BEYOND NUCLEAR PUBLICATIONS

Search
JOIN OUR NETWORK

     

     

DonateNow

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.

.................................................................................................................................................................................................................

Thursday
Jan172013

Forbes: "the nuclear renaissance may be largely over before it started" 

"Burning Money" image by Gene Case, Avenging AngelsPeter Kelly-Detwiler, Contributor to Forbes, has published an op-ed entitled "New Centralized Nuclear Plants: Still an Investment Worth Making?" He begins the piece:

"Just a few years ago, the US nuclear renaissance seemed at hand.  It probably shouldn’t have been.  Cost overruns from Finland to France to the US were already becoming manifest, government guarantees were in doubt, and shale gas drillers were beginning to punch holes into the ground with abandon." (emphasis added)

He concludes that "the nuclear renaissance may be largely over before it started," with not only the vast majority of proposed new reactors in the U.S. being cancelled, but even paid-off old reactors like Kewaunee in Wisconsin being permanently shutdown due to crushing economics -- such as the expense of major, vitally needed safety repairs at the 40-year old reactor.

Kelly-Detwiler cites the "takes too long," "costs too much," and "bet-the-farm" nature of nuclear power for the "failure to launch" of the nuclear relapse.

Regarding that last point, Kelly-Detwiler writes:

'So it appears that the nuclear renaissance may be largely over before it started.  And yet, many projects have not yet been canceled, with utilities and ratepayers accepting ever more risk in order to rescue sunk costs. In many cases, these costs have soared or will soar into the billions. As risk management expert Russell Walker of the Kellogg School of Management is quoted as saying in the Tampa Bay Times “When the stakes get higher, it gets harder for organizations to walk away…this happens a lot.  It’s the same problem a gambler has: If I play a little longer, it’ll come around.” '

However, he points out that the only proposed new reactors that seem to be moving ahead are those privileged by Construction Work in Progress (CWIP) funding. He writes:

'In Georgia, Vogtle Units 3 and 4 (owned jointly by a number of utilities, including Georgia Power) appear in somewhat better shape, but issues have cropped up there as well.  Customers currently pay $10 per month in advance to cover financing associated with the two 1,117 MW units.  Georgia Power is allowed by legislation to recover $1.7 bn in financing costs of its estimated $6.1 bn portion of the $14 bn plant during the construction period.  However, there have already been some cost problems, and Georgia Power is disputing its responsibility to pay $425 million of overruns resulting from delays in licensing approvals.  Total cost excesses to all partners total $875 mn.  The two units were expected to come online in 2016 and 2017, but in a Georgia PSC meeting in December, an independent monitor noted that expected delays of fifteen months are largely as a result of poor paperwork related to stringent design rules and quality assurance.  Those delays will likely continue to cost more money...

With low natural gas prices, efficient combined cycled turbines, more efficient renewables and a host of more efficient end-use technologies, that’s a bet fewer and fewer seem wiling to take.  Unfortunately for ratepayers at some utilities, they are at the table whether they like it or not…' (emphasis added)

If the op-ed's title is meant to imply that so-called small modular reactors might still save the day for the retreating nuclear power industry, it must be pointed out that the supposed justification for giant-sized proposed new reactors (such as the AP1000, at 1,100 MWe; the ESBWR at 1,500 MWe; the EPR at 1,600 MWe; etc.) was "economies of scale." Since small modular reactors represent the opposite end of the spectrum, it stands to reason these would be even more expensive than their super-sized, failed siblings.

In a classic February 14, 1985 piece entitled “Nuclear Follies,” Forbes wrote: 

"The failure of the U.S. nuclear power program ranks as the largest managerial disaster in business history, a disaster on a monumental scale. The utility industry has already invested $125 billion in nuclear power, with an additional $140 billion to come before the decade is out, and only the blind, or the biased, can now think that the money has been well spent. It is a defeat for the U.S. consumer and for the competitiveness of U.S. industry, for the utilities that undertook the program and for the private enterprise system that made it possible.”

Friday
Oct262012

"The Rust-Bucket Reactors Start to Fall"

Harvey WassermanHarvey Wasserman, editor of Nukefree.org and author of Solartopia, has written a blog inspired by the announced closure of the Kewaunee atomic reactor in Wisconsin. He begins by stating 'The US fleet of 104 deteriorating atomic reactors is starting to fall. The much-hyped "nuclear renaissance" is now definitively headed in reverse.'

He points out that Kewaunee may be but the first domino to fall, describing the impact of "low gas prices, declining performance, unsolved technical problems and escalating public resistance" at numerous other old, age-degraded, troubled reactors across the U.S., including San Onofre, CA; Crystal River, FL; Cooper and Fort Calhoun in NE; Vermont Yankee; Indian Point, NY; Oyster Creek, NJ; and Davis-Besse, OH.

