Solyndra, and its possible impacts on nuclear

By Jim Hopf

I’m sure everyone has heard all about the Solyndra “scandal” by now. There have been too many news stories to count on this subject (no need to provide links). So, instead of delving into the details, or giving a blow by blow account of all the events and the hearings in Congress, I will focus on the impacts this whole affair may have on government support for nuclear, and for clean energy in general.

A brief summary of the issue

As part of a general program to support clean/renewable energy sources, the federal government provided Solyndra, the maker of a certain type of solar panel, a $535 million loan guarantee in 2009. Soon after the loan guarantee was awarded, however, market conditions for the company deteriorated, rendering it unprofitable.

The price for solar panels has dropped significantly in the past year or two, primarily due to cheap solar panels produced in China, which heavily subsidizes its solar producers, in addition to having cheap labor. Also, China (and the world in general) appears to have ramped up solar cell production capacity too rapidly, resulting in a supply glut that has, at least temporarily, resulted in a dramatic price drop. It is unclear if most or all solar producers are currently selling at a loss (i.e., not recouping their investment in production capacity), but relatively high-cost producers like Solyndra are clearly being priced out of the market.

As a result, Solyndra recently shut down all operations and filed for bankruptcy. This in turn has resulted in the government losing the $535 million dollars it loaned the company.

The failure of the Solyndra loan has been highly publicized, and has led to congressional investigations and a significant amount of political controversy. Many have accused the Obama administration of incompetence, arguing that the company’s deteriorating prospects should have already been apparent when the loan guarantee was awarded. Others are using this issue to question the general idea of government providing assistance to specific energy sources or companies (i.e., government support of “clean” energy sources).

Nuclear loan guarantees questioned

New nuclear projects, such as at Vogtle, are also receiving federal loan guarantees. Some policymakers, including the Obama administration, would like to increase the nuclear loan guarantee volume.

Markey

Perhaps predictably, nuclear opponents such as Rep. Ed Markey (D., Mass.), have suggested that nuclear loan guarantees should also be scrutinized, or perhaps eliminated, in light of Solyndra. That is, they should be given the same scrutiny/treatment as loan guarantees for renewables. There are significant flaws in this reasoning, however, given the substantial differences in terms between loans given to nuclear projects, and those given to renewable energy projects.

For nuclear project loan guarantees, the government requires that the utility pay a large sum of cash, up front, to the government. This cash payment (the “credit subsidy fee”) is essentially an insurance premium, which compensates the government for the risk of loan default. It is somewhat analogous to mortgage insurance that some homeowners pay. The amount of the cash payment is determined, on a project-specific basis, by the federal Office of Management and Budget (OMB). The required amount can vary significantly for different projects, based on various market factors like whether they are in a merchant or regulated market, if they have a long term power purchase agreement, etc.

The amount of the insurance payment is significant. It can be as much as $1 billion, i.e., a significant fraction of overall project cost; enough to significantly impact the project’s overall economics.

In fact, the cash payments that the OMB has requested have been enough to make a loan guarantee not worthwhile in some cases. Constellation Energy rejected the federal loan guarantee for the Calvert Cliffs-3 project. The government wanted a cash payment of $880 million, equal to 11.6 percent of the total loan amount. Constellation said that not only would those terms render the project non-viable, but that it could probably get better terms on the open market, with no government help. (Some “subsidy”, eh?) In other cases, such as for Vogtle, the calculated fee is much less, and the loan guarantee remains worthwhile.

With renewable project loan guarantees, the OMB also determines the “credit subsidy fee” that would be required to adequately compensate the government for the risk of loan default. As with nuclear loans, the amount of this fee can be very significant, enough to greatly impact the economics of the overall project. (In other words, the OMB has found renewable project risks to be similar to nuclear project risks.)

There is an enormous difference, however. As part of the stimulus package, the federal government has been paying the credit subsidy fees for renewable projects. The fee was determined by the OMB, but then the government appropriated funds to pay that cost. (At least the subsidy is quantified and documented.)

Not only does this difference in terms have a huge impact on project economics, but it also probably has a significant impact on project risk. A nuclear project has to pay the (huge) credit subsidy fee, along with ~$100 million in licensing costs, before it can even start construction. Thus, it has a large investment at stake. With the government paying the credit subsidy fee, renewable projects have much less at stake financially. They don’t have to invest anything up front (or perhaps ever), and the government pays off the loan if the project fails. This, in theory, results in riskier, less viable renewable projects going forward, whereas nuclear companies will do much more in the way of “due diligence.”

