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Loan Guarantees

New reactor construction is so expensive and unpredictable that no U.S. utility is willing to take the risk without the backing of federal loan guarantees, potentially in the hundreds of billions of dollars. Beyond Nuclear and others fight to prevent the mature nuclear industry from seizing any such subsidies which are better spent on true climate solutions such as renewable energy and energy efficiency programs.

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Thursday
Aug142014

Cost overruns and schedule delays at proposed new reactors in GA, SC, and TN

Aerial image of Vogtle nuclear power plant in GA, showing the operational Units 1 and 2, as well as the construction site for the proposed Units 3 and 4. Photo credit: High Flyer.We told them so. As the environmental movement warned 14 years ago, when the nuclear relapse was hatched by the Bush/Cheney administration, proposed new reactors at Vogtle 3 & 4 in Georgia, Summer 2 & 3 in South Carolina, and Watts Bar 2 in Tennessee are suffering major cost overruns and construction schedule delays.

Southern Alliance for Clean Energy (SACE) has published an update on Vogtle 3 & 4, which currently are suffering a 21-month schedule delay, and $1.4 billion cost overrun. The delays could well get worse, at a staggering cost increase of $2 million per day of delay!

Similarly, as reported by SRS Watch, delays of up to three years, and cost overruns topping $500 million, are afflicting the Summer 2 & 3 proposed new reactors in SC.

Note that those April 1st projected opening dates for the new reactors at Voglte and Summer, listed in the updates above, are no April Fool's joke. GA and SC ratepayers are already being gouged for the new reactors' troubled contstruction, on their electricity bills.

Vogtle 3 & 4's financial risks also now implicate federal taxpayers, in the form of a $6.5 billion loan guarantee, likely to soon grow to an $8.3 billion loan guarantee. This is compliments of the Obama administration. So, if Vogtle 3 & 4 default on their loan repayment, federal taxpayers will be left holding the bag. This is 15 times more taxpayer money at risk than was lost in the Solyndra solar loan guarantee scandal. And that risk, of Vogtle 3 & 4 defaulting on its loan repayment, was judged, years ago, by the likes of the Congressional Budget Office and Government Accountability Office, as a much greater risk than Solyndra defaulting on its loan repayment.

Vogtle 3 & 4, as well as Summer 2 & 3, are Toshiba-Westinghouse AP-1000 reactors. They are experimental, never having been built before anywhere in the world, although AP-1000s are also under construction in China.

The proposed new reactor in Tennessee, that is also suffering cost overruns and schedule delays, is the Tennessee Valley Authority's long-mothballed Watts Bar Unit 2.

To add to the irony, the existing reactors at Vogtle, Units 1 & 2, were the poster child for cost overruns in the last generation of reactor construction, coming in at 1,300% their originally estimated cost!

And the operational Watts Bar Unit 1 took 23 years to build, from 1973 to 1996!

Monday
Jun092014

Markey, Burgess Release Report Showing Legal Concerns over Energy Dept.’s Deals with Uranium Enriching Company

U.S. Senator Ed Markey (D-MA)A new GAO report, requested by U.S. Senator Edward J. Markey (D-Mass., photo left) and U.S. Rep. Michael Burgess (R-Texas), finds that the shuttered U.S. Enrichment Corporation (USEC) facility received hundreds of millions of dollars worth of uranium, while ignoring laws and losing taxpayer money.

The report details a pattern of actions by DOE that kept USEC’s facility in Paducah, Kentucky open and subsidized the development of questionable centrifuge technology at its Ohio facility, even as the company was rated as junk bond status, threatened with de-listing from the New York Stock Exchange, and ultimately spiraled into bankruptcy.

USEC was seeking a $2 billion federal taxpayer-backed loan guarantee for its American Centrifuge uranium enrichment plant in Portsmouth (Piketon), Ohio, but the deal fell apart amidst USEC's financial "meltdown," as well as due to technical difficulties with the technology's development.

“Our government has kept this uranium company on life support, wasting money and flouting the law, even though it was clear that it would end up in bankruptcy. This is the kind of government waste that Americans just don’t understand,” said Senator Markey, who is a member of the Environment and Public Works Committee. “It’s time to commit this junk technology to the junk bin.”

Some of the uranium involved is associated with supplying replacement tritium for U.S. nuclear weapons.

Sen. Markey has issued a press release, including a summary, and a link to the full 112-page GAO report.

Wednesday
Apr232014

Radioactive "Moral Hazard": DOE loans, and guarantees, $6.5 billion for two new reactors for a 0%, $0.00 credit subsidy fee!

