsidies in Energy Markets 2007’ – EIA. It is also a better idea to look at the underlying reasons why previous Nuclear builds had failed.
@Scott: exactly, on point number one. Without taxpayers taking on the risk, investors don’t see it as a good investment.
4. Most of the safety ‘issues’ with new designs may not require any change in the design. It may just be as simple as the reactor vendor demonstrating that the design is sound.
Zach,
You don’t like solar. What technology do you have in your pocket that can be scaled to the size of a 3,000 MW plant in any location across the country and run base load power night, day, windy or not, sunny or not without producing any air emissions?
Excuse me- I meant Zach doesn’t like “nuclear” 🙂
@Zachary – do you know the difference between a grant and a loan? Politically favored renewable energy projects in the US have been receiving 30% grants from the federal government in lieu of future production tax credits. A project that might cost $500 million receives $150 million in direct payments from the taxpayers. In the American Recovery and Reinvestment Act nearly $60 billion was set aside for these payments, often to very large companies like BP, Chevron, GE, Siemens, Vestas, Iberdrola, and NextEra Energy (formerly known as FPL Group).
In contrast, the nuclear projects that you are referring to will be getting loan guarantees that cover loans that must be repaid. They will pay a fee to the government, just like a person that gets an FHA loan or a student loan that covers the cost of the guarantee. The companies also have to invest at least 20% of the project cost as equity that would be lost if they defaulted on the loan.
The DOE is doing serious due diligence on these loan guarantees and there is very little chance of a default.
The reasons that the projects are in trouble is that the loan guarantee program was authorized by the Energy Policy Act of 2005, but the very first awarded guarantee did not get issued until a couple of months ago. The company have already invested hundreds of millions of their own money, but they need to have a completed financing package before they can move forward. The government will get its money back unless some obstructionists who would prefer for electricity to be generated by burning coal or natural gas gets in the way of the project completion.
Rod Adams
Publisher, Atomic Insights
@ Rod: yes, i know the different between a grant and a loan and a loan guarantee.
The grants you are talking about are 30% tax credits, these tax credits were allowed to be taken as cash upfront to help pay for equipment like a solar installation, due to the recession, only if the company had no profits the next year (due to the recession!) to take tax credits against.
Most clean energy got loan guarantees like Solyndra. And a solar loan guarantee is a much surer bet than a nuclear one. Very little chance of a default? Where does this statement come from?
The article is a typical antinuke propaganda – these are not “loans”, DoE does not provide any. These are loan guarantees, which the applicant has to pay a hefty fee to obtain. The situation with loan guaranteers is the following: private companies paying cash to the government, not the other way around, as the article suggests.
After several plants were either built and prohibited from operating by a government fiat; or plants canceled and abandoned as the government kept changing the rules of the game such that everything would have to be scrapped and redone so the costs went ballistic, it is not surprising that investors need a guarantee from the government that they will not be cheated out of money again.
@tt23: yes, exactly. they are loan guarantees. already discussed this in reply to other comments… and in the article itself
Re this post and one from 6/24 did the nuclear industry etc.
Very interesting, although not surprising, to learn about the nuclear industry’s success hitching its deregulation wagon to bills having to do with green jobs, energy independence, and climate change.
Are you aware of similar problems with the Cantwell/Collins CLEAR Act?
How about other similar bills that start out being well-intentioned efforts to address energy problems & climate change and end up becoming deregulation vehicles?
BTW, the PSR radio interview with Patterson, Bradford, Lyman, and Curran was very good. We need more of those. About 6-8 months ago, I searched for intelligent discussions re subsidization of the nuclear industry and its claims of being safe, and came up with only marketing claims from the NEI and shouting matches between industry CEOs/NEI representatives and people who disagreed with their claims.
It’s going to be very tough to keep deregulation of the nuclear industry out of energy/climate legislation, especially given President Obama’s reference to it being a necessary part of energy independence in his first SOTU.