Another reason why nuclear loan guarantees may be more justifiable than renewable loan guarantees is the issue of “sovereign risk.” That is, nuclear projects have a significant need to be protected FROM the government. Many in the nuclear industry, who remember the Shoreham debacle, view this as the main reason why government loan guarantees are necessary for new nuclear.

With a government loan guarantee, the government has “skin in the game” financially (even with a credit subsidy fee payment). As a result, it is much less likely that the government will act to kill a project just because it thinks that it may provide some short-term political benefit. For (motherhood and apple pie) renewables, this is not a significant issue.

To summarize all the above, renewable project loan guarantees are very clearly a subsidy, which (as currently structured) may encourage risky loans. It is much less clear whether nuclear project loan guarantees are a subsidy at all, and their current terms, which require large amount of money to be put at risk by the builder, are much less likely to encourage risky projects. Perhaps instead of calling for an end to loan guarantees, Congress should just require that all projects pay the credit subsidy fee determined by the OMB.

Let the “market” decide?

Attacks on the nuclear loan guarantee program, as a result of Solyndra, are not only coming from the (anti-nuclear) Left. They are also coming from the right side of the political spectrum. Many of the Republican presidential candidates were previously supportive of nuclear project loan guarantees, particularly if the project was in their state or district. Now, virtually all of them have come out in opposition to all energy project loan guarantees, including nuclear. Texas Gov. Rick Perry is one notable example.

The argument being presented by most (if not all) Republican candidates is that the government should not “pick winners and losers” in the energy industry (given how Solyndra went), and more generally that the government should not interfere with energy markets, to promote one form of energy over others. Instead, the “market should decide” what energy sources get used.

I have several problems with this line of reasoning. First of all, the notion of a “free” market with no government intervention is a complete myth. There has never been such a free and fair market. Not only is the market rife with subsidies of all kinds, given to all energy sources, but there are also huge differences in the level of regulatory requirements applied to various energy sources. The most notable example are the rigorous regulatory requirements that are applied to nuclear, which are orders of magnitude more strict than those applied to other (notably fossil) energy sources.

The second issue is that, under current policy and regulations, the enormous external (i.e., public health and environmental) costs associated with fossil fuels, particularly coal and oil, are not accounted for by the market, or reflected in their price. This represents a colossal market failure. Scientific studies estimate that accounting for external costs would roughly double the price of coal and oil derived energy.

Spending hundreds of billions of dollars annually to patrol the Persian Gulf (and fight wars in the Middle East) in order to secure oil supplies, but not having that cost paid for by a tax on oil or gasoline, represents an enormous government market intervention. Allowing coal plants to dump massive amounts of pollution into the atmosphere for free (resulting in ~20,000 deaths annually in the United States, along with global warming), is a massive market intervention. Giving shale gas drillers a blanket exemption from the Clean Water Act (while holding anything nuclear to impeccable standards) represents a huge market intervention.

In my September. 28 post, I discussed external costs, and the various options we have for addressing them. One can issue regulations that require reductions in air pollution, CO2 emissions, or oil imports. Alternatively, one can reflect these external costs in the market by imposing taxes on those things. Barring either of those (more enlightened) policies, one can support or subsidize clean energy sources that do not have the above negative impacts.

Conservatives have always been dead set against either the regulatory or financial disincentive (i.e., taxation) approaches, and now, after Solyndra, they are coming out against any type of support for clean, domestic energy sources. Thus, they are against any policies that would correct the enormous market failures discussed above. When they say that the market should decide, they really mean that the current (regulatory and policy) status quo should remain intact. These policies represent an enormously slanted playing field, with what effectively amounts to a large amount of government intervention on behalf of fossil fuels.

Renewable energy sources are also the beneficiary of huge government market interventions, mainly at the state level. In addition to very large subsidies, renewables benefit from portfolio standards that require a large market share for renewables, regardless of their cost or practicality. This is a huge (essentially infinite) subsidy.

Future slanted against nuclear?

As retiring Exelon chairman John Rowe recently pointed out, in the current political climate, renewable portfolio standards are probably going to be the only policies out there to support clean energy, in lieu of more intelligent policies that tax or limit pollution and let the market decide how to respond. That will be a shame, because (as he points out) such policies will result in emissions reductions being achieved in a more expensive way.

Such (renewable portfolio standards only) policies are bad news for nuclear. Under such a scenario, fossil fuels continue to benefit from having their huge external costs not counted, whereas renewables benefit from outright government mandates for their use. Nuclear is left out in the cold.