Aerial image of Plant Vogtle Nuclear Generating Station - photo credit to High Flyer. The photo shows the operating Units 1 and 2, as well as the construction site for proposed new Units 3 and 4.Southern Alliance for Clean Energy reports in a press release entitled "New Documents Confirm Utility Giant Southern Company Gets Sweetheart Deal from Energy Department for Multi-Billion Nuclear Loan Guarantees for Vogtle Reactors":

"As revealed today in an Energy & Environment News story by Hannah Northey, the credit subsidy fee for utility giant Southern Company and its utility partner, Oglethorpe Power, for billions of dollars in taxpayer-backed federal loan guarantees, is nothing, $0. This shocking information was disclosed two months after the Department of Energy (DOE) finalized terms of $6.5 billion worth of loan guarantees that were offered as part of an $8.3 billion package to build two new nuclear reactors at Plant Vogtle in Georgia. A third partner in the project, MEAG, has yet to have their $1.8 billion loan guarantee finalized."

Please register your disapproval of this nuclear sweetheart deal, at taxpayer expense and risk, to President Obama, your two U.S. Senators, and your U.S. Representative! You can be patched through to your Members of Congress via the Capitol Switchboard at (202) 224-3121.

BACKGROUND

President Obama himself announced the $8.3 billion loan guarantee offer for Vogtle 3 & 4 in Feb. 2010. After four years of wrangling, the new reactor proponents have managed to convince Obama's DOE to provide the loan guarantees at no charge whatsoever.

The credit subsidy fee is supposed to be charged to the new reactor proponents so they have at least some "skin in the game," and to provide at least some meager protection to taxpayers if the project goes "belly up." Over a decade ago, the Congressional Budget Office reported that the history of new reactor projects reveals a whopping 50% risk of default.

In fact, of three dozen proposed new reactors targeted at the U.S. just several years ago, all but a handful are either indefinitely suspended, or outright canceled.

The only four actually under construction -- Vogtle 3 & 4 in Georgia, and Summer 2 & 3 in South Carolina -- have relied on gouging ratepayers through "Construction Work in Progress" surcharges -- or "nuclear taxes" -- on household and business electricity bills, a practice that is illegal in most states.

To that, Vogtle 3 & 4 now have added the advantage of federal nuclear loan guarantees -- which could leave taxpayers holding the bag for $8.3 billion. That's 15 times more taxpayer money than was lost in the Solyndra solar loan guarantee default -- only Vogtle 3 & 4 are at a much higher risk of defaulting that was Solyndra!

As Nomi Prins, a senior fellow at Demos, and author of All the Presidents' Bankers: The Hidden Alliances That Drive American Power, said on April 22, 2014 on KPFA's "Letters and Politics" (beginning at the 18 minute 27 second mark):

"...When money has no consequence, using it improperly has no consequence. Therefore, speculation or reckless activities with that money can create greater havoc for the broader population."

Economics refers to such dynamics as "moral hazards." With the Vogtle 3 & 4 proposed new reactors, the moral hazard comes with a radioactive twist. If the project simply defaults on its loan repayment, a total of $8.3 billion in taxpayer money could be lost to the U.S. Treasury. But if the two new reactors are actually built and operated, the public could bear costs not just to their pocketbooks, but also to their health, safety, security, and environment.

(Check out this op-ed Beyond Nuclear's Kevin Kamps submitted to public radio's "On the Media" in Nov. 2008, focusing on the habit of the media using nuclear metaphors to describe financial crises, but rarely covering literal nuclear risks or disasters themselves! Ironically, "On the Media" did not run with it. Nor did several other media outlets approached with similar op-ed ideas.)

In the form of the high-level radioactive wastes that would be generated, those risks would extend forevermore into the future. In fact, George W. Bush's DOE committed the U.S. taxpayer to ultimate liability for Vogtle 3 & 4's high-level radioactive wastes in his last day's in office, signing contracts with the nuclear utility just a day or two after Barack Obama won the presidential election, but before he took the oath of office.

Several years ago, when Obama's DOE demanded an 11-12% credit subsidy fee (amounting to $880 million) from Unistar Nuclear (a partnership between Constellation Energy and Electricité de France) to build a giant French Areva reactor on the Chespeake Bay in Maryland at Calvert Cliffs nuclear power plant, Constellation not only walked away from that particular project -- it got out of the new reactor biz altogether! The U.S. Nuclear Regulatory Commission was forced to end the licensing proceeding when the French partner could not find a new American partner, due to prohibitions on majority foreign ownership of reactors in the U.S. under the terms of the 1954 Atomic Energy Act.

