Taxpayers must underwrite construction; plants are slow to come online

The nuclear power expansion suggested by Sen. John McCain is likely to cost taxpayers dearly and delay real progress by diverting the money needed for better sustainable energy projects, critics say.

McCain, a longtime supporter of nuclear power, visited the Fermi nuclear generating complex in Monroe, Mich., yesterday to draw attention to his proposal to develop more nuclear power — 45 new plants by 2030. He says this would help reduce dependence on foreign oil.

Opponents of nuclear power have focused mostly on the environmental problems such as waste disposal and the fact that the energy used to start up a nuke plant means the technology is not truly carbon free — but some analysts say the biggest problem with McCain’s call to build nuke plants is economic.

Nuclear power plants are so time consuming and expensive to build that private investors insist that any new nuclear project be heavily underwritten by the government.

Last year, several of the nation’s largest investment banks — Citigroup, Credit Suisse, Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley — told the Department of Energy, “We believe these risks, combined with the higher capital costs and longer construction schedules of nuclear plants as compared to other generation facilities, will make lenders unwilling at present to extend long-term credit.”

At the time, the Department of Energy was in the process of deciding how to allocate $30.5 billion under the Energy Policy Act of 2005, which gave it authority to offer loan guarantees for new and innovative technologies, including new nuclear plants, that reduce greenhouse emissions and are not currently in commercial use.

Michael J. Wallace, the co-chief executive of UniStar Nuclear, a partnership seeking to build nuclear reactors, and executive vice president of Constellation Energy, told the New York Times, “Without loan guarantees we will not build nuclear power plants.”

The DOE elected to offer the bulk of its loan guarantees to the nuclear industry — $20.5 billion. The agency agreed to back financing of 80 percent of the costs of new plant construction.

Critics worry that the loan guarantee program will cost taxpayers billions of dollars, and they note that this Congressional Budget Office report concluded that defaults on loans to nuclear industry are likely:

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.

In an article titled “Forget Nuclear”  Amory Lovins, efficiency expert with the nonprofit resource analysis group Rocky Mountain Institute, argues that nuclear power should be abandoned for economic reasons alone.

“In today’s capital market, governments can have only about as many nuclear plants as they can force taxpayers to buy,” he wrote. “New nuclear power is so costly that shifting a dollar of spending from nuclear to efficiency protects the climate several-fold more than shifting a dollar of spending from coal to nuclear. Indeed, under plausible assumptions, spending a dollar on new nuclear power instead of on efficient use of electricity has a worse climate effect than spending that dollar on new coal power!”

Amy Sauer, policy associate with the Environmental and Energy Study Institute, agrees.

“When you start taking about building new nuclear you are draining the capacity that the government has to develop other energy such as solar, wind, geothermal and biomass,“ Sauer told Michigan Messenger. She added that these other projects are less expensive and quicker to construct.

“Money going into nuclear is subsidizing something with lots of extra costs, security fuel storage, potential health risks,” Sauer said, “Unfortunately there isn’t a lot of awareness that this is a taxpayer liability. When I talk to people outside of the policy field they are not aware how much government provides to the nuclear industry.”

The major beneficiaries of DOE loan guarantees for nuclear plant construction will be major foreign corporations located primarily in France and Japan, Kevin Kamps of Beyond Nuclear told  Michigan Messenger.

Kamp pointed to this DOE report which states:

Major equipment (reactor pressure vessels, steam generators, and moisture separator reheaters) for the near-term deployment of GEN III+ units would not be manufactured by U.S. facilities. Japanese, Korean, and European manufacturers have the capacity to provide major equipment for U.S. GEN III+ units.

Sen. Barack Obama has stated that he will support new nuclear development only when the security of nuclear fuel and waste and waste storage have been addressed.

Even if no new reactors are built, the cost of disposing of existing nuclear waste is skyrocketing. Yesterday the Department of Energy announced that the cost of storing waste at the not-yet-approved Yucca mountain facility in Nevada will cost $38.7 billion more than predicted in 2001.