Nuclear’s external costs are tiny compared to fossil fuels and similar to renewables. It is more economical and practical than (intermittent) renewables in many if not most cases. Thus, it would do very well under any objective playing field where external costs are accounted for but the market is then left to decide.

Just a few years ago, it appeared that such enlightened policies, such as cap-and-trade and significantly more stringent air pollution requirements, were on the horizon. Now, cap-and-trade appears dead and there is enormous pressure to back down on air pollution rules. The possibility of passing (badly needed) limits on air pollution has even resulted in calls by some to eliminate or emasculate the Environmental Protection Agency. No such pressure on the Nuclear Regulatory Commission.

We’ve all been hearing about how the nuclear renaissance is diminished or dead, and how the reason is because (new) nuclear is no longer economical (due to the “shale gas miracle”, or whatever). My view is that much of this is due to government policies, and a market/regulatory playing field that is very slanted against nuclear. I hope the discussions above have illustrated some of the basis for this view.

In any event, the industry needs to aggressively defend the preservation/expansion of nuclear loan guarantees, as well as the formation of a Clean Energy Bank, and a CO2 tax or cap-and-trade system over the longer term. In terms of policy, things have gotten much worse for nuclear over just the last few years, with no CO2 limits, possibly no more loan guarantees, and possibly less strict air pollution requirements. The economic downturn and the gas glut aren’t helping either. Our current (political) course won’t cut it, if nuclear is to have much of a future.

__________________________________

Hopf

Jim Hopf is a senior nuclear engineer with more than 20 years of experience in shielding and criticality analysis and design for spent fuel dry storage and transportation systems. He has been involved in nuclear advocacy for 10+ years, and is a member of the ANS Public Information Committee. He is a regular contributor to the ANS Nuclear Cafe.

15 Responses to Solyndra, and its possible impacts on nuclear

  1. @Jim – great article. You have provided a lot of solid evidence. I will add what I believe is a key point – the slanted policies against nuclear energy are no accident. The US current has the best government that money can buy and there are few industries that control more money than the established coal, oil, and gas industry.

    The major players in that industry – including the Wall Street investors and bankers that profit greatly from its profits and capital requirements – want the rules the way they are. The tilted playing field is the only thing that gives their less energy dense, more wasteful, more polluting, and more costly fuels a chance to maintain a lucrative share of the market for reliable heat.

    That is the basic input to electricity production provided by both burning fossil fuels and by fissioning uranium or thorium.

  2. I think one of the biggest problems is the nuclear industry’s fear of the power and influence of the fossil fuel companies. They’re afraid to criticize the heavy subsidies and the harmful effects of coal, oil, natural gas, and shale oil because they know that the massive fossil fuel propaganda machine will be turned against them. Fortunately, blog sites like this one have helped to dispel some of the negative myths about nuclear energy and the positive ones about fossil fuels and renewable energy. But nothing is really real in America unless its on TV. Unfortunately energy adverstising on television is currently ruled by the advocates of fossil fuels and renewable energy.

    Nuclear advocacy groups need to go on television and talk about the dangers of global warming and dependence on fossil fuels. They also need to address the cost and safety issues concerning nuclear energy relative to other power systems head on by clearing showing the statistics that nuclear energy has clearly been the safest source of electrical energy ever produced in the US. They also need to talk about the enhanced safety of small nuclear reactors. And finally they need to talk about the potential benefits of spent fuel and its enormous value as an energy commodity potentially worth more than $100 trillion and clean energy production.

    The Federal government needs to do its part by finally taking full acquisition of spent fuel from commercial nuclear reactors which the energy utilities have already paid the Federal government for doing and storing them in cask at secure and military protected locations within each State that produces them (for possibly up to 100 years) until they are transported to reprocessing facilities for the production of more fuel. Many States won’t allow any new power plants to be built until the spent fuel problem is resolved.

    Another problem is the nuclear industry’s reluctance to move towards producing carbon neutral synthetic fuels and industrial chemicals for peak load electricity production. Once nuclear power plants begin to produce carbon neutral gasoline, diesel fuel, and jet fuel, you’re going to see an absolute love fest for nuclear energy in America (American know how wins again)! Sure these synthetic fuels might cost a little more than fossil fuels when they first come out commercially ten or twenty years from now. But the Federal government could easily introduce them into the transportation fuel mix more economically by requiring transportation fuel companies to purchase carbon neutral gasoline, diesel fuel, and jet fuel as clean fuel additives since its going to take a few decades for nuclear produce synthetic fuels to completely replace transportation fuels from fossil fuels. The prevalence of plug-in- electric vehicles should also make synthetic fuels a lot more affordable for public consumption ten or twenty years from now.

