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.

The Union of Concerned Scientists is the leading U.S. science-based nonprofit organization working for a healthy environment and a safer world. Founded in 1969, UCS is headquartered in Cambridge, Massachusetts, and also has offices in Berkeley, Chicago and Washington, D.C.

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