Gambling on nuclear power: How public money fuels the industry

The nuclear power industry in the United States has relied on government intervention and support for over fifty years, raising critical questions. Is this the best use of public funds to promote sustainable energy production? Are subsidies distorting the energy market in ways that are excluding more efficient and cleaner energy options? For answers, Subsidy Watch interviewed Doug Koplow, founder of Earth Track and one of the leading experts on government intervention in the energy sector.

SW: Can you give us a sense of the scale of public subsidies to nuclear power in the United States?

DK: All operating nuclear power plants in the U.S. were built with substantial public subsidies. These included large subsidies to research and development, plant construction, uranium enrichment, and waste management. Since its inception, the industry has also benefitted from government programs to shift key risks of the nuclear fuel cycle away from investors and onto taxpayers.

A handful of studies have quantified subsidies to the nuclear-power industry over the decades, indicating aggregate subsidization at well over US$ 150 billion, and a subsidy intensity (government support per kWh output) normally exceeding 30% of the market value of the energy produced.

These subsidies have enabled our existing commercial reactors to remain viable power providers, but only with additional capital write-offs. These write-offs have occurred not only through bankruptcies, but in the form of compensation for "stranded costs" as well. Basically, a cost was considered stranded if it made a plant uncompetitive at the time the electricity industry was being deregulated. Nuclear generation accounted for large share of total stranded costs in the United States, with nearly US$ 100 billion (2007$) of nuclear-related infrastructure deemed uncompetitive transferred as a liability to be bailed out by ratepayers. Although the industry frequently points to its low operating costs as evidence of its market competitiveness, this economic structure is an artifact of large subsidies to capital, historical write-offs of capital, and ongoing subsidies to operating costs.

Oops Sorry forgot to give the URL:
http://www.globalsubsidies.org/en/subsidy-watch/commentary/gambling-nuclear-power-how-public-money-fuels-industry

Too cheap to meter! :þ

USC 2010 subsidies report
http://www.ucsusa.org/assets/documents/nuclear_power/nuclear_subsidies_report.pdf

From: http://www.automatedtrader.net/real-time-dow-jones/46677/obama-administration-seeks-additional-36-billion-for-nuclear-loan-guarantees

WASHINGTON -(Dow Jones)- The Obama administration is hoping to triple the amount of money it's allowed to use to guarantee loans for nuclear power plants, seeking an additional $36 billion for the guarantees in its fiscal 2012 budget proposal.

Created by a 2005 law, the loan guarantees promote the construction of nuclear power facilities by allowing the federal government to serve as a backstop for loan defaults.

CBO estimate on nuclear loan guarantees



Note the price - $2.5 billion was to be only for the first plant. Future plants were, according to the assumptions provided by the nuclear industry, expected to have lower costs as economy of scale resulted in savings.

In fact, since the report was written the estimated cost has risen to an average of about $8 billion.

Wonder what that does to the “risk is that … the plant would be uneconomic to operate because of its high construction costs, relative to other electricity generation sources”?

Does that risk diminish or increase when the price rises from $2.5 billion to $8 billion?