Another top contender for federal loan guarantees were the proposed new Units 3 & 4 at South Texas Project nuclear power plant. However, its major foreign partners were Japanese, including Tokyo Electric Power Company. Shortly after the Fukushima nuclear catastrophe began at TEPCO's Daiichi nuclear power plant in March 2011, the U.S. partner, NRG of New Jersey, withdrew from the project. The Japanese consortium, including Toshiba, Hitachi, and the Japan Bank for International Cooperation, could not entice a new American partner to join the scheme.

Beyond Nuclear's Kevin Kamps attended (and took notes on, including making commentary) the giddy DOE-Southern Co. press conference featuring Energy Secretary Moniz announcing the $6.5 billion loan guarantee deal at the Vogtle 3 & 4 construction site on Feb. 20, 2014. Moniz said he looked forward to Vogtle 3 & 4's operation commencing “In four years, [although] I wish you could accelerate it by a year.” (Although DOE promoted the press conference on its own website, Georgia Power's PR department, a division of Southern Co., actually ran the press conference. Talk about a "private-public partnership" to promote nuclear power!)

A Southern Co. senior executive, perhaps not realizing the microphone was still on, joked back at the conclusion of the press conference “It would take me two hours to tell you why we can’t go faster.”

All joking aside, nuclear power is very slow to deploy. The last reactor to come online in the U.S. took 23 years to build! As Brice Smith of IEER wrote in his seminal 2006 book Insurmountable Risks: The Dangers of Using Nuclear Power to Combat Global Climate Change, nuclear power is not only too astronomically expensive, it is also too glacially slow, to solve the accelerating climate crisis.

Vogtle 3 & 4 have already experienced significant cost overruns, as well as schedule delays, in the past several years of construction.

Moniz spoke at the press conference of "$30 billion out, $40 billion yet to play" in terms of federal energy loan guarantees (emphasis added: note the gambling metaphor!). That includes another $10.2 billion for new atomic reactors, and $4 billion for new uranium enrichment, authorized several long years ago now.

Moniz also spoke enthusiastically about Small Modular Reactors (SMRs). DOE, on his watch, has granted nearly half a billion dollars of taxpayer money towards SMR R&D, despite SMR consortia putting their grand schemes on indefinite hold for lack of interested customers!

Urge Energy Secretary Moniz to direct federal support towards safe, clean, and cost-effective renewables such as wind and solar, not dirty, dangerous and expensive nuclear power!

Friday
Mar282014

RMI: "Nuclear Power's Competitive Landscape and Climate Opportunity Cost"

Amory B. Lovins, Cofounder and Chief Scientist, RMITitiaan Palazzi, Special Aid, RMIAmory B. Lovins, Cofounder and Chief Scientist, and Titiaan Palazzi, Special Aid (photos, left), of the Rocky Mountain Institute in Snowmass, CO, presented "Nuclear Power's Competitive Landscape and Climate Opportunity Cost" at "Three Mile Island 35th Anniversary Symposium: The Past, Present, and Future of Nuclear Energy" held at the Thayer School of Engineering at Dartmouth College in Hanover, NH, on 28 March 2014.

Lovins and Palazzi report that, when compared to nuclear power: (1) Efficiency and renewables are far cheaper; (2) Renewables can deliver similar or better service and reliability; (3) Renewables can scale faster;  and (4) For climate protection, efficiency and renewables are far more effective solutions than new nuclear build, which indeed is counterproductive.

Lovins and Palazzi's economic critique extends not only to proposed new atomic reactors, but even to existing, age-degraded reactors. They state "Reactors are promoted as costly to build but cheap to run. Yet as Daniel Allegretti ably described, many existing, long-paid-for U.S. reactors are now starting to be shut down because just their operating cost can no longer compete with wholesale power prices, typically depressed by gas-fired plants or windpower."

Speaking about new build, they point out that "five U.S. units enjoy special nonmarket conditions." These include two proposed new reactors, Vogtle 3 & 4, in Georgia, and two new proposed reactors, Summer 2 & 3, in South Carolina. All four enjoy construction work in progress (CWIP) "nuclear tax" surcharges on ratepayer electricity bills, while Vogtle 3 & 4 also enjoy $8.3 billion in federal taxpayer-guaranteed loans.

Lovins and Palazzi conclude that "efficiency is clearly cheaper than average nuclear operating costs, which exceed 4¢/kWh [4 cents per kilowatt-hour] at the busbar and 8¢ delivered. Thus overall, for saving coal plants’ carbon emissions, efficiency is about 10–50x more cost-effective than new nuclear build—or about 2–12x more cost-effective than just operating the average U.S. nuclear plant."

