A Nuclear Power Boost for Senate Bill - Tax incentives offered with climate measure
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Source: Common Dreams
Published on Wednesday, October 28, 2009 by The Washington Post
A Nuclear Power Boost for Senate Bill
Tax incentives offered with climate measure
by Steven Mufson
Will a heaping spoonful of nuclear power help Congress swallow a climate bill?
The Obama administration and leading congressional Democrats are wooing wavering Democrats and Republicans to back a climate bill by dangling federal tax incentives and new loan guarantees for nuclear power plant construction, even though financial analysts warn that huge capital needs and a history of cost overruns would constrain what many lawmakers hope will be a "nuclear renaissance."
The elements of a nuclear package under discussion include investment tax credits, a doubling or more of the existing $18.5 billion in federal loan guarantees for new plants, giving nuclear plants access to a new clean energy development bank, federally financed training for nuclear plant workers, a new look at reprocessing nuclear fuel, and a streamlining of the regulatory approval process, according to corporate, congressional and administration sources.
Designed to put nuclear power on an even footing with wind and solar, the package comes on top of existing incentives, such as the production tax credit.
"It seems to me that when talking about ways to reduce emissions . . . that nuclear comes first," said Sen. Lisa Murkowski  (R-Alaska), ranking Republican on the Senate Energy and Natural Resources Committee. Some GOP leaders like Sen. Lamar Alexander  (R-Tenn.) want any climate bill to include plans for 100 new nuclear plants -- doubling the current fleet -- by 2030.
Even relatively liberal lawmakers such as Sen. Mark Udall  (D-Colo.) are talking about the need to insert nuclear power incentives into a climate bill. President Obama has said he is open to new nuclear plants. And Energy Secretary Steven Chu has said that the country should "not stop at three or four, but should get tens of [new] reactors."
Asked how many Republicans could be won over to a climate bill with a substantial nuclear power provision, Sen. Lindsey O. Graham  (R-S.C.) said: "At least half a dozen, depending on how this issue comes out. Maybe more." And, he added, "you're not going to get a bill without meaningful Republican participation."
Graham, who recently joined Sen. John F. Kerry  (D-Mass.) to list common principles for a bill, including new nuclear incentives, said "people who are involved in writing this bill need to grasp the fact that America's turned the corner on nuclear power."
A few plants, not 100
But financial analysts and utility executives warn that while a package of federal tax and regulatory incentives might jump-start a few new nuclear plants, it will be nowhere near enough to lead to 100 facilities.
"That's $1 trillion," said Aneesh Prabhu, a credit analyst for nuclear utilities at Standard & Poor's. "Some people say that by 2030 you could have quite a few going, but 100 is not feasible . . . The most optimistic number I've read is 50 of them by 2035 -- and that's the most optimistic number . . . That's from the perspective of financing."
The nuclear ambitions of GOP lawmakers exceed those of the nuclear power industry itself. "Industry's expectations are colored perhaps by knowing too much," said one utility executive, who spoke on the condition of anonymity to preserve his relations with lawmakers. Building 100 plants "would be extremely difficult, extremely difficult," he said.
In the United States, no one has begun construction of a nuclear plant in more than 30 years. Nuclear firms say their technology is better and safer than ever, but critics frequently point to delays and cost overruns at a plant that France's Areva is building in Finland as an example of persistent obstacles. Separately, on Oct. 15, the Nuclear Regulatory Commission rejected a steel and concrete structure Toshiba's Westinghouse Electric said would shield its reactor against extreme weather.
Jacques Besnainou, president of Areva North America, said that the Finnish reactor was "a difficult project" with "a very difficult customer." He said that U.S. customers would benefit from its lessons. "Nuclear is not the only solution for the U.S., but there's no solution without nuclear energy," he said. Areva is investing $400 million in a Virginia plant that will manufacture nuclear reactor components.
Another obstacle could be the price of natural gas, which offers a cheaper alternative. Natural gas power plants produce only half the carbon dioxide of coal-fired ones. With the discovery that vast shale gas resources can be tapped with new technology, natural gas prices are low and attractive for power producers.
Relying on subsidies
Analysts say nuclear plants will only be viable if natural gas prices stay higher than $7 per one thousand cubic feet, but current prices are less than half that level. As a result, utility plans for new nuclear plants have lost momentum. Moody's said that more than half of loan guarantee applicants were at a "low" level of activity.
Without subsidies from taxpayers, the expense of new plants would abort the much ballyhooed "nuclear renaissance," analysts say. The new plants are expected to cost $8 billion to $10 billion each. Moody's analysts said it was a " 'bet the farm' endeavor for most companies."
Henry Sokolski, director of the Nonproliferation Policy Education Center, lamented that Senate Republicans were "giving up their economic principles in exchange for more federal subsidies for . . . super-expensive, financially risky nuclear power."
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Lobbyists say that even a generous package of nuclear power subsidies might not attract the votes needed for a climate bill. A nuclear package is "necessary but not sufficient for a lot of Republicans," said an expert at one major utility.
Alexander said nuclear power subsidies would not win his vote "because the economy-wide cap-and-trade [system] is so flawed." A cap-and-trade system is the centerpiece of both Senate and House climate bills; it would set a ceiling on greenhouse-gas emissions and allow companies to trade emission permits.
The $18.5 billion of nuclear loan guarantees, included in legislation adopted under former president George W. Bush, would cover two or three nuclear plants. Administration officials have said that they might try to stretch that money by combining it with loan guarantees from Japan, home of some of the contractors seeking to build U.S. plants.
Staff writer Juliet Eilperin contributed to this report.
© 2009 The Washington Post Co.
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