Nuclear Power Surge Coming
With this week's application to build a new nuclear plant - the first such filing in nearly 30 years - the industry says the US is on the verge of a nuclear power renaissance.
With virtually no greenhouse-gas emissions, reactors are touted as part of the solution to global warming. Over the next 15 months, the Nuclear Regulatory Commission expects a tidal wave of similar permit applications for up to 28 new reactors, costing up to $90 billion to build.
But the renaissance may be less robust than it looks. Even if the projects are successful and building proceeds at breakneck speed, the lead times are so long and costs so high that it's unclear that the US can build enough nuclear plants to make a dent in greenhouse-gas emissions by 2050. They're so financially risky, experts say, that the only reason building plans are under way is that the federal government has stepped in to guarantee investors against loan defaults.
"Clearly, [nuclear power companies] are not so confident or they wouldn't want the federal government and taxpayer to be guaranteeing the loans," says David Schlissel a longtime nuclear industry analyst with consulting firm Synapse Energy Economics in Cambridge, Mass.
The industry says it needs the aid to get nuclear power rolling again.
"Yes, we need some help and assistance getting these large projects off the ground," says Paul Genoa of the Nuclear Energy Institute (NEI) in Washington. "This will always be labeled as subsidies. But one person's subsidy is another person's incentive. These are the first nuclear power plants to be built in years and there's a role for government here."
Also, loan guarantees don't affect taxpayers unless those loans are defaulted on, he points out.
Under the Energy Policy Act of 2005, the industry already is getting an estimated $12 billion in tax breaks and other largess. The Price-Anderson Act, a law dating from the 1950s, caps the industry's liability at about $10 billion in the event of an accident, even though studies show that a major nuclear meltdown could easily run 50 times that.
Now, the Senate version of a new energy bill includes a provision that could provide tens of billions of dollars more in federal-loan guarantees. On Tuesday, the Energy Department announced it would provide up to $2 billion in federal risk insurance for the first six new nuclear-plant projects, protecting them against losses from regulatory or legal delays.
"In my view, these kinds of taxpayer subsidies are vital to the industry, and they wouldn't be building any of these new nuclear plants without them," says Doug Koplow, president of Earth Track, a Cambridge, Mass., consulting firm that analyzes subsidies for all forms of energy, including biofuels.
The nuclear industry gets about $9 billion a year in federal subsidies, he calculates, trailing only oil and coal in federal energy aid. That amount could go far higher if companies were to begin defaulting on guaranteed loans, he adds.
The nuclear industry has already put Congress on notice that it could require loan guarantees of at least $20 billion for planned projects - and more later, NEI officials told The New York Times in July.
The reason is that nuclear power plants are far more expensive to build than coal- or gas-fired facilities. For example: On Monday, New Jersey-based NRG Energy Corp. filed its application with the Nuclear Regulatory Commission to build two reactors in Texas at a cost between $5.4 and $6.7 billion.
That huge startup cost might make financial sense, given a reactor's low operating expenses, especially if government begins to charge utilities for the greenhouse gases they produce. Nuclear power is virtually emission-free.
But the last time that the nuclear industry was on a building spree - in the 1980s - roughly half of the power plants proposed were never finished, in part because of fears caused by the accident at Three Mile Island. Those that were finished were delayed for years and cost far more than estimated. A number of power companies went bankrupt. In late 2003, NRG - the company that filed Monday's permit application - emerged from bankruptcy caused by overexpansion in the 1990s.
If defaults occur in the new round, critics worry federal costs will be huge.
"This is the second or third 'nuclear renaissance' I've seen," says Tyson Slocum, director of energy program at Public Citizen, Ralph Nader's consumer-protection group. "When you look at the cost of these plants and the massive financial subsidies by US taxpayers, I think that money would be better invested in cheaper sources of emissions-free power that don't have the fatal flaws nuclear power does."
In 2003, a Congressional Budget Office analysis warned of potential default rates of 50 percent or more on new plants.
Wall Street is also skeptical. In a July letter to the Department of Energy, six investment banks, including Citigroup and Goldman Sachs, made it clear that federal guarantees were required. "We believe many new nuclear construction projects will have difficulty accessing the capital markets during construction and initial operation without the support of a federal government loan guarantee," they wrote.
The risks might be worth the cost if nuclear power can have a substantial impact in slowing global warming. But even some industry experts doubt that's possible. To reduce carbon dioxide emissions by 1 billion tons annually, the level set by some scientists as a goal for nuclear power, the world would need to build 21 new 1,000-megawatt nuclear plants per year - about five of those annually in the US - for the next 50 years, says a Keystone Center report endorsed by the NEI. The US industry reached that level in the 1980s. But even under its most optimistic assessment, the Energy Information Administration recently projected that only about 53 nuclear power plants would be built by 2056. At that rate, this would not even replace the existing nuclear capacity expected to be retired during that time, the Keystone report said.
While such a conclusion would seem to blunt nuclear power's appeal, industry experts predict that climate legislation is likely to boost the cost of carbon-dioxide emissions. When it does, nuclear power construction will be suddenly very competitive with coal power - and that will accelerate growth faster and farther than predicted, they add.
Nuclear power "clearly can't do it all, but will do its share" to mitigate greenhouse-gas emissions, says Mr. Genoa.