Why Obama's Nuclear Bet Won't Pay Off

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Southern Nuclear

The Alvin W. Vogtle nuclear power plant outside Atlanta

If you want to understand why the U.S. hasn't built a nuclear reactor in three decades, the Vogtle power plant outside Atlanta is an excellent reminder of the insanity of nuclear economics. The plant's original cost estimate was less than $1 billion for four reactors. Its eventual price tag in 1989 was nearly $9 billion, for only two reactors. But now there's widespread chatter about a nuclear renaissance, so the Southern Co. is finally trying to build the other two reactors at Vogtle. The estimated cost: $14 billion. And you can be sure that number is way too low, because nuclear cost estimates are always way too low.

That's why no Wall Street moneyman in his right mind would finance a new reactor. But President Obama has located an alternative financier: you. On Tuesday he announced an $8.33 billion loan guarantee for the new Vogtle reactors, the first step in the Administration's push to jump-start the nuclear construction industry. Obama also urged Congress to set aside political differences and triple the budget for nuclear loan guarantees. "On an issue that affects our economy, our security, and the future of our planet, we can't keep on being mired in the same old stale debates between the left and the right, between environmentalists and entrepreneurs," Obama said.

But the President is ignoring a much fresher debate: between theory and reality. Even if Obama were correct that a nuclear rebirth is needed to address the climate crisis — and he isn't correct — the fact is that the rebirth isn't happening. Despite the prospect of new taxpayer guarantees — and the cradle-to-grave subsidies that already support this 50-year-old industry at the federal and state level — utilities keep scrapping or delaying plans for new reactors.

In January, for example, after a Florida commission denied requests for dramatic electricity-rate hikes, plans for two new reactors in the Keys were suspended, and plans for two more reactors outside St. Petersburg were delayed. Last August, the Tennessee Valley Authority scrapped plans for three new reactors in Alabama and delayed a fourth by at least four years. Other reactors have been canceled in Texas, Missouri and Idaho; license applications have been suspended in Mississippi, Louisiana and New York. Peter Bradford, a former member of the Nuclear Regulatory Commission (NRC), has calculated that of the 26 new applications submitted to the NRC since 2007, nine have been canceled or suspended indefinitely, and 10 more have been delayed by one to five years. Utilities like Exelon, Duke Energy and FPL have ditched or scaled back their nuclear ambitions.

In his speech Tuesday, Obama acknowledged "some serious drawbacks with respect to nuclear energy," but the drawbacks he mentioned — waste disposal and reactor safety — are not the real obstacles to a rebirth. It would be nice to have a permanent Yucca Mountain–style repository for spent nuclear fuel, but for now plants have been storing their waste on-site without major problems. And the nuclear industry's safety record has improved dramatically in the 30 years since the Three Mile Island meltdown, although there are still occasional blips like the recent radioactive leak at a Vermont plant. The NRC is not exactly a hostile regulator, but sometimes it shows teeth: in October, it identified problems with the Westinghouse AP1000 reactor design, which could create additional delays for nearly half of the proposed new reactors, including the ones at Vogtle.

But waste-disposal problems, safety issues and regulatory delays create a much more serious obstacle to a nuclear comeback: they jack up the already exorbitant cost of construction. That is the truly serious drawback of nuclear energy. Recent studies have priced new nuclear power at 25 to 30 cents per kilowatt-hour, about four times the cost of producing juice with new wind or coal plants, or 10 times the cost of reducing the need for electricity through investments in efficiency. Nuclear energy is much cleaner than coal, and it provides baseload power when the wind isn't blowing and the sun isn't shining, so it sounds like a sensible way to accommodate increasing electricity demand. But it's not nearly as sensible or feasible or affordable as decreasing electricity demand altogether.

Meanwhile, nuclear costs keep spiraling out of control. Last year, the estimates for several reactors doubled, and for one Pennsylvania reactor more than tripled. This is why credit-rating agencies keep downgrading utilities with nuclear ambitions, which increases their borrowing costs and makes their projects even more expensive. Even with the federal guarantees, the new reactors at Vogtle are expected to boost local electricity bills by 9% — and like most nuke-friendly states, Georgia has enacted a law ensuring that ratepayers won't get their money back if the utility fails to complete the plant.

Nuclear power really is emissions-free, so we're fortunate that 20% of our electricity comes from existing nuclear plants. But even if they weren't spectacularly expensive, additional nukes couldn't come on line quickly enough to solve our climate problems; the industry dream of 45 new plants by 2030 would barely replace aging plants scheduled for decommissioning. And nuclear energy may be the least cost-effective way to reduce greenhouse gases, which is why private investors are pouring billions into efficiency as well as wind, solar and other renewables instead. Taxpayers would get more bang for their energy bucks if their elected representatives made similar choices.

But nuclear energy is popular with the public and wildly popular on Capitol Hill. Obama's push to expand the loan guarantees was one of the only bipartisan applause lines in his State of the Union address. New nukes are a priority for unions as well as for utilities; the Vogtle project, while not exactly shovel-ready, is expected to create 3,500 well-paying jobs if dirt starts moving next year. Meanwhile, Republican politicians who don't believe in global warming and didn't even want the word French in their fries can't stop talking about French nuclear plants that slash French emissions and produce 80% of French electricity. They tend not to mention that those plants were financed by the French government.

Ultimately, the U.S. may be heading toward a similar brand of nuclear socialism. Obama talks about massive nuclear subsidies as just one part of his larger clean-energy agenda, but he hasn't made them contingent on GOP support for that larger agenda. So the nuclear subsidies are sure to pass, while the larger agenda is likely to stall. Eventually, extravagant government largesse might create a nuclear rebirth of sorts — but it might end up strangling better solutions in their cribs or prevent them from ever being born.