Loan Guarantee Program and Nuclear Power
Although the nuclear industry is proposing to build new nuclear reactors in the United States for the first time in nearly 30 years, Wall Street has made it clear that experience with nuclear reactor construction in the 1960s and 1970s has made investors wary of putting money in such risky projects. So the nuclear industry lobbied the administration and Congress to shift the massive financial risks of new reactors from investors to taxpayers. Lawmakers complied in the Energy Policy Act of 2005 (EPACT 2005). Among the more than $13 billion in subsidies, tax breaks and other incentives for the construction of reactors in the statute, its Title XVII establishes a loan guarantee program under the U.S. Department of Energy (DOE).
This program authorizes the DOE to guarantee loans taken out by industry for 10 types of “new or significantly improved technologies” that are supposed to reduce greenhouse gas emissions. “Advanced nuclear energy facilities” are included in the list. Although nuclear power is only one of more than 10 eligible technologies, the nuclear industry is demanding a massive amount of taxpayer-backed loan guarantees. The risk of default on loan guarantees for new nuclear plants is “very high—well above 50 percent,” according to a May 2003 Congressional Budget Office (CBO) report. The program authorized in 2005 has yet to grant a loan guarantee, although DOE has apparently identified four companies for the conditional loan guarantees, which would not become final until reactor license approval is issued by the Nuclear Regulatory Commission, which is several years away at best. Seven planned reactors from these four companies are under consideration: Unistar Nuclear in Maryland (one reactor at the Calvert Cliffs site), SCANA in South Carolina (two reactors at the V.C. Summer site), Southern Company in Georgia (two reactors at the Vogtle site), and NRG Energy in Texas (two reactors at the South Texas Project).
Given that DOE has the authority to hand out only $18.5 billion in loan guarantees and that the current estimated price tag for a single reactor is $9 - $15 billion, it is clear that DOE will not be able to fully back all of the new nuclear reactors currently under consideration. Even so, it is Public Citizen's position that the escalating and indefinite costs for new reactors coupled with the uncertain and risky cost recovery renders this technology unqualified for a financing mechanism that legally puts U.S. taxpayers on the hook.