  3. I have a question that I hope will bring some additional clarity to the loan guarantees for nuclear power plant projects.

    When a project like Vogtle is awarded the loan guarantee, it was my understanding this is not a loaning of money in the traditional sense but rather the government acts as a cosigner for about 80% of the project cost. The project still needs traditional financing but then the government would be on the hook if and only if the project failed to complete. So no money is awarded outright but the promise is made to reimburse the financiers should the project fail.

    Do I have this wrong? Or does it actually work by the government awarding a lump sum to be paid back with interest?

  4. Jason,

    I believe you are right. The govt. is just acting like a co-signer on the loan. No cash has to be appropriated, or given to anyone up front. The govt. backing simply reduces the interest rate on the loan, and increases the chance of finding a willing lender in the first place.

    Unless the project fails, it will cost the government nothing. In fact, the government will make money, since the utility has to pay a large lump of cash upfront (the “credit subsidy fee”) to the govt. The utility does not get that money back.

    It’s a loan guarantee, not a loan.

  5. Jim and Jason — It’s a loan. In nuclear’s case, and possibly others as well, the “guaranteed” funds come directly from the Federal Financing Bank, a unit of the U.S. Treasury. There is as yet no private debt in the federally guaranteed portion of nuclear projects being considered for or conditionally granted loan guarantees. The “guarantee” aspect is actually a device to keep the large sums involved off-budget, so they do not count against the federal deficit.

  6. Jim,
    Thanks for the great article. The discussion at this stage about “loan v. loan guarantee” is stunning: I guess a sign of how innovative financial engineering is killing the real economy today. I agree the externalities you are talking about are very real and create a huge distortion to an energy “free” market. In the meantime, and for the industry to be proactive, I feel we should give some thoughts to the nuclear industry untold externality, i.e the BDB accident like Fukushima. What impact on Price-Anderson? What impact on insurance premiums and taxpayers money?

  7. Catherine,

    My thoughts on the external cost related to (rare) nuclear accidents is as follows. I’ll break it into two areas, what the cost is, and the degree to which it is external (as opposed to internal, i.e., paid for and accounted for in nuclear’s cost).

    It’s pretty clear that the cost from rare nuclear accidents is tiny compared to the (uncounted) external costs of fossil fuels. Whereas worldwide fossil fuel use causes hundreds of thousands of deaths annually, as well as causing global warming, (non-Soviet) nuclear power has caused few if any deaths, even if Fukushima (the only significant event/release in nuclear’s entire ~50 year history) is included. If one considers economic costs (vs. deaths or health effects), we have one significant event (Fukushima) whose total costs will be on the order of $100 billion dollars. Worldwide, nuclear generates ~3.3 trillion kW-hrs per year. Over 30 years, that’s ~100 trillion kW-hrs. Thus, if you assume a Fukushima event once every 30 years (probably a conservative, pessimistic assumption), you have a cost of ~$100 billion divided over ~100 trillion kW-hrs. This works out to only 0.1 cents/kW-hr (insignificant). This compares with external costs of several cents/kW-hr (enough to almost double the cost) for coal and oil.

    In terms of how much the costs of a meltdown are internalized (paid for), it’s notable that the Japanese utility will be required to pay most or all of the ~$100 billion cost of plant decommissioning, contamination cleanup, and public compensation (although the govt. may give them some loans to help them cover the costs in the near term). Again note how coal is allowed to continually dump pollution into the atmosphere, and cause over 20,000 deaths per year in the US, without paying anyone one dime of compensation. Thus, in Japan’s case, the severe accident cost was pretty much fully internalized (i.e., no subsidy or external cost).

    As for the US, there is a $10 billion liability cap (Price Anderson). Of note, however, is the fact that offshore oil drillers have a liability cap of only $75 million, but BP (voluntarily?) paid tens of billions of dollars in cleanup and compensation costs. It’s likely that a US nuclear utility would do the same in the event of a severe nuclear accident (although they too may need some bridging loans).