Regarding nuclear power's retreat, Lovins and Palazzi report:

"Nuclear power also has to run ever faster to stay in the same place as its 1970s and 1980s growth turns into a bulge  of retirements. After the next few years, retirements will exceed all planned or conceivable global nuclear additions, even with all license extensions as shown here. Power reactors’ terminal decline will be over by about 2060—and in view of both competition and aging, this projection by Mycle Schneider [Mycle Schneider et al., World Nuclear Industry Status Report 2013] is more likely to overstate its longevity than its brevity."
They conclude their presentation by stating: "So whether you choose e fficiency, cogeneration, or renewables, just being nearly carbon-free does not make new nuclear build an effective climate solution. Rather, because it saves ~3–50x less carbon per dollar than its main competitors, and deploys slower, new nuclear build reduces and retards climate protection. If climate is a problem, we must invest judiciously, not indiscriminately, to get the most solution per dollar and per year. Anything less makes the problem worse. Nor do we need nuclear power to offset PVs’ and windpower’s variability, or to scale faster than renewables, or to save or make money, because, as we’ve seen, nuclear power cannot do any of these things. So there is no reason to build more nuclear plants. Capital markets, seeing big new costs and risks without offsetting benefits, long ago reached the same conclusion. Existing nuclear plants, a future idea whose time has passed, will simply retire; the only choice is how quickly and at what cost to whom. End of story." (bold added)
Thursday
Feb202014

DOE signs $6.5 billion federal nuclear loan guarantee for Vogtle 3 & 4

Aerial image of Plant Vogtle Nuclear Generating Station - photo credit to High Flyer. The photo shows the operating Units 1 and 2, as well as the construction site for proposed new Units 3 and 4.U.S. Secretary of Energy Ernest Moniz has announced that the Department of Energy (DOE) will sign an agreement with Southern Co. and Oglethorpe Power for a $6.5 billion loan guarantee that puts federal taxpayers on the hook if the Vogtle 3 & 4 new reactor project defaults on its loan repayments. This, despite the fact that the project is seriously over budget and behind schedule, as has been so common in the history of nuclear power. The sluggish construction has only been able to slog along thus far due to gouging of ratepayers via Construction Work in Progress (CWIP) surcharges on their electricity bills, illegal in most states.

Energy Secretary Ernest Moniz will speak at the proposed new reactor construction site at 2 PM Eastern today, Thursday, Feb. 20th (you can listen to his address by calling 1-800-282-1696).

President Obama gave the Vogtle 3 & 4 federal loan guarantee offer (for a total of $8.3 billion) the highest profile possible, by announcing it himself at a press event in Feb. 2010. Despite this, it has taken over four years for the project proponents to sign on the dotted line, given their reluctance to put any of their own "skin in the game," in the form of credit subsidy fees. The nuclear loan guarantee program was authorized in the 2005 Energy Policy Act, and $22.5 billion was approved by Congress and George W. Bush for new nuclear facilities on Dec. 23, 2007 ($18.5 billion for new reactors, $4 billion for new uranium enrichment).

The $8.3 billion Vogtle 3 & 4 federal loan guarantee is 15 times bigger than the infamous Solyndra solar loan guarantee, which defaulted on its loan repayment, a $585 million loss to the U.S. Treasury. But the Vogtle 3 & 4 loan guarantee is at much higher financial risk of default than was the Solyndra solar project!

Beyond Nuclear's Paul Gunter blasted the deal in a Common Dreams interview. Southern Alliance for Clean Energy (SACE) also blasted the deal in a press release. Harvey Wasserman has penned an essay entitled "Obama's Nuke-Powered Drone Strike on America's Energy Future."

Please contact President Obama and Energy Secretary Moniz, registering your disapproval of this $6.5 billion nuclear loan guarantee, and urging them not to grant the remaining $1.8 billion nuclear loan guarantee to project partner MEAG for Vogtle 3 & 4. Also urge them to withdraw any further nuclear loan guarantee offers, with the remaining $10.2 billion authorized for new reactors, and $4 billion authorized for new uranium enrichment.

But the federal nuclear loan guarantees, and even the CWIP charges which are gouging Georgia ratepayers, are not the only subsidies benefitting this proposed new reactor project. If Vogtle 3 & 4 do get built and operated, the George W. Bush DOE also obligated U.S. taxpayers to ultimate liability for the risks and costs of the high-level radioactive waste they would generate. DOE hastily signed the contract in the last days of the Bush administration, despite the fact that federal courts are awarding $500 million per year in damages to nuclear utilities for DOE's breach of contract for failing to begin taking title to irradiated nuclear fuel in 1998 under the contractual agreements signed in the mid-1980s. The hastily signed contacts were exposed by D.C. attorney Diane Curran, IEER President Arjun Makhijani, and Beyond Nuclear's Kevin Kamps in a March 24, 2010 press conference based on a FOIA Request.