But Harvey also points out the momentum applies to new reactors as well, such as at Vogtle, GA and Summer, SC, as well as overseas, in the wake of Fukushima, not only in Japan, but also India, and even Europe, led by Germany's nuclear power phase out.

Harvey writes about the flagship new reactors proposed in the U.S.:

"The two reactors under construction in Georgia, along with two in South Carolina, are all threatened by severe delays, massive cost overruns and faulty construction scandals, including the use of substandard rebar steel and inferior concrete, both of which will be extremely costly to correct.

A high-priced PR campaign has long hyped a "nuclear renaissance." But in the wake of Fukushima, a dicey electricity market, cheap gas and the failure to secure federal loan guarantees in the face of intensifying public opposition, the bottom may soon drop out of both projects.

A proposed French-financed reactor for Maryland has been cancelled thanks to a powerful grassroots campaign. Any other new reactor projects will face public opposition and economic pitfalls at least as powerful."

The Vogtle 3 & 4 reactors (proposed new Toshiba-Westinghouse "Advanced Passive" 1,100 Megawatt-electric (MWe) reactors, or so-called AP-1000s) were offered an $8.3 billion federal loan guarantee by the U.S. Dept. of Energy (DOE), announced by President Obama himself in Feb. 2010. Yet, the deal has never been inked. Apparently, Southern Nuclear is unwilling to pony up a mere few tens of millions of dollars, the secretive, small amount of "skin in the game" Obama's Office of Management and Budget has required in the form of a "credit subsidy fee" before the massive taxpayer-backed nuclear loan guarantee can be finalized. 

Similarly, the Calvert Cliffs 3 proposed new French Areva "Evolutionary Power Reactor" (or EPR, a 1,600 MWe design) in Lusby, MD was a lead candidate for a federal nuclear loan guarantee. But Obama's OMB required an 11-12% credit subsidy fee on the $7.5 billion nuclear loan guarantee, amounting to $880 million of "skin in the game." In Oct. 2010, Baltimore-based Constellation Energy indicated it was unwilling to pay that much, and so withdrew its involvement in the project, leaving Electricite de France as the sole partner. But foreign ownership of an American atomic reactor is not permitted by the Atomic Energy Act, so the project appears in its last days, as EDF has failed to find an American partner to replace Constellation.

Another lead candidate for a federal nuclear loan guarantee was the South Texas Project Units 3 & 4, proposed new General Electric-Hitachi ABWRs (so-called "Advanced Boiling Water Reactors," of 1,300 MWe each). However, partners in the proposal included Tokyo Electric Power Company (TEPCO), as well as Toshiba, and the Japan Bank for International Cooperation (JBIC). TEPCO's Fukushima Daiichi nuclear catastrophe, which began on 3/11/11, spelled doom for the South Texas new reactors. The lead U.S. partner, NRG Energy of Princeton, NJ, largely and quickly threw in the towel.

Harvey, a senior advisor to Greenpeace USA and Nuclear Information and Resource Service (NIRS), will address "From Fukushima to Fermi-3: Getting to Solartopia Before It's Too Late" in Dearborn, MI on Dec. 7th at the official launch event for the new organization, the Alliance to Halt Fermi-3.

Wednesday
Oct172012

U.S. House Energy and Commerce Chair Upton attempts flipflop on nuclear subsidies

U.S. Rep. Fred Upton (R-MI)A number of news reporters have noted the significance of U.S. Representative Fred Upton (Republican from Michigan's 6th congressional district, Chairman of the U.S. House Energy and Commerce Committee, pictured left) stating at an October 8th congressional debate at Western Michigan University in Kalamazoo that federal energy subsidies should be eliminated. It is most ironic, for Upton led efforts in the U.S. House to approve $20.5 billion in new nuclear power subsidies in late 2007, a measure then signed into law by George W. Bush on December 23rd, when almost all unsuspecting Americans were focused on holiday celebrations.

Specifically, those subsidies took the form of federal nuclear loan guarantees, making federal taxpayers the co-signers on loans for new nuclear projects. $18.5 billion was designated for new atomic reactors, while $2 billion was designated for new uranium enrichment facilities. Another $2 billion was later added for new uranium enrichment, from a "slush fund" of energy loan guarantees administered by the U.S. Department of Energy.

In Feb., 2010, President Obama himself announced the awarding of $8.3 billion in nuclear loan guarantees for two proposed new Toshiba-Westinghouse AP1000 reactors targeted at Vogtle, Georgia. No other new nuclear loan guarantees have yet been awarded. But, in the aftermath of the Solyndra solar loan guarantee scandal, the Vogtle nuclear loan guarantee has yet to finalized. Apparently, Southern Nuclear is unwilling to pony up a mere tens of millions of dollars of its own (or other private investors') money required by Obama's Office of Management and Budget as "skin in the game." Thus, none of the $22.5 billion in new nuclear loan guarantees approved five years ago has actually been disseminated.