    I’m not sure how Fukushima would change Price Anderson policy (or implementation). It should be noted that even opponents of Price Anderson estimate the “subsidy” to only be on the order of 0.1 cents/kW-hr (the same order of magnitude as my severe meltdown cost estimate above).

    http://en.wikipedia.org/wiki/Price%E2%80%93Anderson_Nuclear_Industries_Indemnity_Act

  8. Christopher,

    I see you’re with NRDC. While we may disagree in some areas, we may agree in others. I’d like to get your take on my Sept. 28 post, regarding the idea of using total cost (including externalities) as opposed to just raw economic cost, when setting the order of generation in the dispatch queue.

    Is this something that NRDC or Sierra Club could persue, as an alternative policy option that would result in large reductions in air pollution and CO2 emissions (as it would result in large-scale replacement of coal with gas)?

    Such an approach would go a long way towards effectively getting external costs counted, w/o any kind of taxes, and without any kind of govt. subsidy.

    Unlike trying to pass tighter air pollution regulations, the utilities won’t be able to argue that it would threaten sufficient supply, or grid reliability, since this approach would allow coal plants to be fired up if they’re needed (they just won’t be first in line). They may not even be able to characterize it as a cost imposed on them by govt., since the govt. isn’t actually requiring them to do anything.

  9. Chris, I believe you are incorrect. The government is essentially selling a credit default swap on the bonds for the project to the utilities. The bonds are auctioned similar to any other utility debt.

    http://buildamericabondsonline.com/?tag=vogtle

    The “subsidies” are the government getting into the bond insurance business. If a utility doesn’t like the price of insurance sold by DOE, they are welcome to shop around. Personally I’d like to see Southern Company test the markets on a portion of their bonds so the others can get a feel for where the markets are pricing risk.

    We’re in one of the largest bond bubbles of all time. I don’t believe for one second that financing costs are what is holding some of these projects back.

  10. Mr. Hope,

    I’m not a finance guy, but might the situation be similar to that which exists for ordinary home buyers in the current economy? What I’ve heard is that while home loan interest rates are extremely low, mortgage lenders are extremely risk adverse, and thus it is hard for many to get a loan at all. It is harder to qualify, and the required down payment is much higher.

    Thus, although the loan rates (financing costs) may currently be low for industrial projects, due to the bubble you refer to, might it be that these nuclear (or renewable) projects would not be able to get private financing at all, w/o a govt. loan guarantee? Or is the nature of the business that anything is available, to anyone, at the right price?

  11. The way utilities sell their bonds is very different from you and I obtaining a mortgage (due to the size of the debt). Since a utility issues debt in the billions of dollars, they auction it on the open market by paying a fee to Goldman Sacs, Morgan Stanley, etc. Mexico just sold $1 billion in 100 year bonds at about 6%. 100 years!!! I think the power companies can sucker enough people into buying $5 billion in bonds for a nuclear unit without a government backing. However, that government guarantee effectively gives utilities millions in extra profits via financing savings. How many millions is the “million dollar question”.

    You have to look at this problem from the perspective of a utility CEO. If you as the CEO have seen the government support nuclear or propose legislative support, you are certainly going to hold your cards in hope of a sweet deal. You can afford to do that because in the short term electricity demand hasn’t moved much and natural gas is dirt cheap. There are also regulated vs merchant utility dynamics, but that’s another story.

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  13. Jim,

    Thanks for your comments and explanations. I end up with an optimistic figure 5 times your 0.1 ct/ kWh for the externalized costs and here is why…

    In most estimates I found the cost of third-parties compensation alone at Fukushima is in the $ 120 billions range. This cost actually depends more upon the population and the economic activity in the region surrounding the nuclear reactor than upon the actual number of reactors at the facility. The $ 120 billions estimates are site and country specific. In the case of Fukushima, they do not factor in the damage to property caused directly by the natural disasters (earthquake and tsunami), which significantly lowers the bill. We can also note that one severe accident at one reactor only on a multi-units site would have caused the same amount of liability since the problem is the long term relocation of people and businesses.

    The cost of clean-up BEFORE any decommissioning may end up in the same $ 100 billions ballpark range as the 3rd parties compensation costs: we know today that some used nuclear fuel is out of the pressure vessels at all 3 reactors in Japan. I agree this cost is internalized by TEPCO…although with loans from the Japanese government and mandatory increase of electricity prices paid by the captive customers left.

    But if the costs of clean-up on site and decommissioning are “internalized” in Japan, the costs of third-parties compensation are not. The nuclear liability of nuclear utilities is caped up to the Yen equivalent of $ 12 billions, shared by all Japanese nuclear utilities. The Japanese enacted a Law equivalent to Price Anderson in the US throughout the summer of 2011: the difference ($ 120 Billions-$ 12 Billions so roughly $ 100 billions) needed to compensate Fukushima 3rd parties is taxpayers’ money.

