Jurassic Parc -Marketplace dinosaur seeks more public financing.

Jurassic Park
Marketplace dinosaur seeks more public financing.

By MARK HAIM
Published Tuesday, November 20, 2007
In a July 31 interview with a New York Times reporter, Michael Wallace, co-chief executive of UniStar Nuclear - Ameren's partner in the proposed new Callaway reactor - said, "Without loan guarantees, we will not build nuclear power plants."


They've picked our pockets before, and now they are back for more, tens of billions more. Having failed the test of the marketplace nearly three decades ago, the nuclear power industry has repackaged itself. Today it's trying to sell its overpriced product as the answer to global climate change. Wall Street isn't buying it, however, so the nuclear lobby wants you and me, the taxpayers, to underwrite a whole new generation of plants. They want $50 billion in federally guaranteed loans. And that?'just a down payment - the amount they?re asking for fiscal years 2008 and 2009.

More than 50 years ago, when the Atoms for Peace program began, its backers promised us limitless energy so abundant it would be "too cheap to meter." By 1985, Forbes Magazine declared, "The failure of the U.S. nuclear power program ranks as the largest managerial disaster in business history, a disaster on a monumental scale." And in 2001, The Economist, Britain's leading financial journal, wrote "Nuclear power, once claimed to be too cheap to meter, is now too costly to matter."

For decades nuclear power has been a classic example of lemon socialism. Taxpayers have picked up the tab for everything from research and development to assuming ultimate responsibility for the deadly waste that needs to be isolated in perpetuity, to acting as the insurer of last resort in the event of a major nuclear accident. Over the 50-year period of 1948-1998, nuclear power received $74 billion in federal research and development subsidies (in constant 2003 dollars). This was 56 percent of all federal energy research and development money.

Despite nearly six decades of pump-priming and $13 billion in new subsidies in the 2005 energy act, nuclear power is still not ready to stand on its own two feet. Before Congress agrees to underwrite a new generation of nuclear dinosaurs, I hope they will consider the following:

* The last U.S. nuclear plants were ordered in 1973. No one really knows how much a new nuclear plant will cost or how long it will take to build one.

* Plants being built in Finland, China and Taiwan are all significantly over budget and behind schedule. In September, Thompson Financial reported Finland?s Olkiluoto-3, the first reactor to be ordered in Western Europe since the disastrous 1986 Chernobyl accident, is delayed more than two years. Its original cost estimate was 3 billion euros ($4.35 billion), but this has now risen to 4.5 billion euros ($6.53 billion), and the latest estimated completion date is still four years off; thus the final price tag is still unknown.

* Moody's Investor Services in October estimated new generation nuclear plants in the United States will cost as much as $6 billion to $9.6 billion each, more than double optimistic industry projections.

* The leading U.S. investment banks, including Citigroup, Goldman Sachs, Merrill Lynch and Morgan Stanley, in comments for rulemaking on the Federal Loan Guarantee Program, indicated their unwillingness to finance new nukes. They said in part: "We believe these risks, combined with the higher capital costs and longer construction schedules of nuclear plants as compared to other generation facilities, will make lenders unwilling at present to extend long-term credit."

* The Congressional Budget Office shares this skepticism. In a 2003 report examining costs of the prospective energy bill, it expressed concern that taxpayers would be saddled with heavy losses if loan guarantees were provided for nuclear plants, saying in part: "CBO considers the risk of default on such a loan guarantee to be very high - well above 50 percent. The key factor accounting for this risk is that we expect that the plant would be uneconomic to operate because of its high construction costs relative to other electricity generation sources."

* The Government Accountability Office in February expressed its concerns that taxpayers would bear an undue burden if the government implemented a loan guarantee program, saying in part: "Although LGP guidelines call for borrowers to be charged fees to cover program costs, the program could result in substantial financial costs to taxpayers if" the Department of Energy "underestimates total program costs." They went on to say, "DOE will have to estimate the subsidy cost to determine the fees to charge borrowers, but it currently has no policies or procedures for doing so. Estimating this cost could be difficult because the program targets innovative energy technologies, and loan performance could depend heavily on future economic conditions, including energy prices, which are hard to predict accurately."

Where are we headed?

Before diving, it?s essential to know how deep the water is and what rocks might lie below the surface. If we, the taxpayers, underwrite eight large new nuclear plants to the tune of $48 billion, we might be saddled with huge losses.

Even if everything went well, however, with no defaults, is this really the best place to invest our limited funds? Consider: If eight large nukes are built, we would net only 12,800 megawatts of generating capacity. This $48 billion, coincidentally, is about the same amount of capital currently invested in the entire global wind industry. But $48 billion has purchased 74,000 megawatts of generating capacity.

If our interest is in cutting our use of fossil fuels - both because they are finite and because burning them alters the climate - the fastest and most cost-effective route is investing in efficiency improvements and renewable energy sources. We can get the energy we need, and get it more quickly and more cheaply, if we eschew the nuclear option. We would also avoid the downsides of nuclear power, including waste, accident risks, terror threats, transportation issues, weapons proliferation risks and more.

As Amory Lovins, CEO of the Rocky Mountain Institute, said in a 2006 paper, "Every dollar invested in nuclear expansion will worsen climate change by buying less solution per dollar."

If we take seriously the charge to address climate change and peak oil, we must move expeditiously to invest in efficiency and renewables. We can?t afford to allow the nuclear industry to hijack our energy policy and divert us from cost-effective solutions.


Mark Haim has been active around sustainability and energy concerns for more than 30 years. He is a co-founder of Missourians for Safe Energy.