The Kalamazoo Gazette reported:

"...The candidates also disagree on what role the government should have in the energy industry. During Monday’s debate, Upton said he supports removing subsidies for all energy companies, including those that produce oil and gas.

'Let's talk about taking those subsidies away,' Upton said. 'Let the real cost of it be out there and let them compete on an even playing field.'..."

Jackson Citizen Patriot columnist commented:

"...Rep. Fred Upton, R. Kalamazoo, said he 'supports removing subsidies from all energy companies.' If so, he should start with the nuclear power in his district. The federal government subsidizes the nuclear industry more than any other. The Union of Concerned Scientists calculates that it would be cheaper for the federal government to purchase electricity and give it away than to subsidize nuclear power!"

Beyond Nuclear has published a number of exposés on Congressman Upton over the years, including a two page summary, a full 22 page long report, as well as details of the nuclear power industry related Political Action Committee and individual campaign contributions he has recieved in return for his extreme pro-nuclear advocacy on Capitol Hill.

Wednesday
Jul042012

Obama DOE gave Southern Nuclear "sweetheart deal" on Vogtle 3 & 4 loan guarantees

"Burning Money" image by Gene Case, Avenging AngelsThe Inter Press Service has reported that President Barack Obama's U.S. Department of Energy has offered Southern Company a "sweetheart deal" on federal nuclear loan guarantees for the Plant Vogtle Units 3 & 4 proposed new atomic reactors: a 0.5 to 1.5% credit subsidy fee, lower than college students pay on their federal student loans. These facts came to light thanks to a courtroom victory by the Southern Alliance for Clean Energy (SACE), which won a Freedom of Information Act (FOIA) ruling from a federal judge who ordered DOE to divulge the terms of the first and only federal taxpayer-backed nuclear loan guarantee yet conditionally awarded.

Remarkably, Southern Co. has been asked for a mere $17 to $52 million of "skin in the game," in exchange for $8.3 billion in federal taxpayer-backed nuclear loan guarantees for Vogtle Units 3 & 4 -- proposed Toshiba-Westinghouse AP1000s (1,100 Megawatt-electric "Advanced Passive" pressurized water reactors). If Southern and its partners default on their loan repayments, the federal taxpayer will be left holding the bag. To make matters worse, taxpayers are not only guaranteeing the loans, they are also providing the loans. The source of the loans, the U.S. Finance Bank, is federal taxpayer funded. Despite the nuclear loan guarantees, private investment banks have not touched the financially risky project. 

The "moral hazard with a radiological twist" represented by this risky financial scheme puts 15 times more taxpayer funding at risk than was lost in the Solyndra solar loan guarantee scandal ($535 million); NIRS executive director pegs the default risk of Vogtle 3 & 4 as some 50 times higher than Solyndra's.

Despite such favorable terms, President Obama's Office of Management and Budget is still wary of the deal, offering opponents an opportunity to kill it. The "sweetheart deal" revealed by the unearthed documents has prompted Harvey Wasserman of Nukefree.org to ask, "Why should nuke loan guarantees cost less than student or home loans?"

Saturday
May122012

More than $900 million cost overrun documented at Vogtle 3 & 4 new reactor construction project

"Burning Money" image by Gene Case, Avenging AngelsA coalition of environmental groups, including North Carolina Waste Awareness and Reduction Network (NC WARN), has issued a press release decrying a nearly billion dollar cost overrun at the Vogtle 3 & 4 new reactor construction project in Georgia. The groups warn that further cost increases are likely, due to rushed design and construction that has led to errors, as in sub-foundation grading, rebar quality assurance, and even radiological containment "shield building" design and construction.

Such cost overruns, as well as construction schedule delays, could lead to the Vogtle 3 & 4 project defaulting on its loan repayments. This puts $8.3 billion in federal taxpayer nuclear loan guarantees (and even the actual loans themselves, since they come from the taxpayer-funded U.S. Finance Bank) at risk. $8.3 billion is 30 times the amount taxpayers lost to the Solyndra solar loan guarantee scandal.

The coalition's expert witness Arjun Makhijani, President of the Institute for Energy and Environmental Research (IEER), said: “Southern Company rushed into this project, as evidenced by the many requests for modifications of the license and early technical difficulties and problems including failure of ‘some details’ of early construction to conform to the Design Control Document, according to Georgia Power’s filing with the Securities and Exchange Commission.  Indeed, a part of the cost increase of $900 million appears to be attributable to overcoming delays and rushing the project again despite construction non-compliance.  The cost increase should not be a surprise; rather it is déjà vu all over again.  Rushing nuclear power reactors is not prudent and stockholders and/or the vendors, not ratepayers, should bear the burden of such costs.  It would be much better if construction were suspended until all design issues were resolved.”