    I do not concur with your estimate of probabilistic occurrence of a severe accident at a nuclear plant. Within 50 years of commercial nuclear and 440 reactors worldwide, we had 5 severe accidents with radioactive releases to the environment justifying evacuation of the neighboring people and businesses: TMI, Chernobyl, Fukushima 1-2-3. So we have to expect 1 severe accident every 10-12 years worldwide. We can also note that one severe accident at one reactor only on a multi-units site would cause the same (or greater) damage to third parties, based on decay of the long half-life span of radioactive releases.

    Going back to my calculation, assuming a 2630 TWh per year worldwide nuclear electricity generation (IAEA official figure 2010), the Fukushima external costs are:
    ($ 120 Billions-$ 12 Billions)/2.630 10-12*10 = cents $ 0.46 per kWh.
    This figure alone is almost 5 times the amount the utilities pay today to the nuclear fund for the Government to take care of the nuclear spent fuel (cents $ 0.10 per kWh).

    Please don’t get me wrong. I strongly agree with your overall analysis. My point is only that for nuclear power to be a respectable and respected part of the future US energy mix, hard cold rational economic external costs are not enough. To have a viable future, we need to be ready to face a Fukushima-like event with adequate protection of the public and the environment, thus drastically reducing the externalized costs from nuclear severe accidents. It’s not enough to reassess and confirm the low likelihood of a Fukushima-like external event. The risk of severe accident from a nuclear reactor in the US is today 0.1 *104/440 per year = 2.4% per year. Whatever the statistics, the Black Swan can show up in different shapes, human made or nature made… In other words, to fairly argue “at par” with fossil and renewable fuels, we cannot afford the Fukushima-like consequences of the long term relocation of people and businesses around the nuclear plants.

  14. I can’t agree with your frequency of ~10 years. TMI didn’t have any impact and Chernobyl simply doesn’t count (how is it in any way representative of Western nuclear’s technology and practices?).

    As for Fukushima, note that you engaged in some double counting. When establishing the frequency of accidents, you counted Fukushima as three events (one for each reactor), but you still used the (observed) consequences of the entire Fukushima event when determining the cost of a severe accident (from one reactor).

    What we have is one significant event in the ~50 year history of non-Soviet nuclear power that inflicted on the order of $100 billion in economic damage (including compensation). Admittedly, it’s hard to establish a frequency with only one data point, but the fact that we went ~50 years w/o a significant release is indicative.

    If anything, my 30-year frequency is probably conservative, since it does not reflect any reduction in frequency due to technological advances and the application of lessons learned from Fukushima.

    Your 2.4% figure for the US is too high by a large margin, for numerous reasons. The observed severe accident frequency is closer to 50 years than to 10 years. Most of our plants are more modern (better). Even our Mark 1′s are better than Fukushima. We will make improvements as a result of Fukushima. We do not have anywhere near the earthquake and tsunami risk. Official PRA analyses estimate the severe accident (release) risk to be roughly one per 100,000 reactors years, which would equate to a probability of ~0.1% per year for the entire US.

    What exactly are you asking the US industry to do? Spend an astronomical amount of money to make nuclear’s overall risks even more negligible? If we did so, no new nukes would be built, older nukes would be shut down, and we would use fossil fuels instead, for the most part. This will greatly increase (not decrease) the human health and environmental costs of our power generation.

    What do you mean when you say that nuclear must guarantee no accidents in order to “argue at par” with fossil fuels and renewables? Nuclear is already roughly at par with renewables in terms of external costs, and fossil fuels external costs are vastly higher (more than an order of magnitude higher, even if we accepted your 0.5 cent figure).

  15. Mr. Hope,

    I’m basically interpreting your response as saying yes, the industry should be able to get loans if the interest rate is high enough.

    It may be true that the utility would benefit if it waits for a loan guarantee for a project it was going to build anyway, but it may also true that nuclear would not go forward at all w/o such guarantees, at least for the first few plants. Also, one must be sure to factor in the impact of the (large) credit subsidy fee that must be paid upfront before concluding that the loan guarantee would result in a significant increase in profits. (For renewable projects on the other hand…!).

    Also, I still think my point about needing protection FROM the govt. (i.e., from sovereign risk) is still a valid one. Given the history, I think the nuclear industry has every reason to be afraid of getting screwed by the government (state, if not federal), and that they have every right to demand that the govt. put some of its skin in the game, at least for the first few projects.