Energy Sec Unaware That Nuclear Loans Have 50 Percent Risk of Default

Source: Mother Jones

Energy Sec Unaware That Nuclear Loans Have 50 Percent Risk of Default

— By Kate Sheppard
| Tue Feb. 16, 2010 11:08 AM PST

The Obama administration on Tuesday announced a loan guarantee for the first new nuclear reactor to be built in the US in decades—part of a planned $54.5 billion program to kickstart a nuclear revival using government-backed loans. Yet Chu said he was not aware of a Congressional Budget Office study showing that the chances of default on these loans are "very high—well above 50 percent."

"I don't know of the CBO report," Chu told reporters during a conference call on Tuesday. "We don't believe the chance of default is 50 percent. We believe it's far less than that." The first loan guarantee, worth $8.33 billion, was awarded to two proposed reactors to be built by Southern Company at Plant Vogtle in Burke, Georgia.

As Mother Jones has reported, the proposal to encourage nuclear construction via massive federally backed loans represents a major risk for the US taxpayer. While the nuclear industry as recently as 2005 claimed the price tag for a reactor was $2 billion, independent estimates now put the cost as high as $12 billion.

In fact, the economics of the nuclear industry look so dicey that Wall Street banks—no strangers to high-risk investments—have for several years balked at financing new plants unless the government underwrites the deal. "There will be no nuclear renaissance beyond what the government is willing to underwrite," Peter Bradford, a former member of the Nuclear Regulatory Commission who is now a professor at Vermont Law School, told Mariah Blake in a recent piece for Mother Jones. And the nuclear industry has not been shy about announcing its reliance on the taxpayer. "Without loan guarantees we will not build nuclear power plants," Michael J. Wallace, co-chief executive of UniStar Nuclear and vice president of Constellation Energy, told the New York Times in 2007. That means the government would assume almost all the risk.

"Even Wall Street traders say these reactors are too risky to invest in...

Read more: http://motherjones.com/blue-marble/2010/02/chu-not-aware-nuclear-default-rates

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According to a recent comprehensive analysis, delivered power from new nuclear plants is expected to be between 25-30 cents /kwh. That is more than any other source of generation by a huge margin.

Nice if you're in the nuclear (nookular?) power business. Almost as good as being employed by JP Morgan.

Or do they only pay if the utility fails to?

I support nuclear power, but it seems to me that the if the government is carrying the risks, they should also reap the benefits. They should just provide the loan directly and earn the interest on it.

where it can be "lost".

for building 5 nuclear plants

http://www.historylink.org/index.cfm?DisplayPage=output.cfm&File_Id=5482

Seriously.

of the opposition that goes up against new nuclear plants and reactors? With the federal government behind the new builds that changes things. Even says in the article that banks have balked unless the government underwrote things, which they haven't done until now.

Areva is having such huge cost overruns, they're thinking of going back to their older "Generation II" reactor designs.
New reactors in the US are already having huge cost overruns and they haven't even started construction yet - can't blame that on "opposition".
The US regulations were changed in 2005 under a Republican President and Republican Congress to keep "opposition" from affecting construction, but the banks still balk unless the government completely underwrites them.
So, no, it's not because of "opposition".

The worst bang for our buck, and it increases the number of terror targets. What are we doing this for?

7c a kwh for industrial consumers. Even when it is raining and the wind is not blowing.

What electricity costs from a new plant is what it costs; pointing to what one consumer pays only indicates that someone else is getting shafted.

considerably less expensive.

and we have some of the lowest rates in the country.

Wiping out the cost of construction. The price of electricity from future construction is expected to be $0.25-0.30 /kwh. That is, unless they too go through a series of bankruptcies and the taxpayers are again left holding the bag.

I did some online searching on the plant (Fort Calhoun) and could not find anything saying they ever filed for bankruptcy. Additionally, how would bankruptcy work, as it is owned by the public power district?

It is a well known and discussed part of the historical picture of the industry. Why do you think they need the loan guarantees? No other source of power generation needs them for building a generating plant, but investors wont touch nuclear precisely because they go bankrupt so often.

http://www.rmi.org/rmi/pid257#E08-01

Wiping out the cost of construction. The price of electricity from future construction is expected to be $0.25-0.30 /kwh. That is, unless they too go through a series of bankruptcies and the taxpayers are again left holding the bag.

I like to hear rationales. Bases for conclusions. Assumptions to bridge where facts fail. Sources for facts. Not every detail: just enough to make the conclusion at least reasonably believable.

The CBO report: How old? Based on the track record? Based on projections? What's the assumptions behind the projections?

The MySanAntonio article referenced in one link concerning that power station. There was a report saying that the projected costs would be $20-22 billion. Based on historical trends projected forward. Is that reasonable?

Others assume there's no sure income stream. What does that assume about coal, oil, and natural gas pricing and availability? Electricity consumption?

The per kW price mentioned. Does that include government subsidies? Just local costs? What kind of amortization?

I'm being asked to form an opinion, to accept conclusions, and there's no basis given. "Here, we're Mother Jones, are you going to insult us being even thinking that we just possibly might ever be wrong about anything?" No worse or better than Chu or the CBO. Pablum.

I'd like to give Chu the benefit of the doubt. He seems to be immensely qualified, and Lawrence Berkeley Lab certainly isn't anything to sneeze at when it comes to energy analysis. Hopefully more analyses in the mainstream press will emerge...

The information from MJ regarding the historical record is just that - the historical record. If you want to dispute it, then look it up, find out what you think are the weaknesses and then share them. All you are doing is trying to defend nuclear power without getting into the actual data, which I presume you already know is indefensible at the factual level.

The value of the OP is the fact that Chu denies awareness of the default rate. If that's true it begs the question of what the basis for the decision actually was; what else doesn't he know. I have a great deal of respect for Chu but energy policy isn't physics and this doesn't inspire confidence in his leadership on the issue.

I would be interested to hear answers.

- Fucking exactly.

K&R

Looks to me like in this millennium it's gonna be 100%.

Chrysler is a dead man walking. GM stock would have to rise to the largest valuation in the entire history of the company to pay the bailout "loan" back. I'm happy to entertain side wagers on that happening. ;)

Change I can believe in, but not nuclear power. That's a waste of money, and just plain dangerous.

and he shouldn't believe anything Geithner, Summers, Rubin or Paulson or Bernanke say....

Stick to your science, guy.

to accept MONEY to insure these doomed behemoths.

Now, when money-sucking vampire squids won't touch it, what do you think the odds are on default?

They want to build them with their own money, that might be one thing. But these huge subsidies they get, along with corollary guarantees, are just sickening, especially when TPTB say we can't afford single payer!

Just one example: the nuclear dump 50 miles away from here that sits on my water supply is owned by a private company, BUT the Texas Legislature agreed to accept ALL liabilities onto the Texas taxpayer NO MATTER WHAT goes wrong. Interesting, eh? But your heart goes wrong, fuck you, you should have seen that your lifestyle/diet/genes/random universal bullshit was going to cause you problems, and you should have headed it off!

Nuclear mishap, eh? Well, nobody could have foreseen.........


Way tired of this shit already, being fed feces and told they're yummy chocolate.

from any angle you look at them -- and presume there are many health issues

that we aren't aware of, as well --

Downwinders ...

of the country has a dead thyroid.

Those tests in New Mexico when we were kids, nothing to worry about.

Right?

as they say . . . "doesn't bode well for future" -- !!!

Sad -- really sad --