From Bloomberg, we have this baffling article: Obama Said to Seek $54 Billion in Nuclear-Power Loans Baffling not only because the left has never been nuke-friendly in the US, but also because of the details.
Jan. 29 (Bloomberg) — President Barack Obama, acting on a pledge to support nuclear power, will propose tripling U.S. loan guarantees for new reactors to more than $54 billion, an administration official said.
The additional loan guarantees in Obama’s budget, which will be released Feb. 1, are part of an effort to bolster nuclear-power production after the president called for doing so in his State of the Union address Jan. 27. In a conference call with reporters, Energy Secretary Steven Chu today announced a panel to find a solution to storing the waste generated by nuclear plants.
The motivation I think is pretty clear. They know that they aren’t going to get a cap-n-trade kind of deal, and they also know that the economics of solar and wind just doesn’t pencil out, and so if they want to reduce CO2 emissions (and punish the coal industry), the way to do it is to incent nukes.
But here’s the part that doesn’t make any sense:
For the 2011 budget, the department will add $36 billion to the $18.5 billion already approved for nuclear-power plant loan guarantees, according to the official, who asked not to be identified because the budget hasn’t been released. Congress started the program in 2005 to encourage new plant construction, but the department has yet to issue a loan guarantee.
[…]
Industry groups such as the Washington-based Nuclear Energy Institute have said the loan guarantees are critical to reviving the industry because most companies can’t afford the capital investment in a facility that can take a decade to complete. The institute in a December report put the cost of a reactor at as much as $9 billion.
So the loans need to be guaranteed by the government and the guarantees have to be budgeted? It sure sounds to me like the operators have no intention of repaying the loans, and this is a back door subsidy. If the economics pencils out, there should be no need for a guarantee, and if risk is an issue, the biggest risk is legal or regulatory, and the government should indemnify them against lawsuits and regulations coming at them in the future.
I guess that in a roundabout way, they have indemnified them against these risks, but they’re also indemnifying them against other risks, such as the wholesale price of power going down, and the risk of their own operational mismanagement. If the loans are guaranteed, then give all the mucky mucks big fat raises, because Uncle Sam will pick up the tab.
Just like this student loan forgiveness, this kind of guarantee/forgiveness is welfare. In this case corporate welfare. Let’s get out of the way and let them build nukes, but if they won’t do it on their own (and ditto for refineries, btw), the market’s trying to tell us that we don’t need them, at least right now.
The money would be better spent on research into next-generation technologies, but Chu is wetting his pants that the climate is going to melt next year, and we have to do something, big, and now. I think their open mind toward nukes is a step in the right direction, but just watch – this is going to be another massive boondoggle.
UPDATE: As an example of what can go wrong with a massive government-backed crash program of nuclear power plant building, read the history of WPPSS.
UPDATE II: An interesting article about one of the next-generation nuke technologies, Thorium power. Thorium is considerably more abundant than uranium, but that’s not the only advantage.
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Tags: Nuclear Power, Steven Chu
