Can We Afford More Subsidies for Nuclear Power?

The
Senate may finally start debating climate and energy legislation now
that Sens. Barbara Boxer (D-Calif.) and John Kerry (D-Mass.) have
introduced the Clean Energy Jobs and American Power Act. But the
addition of a nuclear provision to the bill raises some questions. What
will be the fate of the so-called nuclear power renaissance, and to
what extent will taxpayers be asked to underwrite it?

Expanding nuclear power capacity in the United States
beyond the current fleet of 104 reactors -- which do not emit global
warming pollution when operating -- has the potential to help combat
climate change. Nuclear power currently generates about 20 percent of U.S.
electricity, and building more reactors could reduce the 50 percent
market share held by coal-fired power plants, the nation's primary
source of global warming emissions.

But
is nuclear power a climate solution we can afford? The short answer,
according to the Union of Concerned Scientists (UCS), is no. As UCS
Nuclear Energy and Climate Change Project Manager Ellen Vancko notes,
"Even if you discount nuclear power's current security and safety
problems, the skyrocketing cost of construction could be the industry's
Achilles' heel."

Wall
Street has made it clear that it will not finance the nuclear
industry's expansion without federal loan guarantees because of the
high risks and uncertain costs associated with such investments. A
recent Moody's report characterized investments new nuclear plants as a
"bet the farm" risk, stating that companies that build new reactors
will take on a higher business and operating risk profile, which will
threaten their credit ratings.

To
circumvent these financing challenges, the nuclear industry is
supporting legislation that was passed by the Senate Committee on
Energy and Natural Resources in June. That bill, S. 1462, would
underwrite the industry's expansion by creating a new Clean Energy
Deployment Administration (CEDA). Although CEDA's provisions are poorly
understood, the implications of this pending legislation are enormous,
according to UCS.

A
recent Congressional Budget Office (CBO) report concluded that S. 1462
would exempt the Department of Energy's (DOE) Loan Guarantee Program,
which was established under the Energy Policy Act of 2005, from Federal Credit Reform Act provisions requiring such programs to be funded each year by congressional appropriation. "The
effect of this exemption," the CBO stated, "would be to give DOE
permanent authority to guarantee such loans without further legislative
action or limitations." That means DOE could give
virtually unlimited loan guarantees to expensive and risky new
technologies, all underwritten by taxpayers without congressional
oversight. (For the CBO report, go to www.cbo.gov/doc.cfm?index=10637.)

"The
Congressional Budget Office estimates that the Energy Department could
hand out more than $130 billion to nuclear and fossil fuel energy
projects," Vancko said. "That's a lot of money. But what is even
more alarming is that CBO's calculation is based solely on pending
Energy Department loan guarantee applications. It does not include an
estimation of the hundreds of billions of dollars in additional loan
guarantees that could be approved by a new energy bank if this program
becomes law."

Vancko recently co-authored a briefing paper, "Nuclear Power: A Resurgence We Can't Afford," which is available at www.ucsusa.org/nuclear_power/nuclear_power_and_global_warming/nuclear-power-resurgence.html.
In it she provides a clear-eyed look at the nuclear industry's history
of cost overruns, projections of current reactor construction costs,
comparisons with cleaner, more cost-effective low-carbon energy
options, and the potential risks to taxpayers from overly generous
federal subsidies and loan guarantees. Another UCS briefing paper from
earlier this year, "Nuclear Loan Guarantees: Another Taxpayer Bailout
Ahead?," should also be of interest.

For that report, go to www.ucsusa.org/nuclear_power/nuclear_power_and_global_warming/nuclear-loan-guarantees.html.

Ellen Vancko is available for interviews. Please call Elliott Negin at 202-331-5439.