Nuclear Loan Guarantees Have Failed

Kennedy Maize

Pages: 1 2

One of the key features of the highly touted 2005 Energy Policy Act was a large pool of loan guarantees designed to jump-start a renaissance in nuclear power in the U.S. The idea was that the federal guarantees, along with some other goodies, both financial and regulatory, would lead the private sector to pony up the considerable amounts of capital necessary to build a new generation of nuclear reactors.

Failure to Launch

By many accounts, including more than a few in the nuclear power business, that approach has failed. This sentiment surfaced at the latest Platts nuclear conference, in Rockville, Md., this February.

From the moment former president George Bush signed the 2005 bill, the industry began pushing the U.S. Department of Energy (DOE) to move rapidly on the $18.5 billion in loan guarantees in Title XVII of the new law.

Little happened. Last year, at the 2008 Platts annual nuclear conference, the industry beseeched the outgoing Bush administration to get the admittedly inadequate loan guarantees nailed down quickly. The industry wanted the implementation in place before an election that could enshrine a new group of politicians and bureaucrats with a new agenda and, perhaps, a selective memory of the wishes of the previous Congress that was under the control of pro-nuclear Republicans.

It wasn’t until June 2008 that the DOE issued its solicitation for applications for loan guarantees. At that point, it was obvious to many observers that the clock would run out on the Bush administration well before any guarantees would flow to the nuclear industry. When the energy department finally opened the door for its first phase of review of nuclear loan guarantees, the demand totally swamped the available funds. Seventeen entities submitted applications for 19 new nuclear reactors, for a total estimated construction cost of $188 billion (an average of over $7 billion per reactor) and requests for loan guarantees totaling $122 billion.

Another part of the nuclear loan guarantee in the 2005 law was an earmark for $2 billion aimed at USEC Inc., the U.S. uranium enrichment firm (spun off from the government some 20 years ago). USEC planned to use the money to leverage funds for continued construction of its advanced uranium enrichment project in Portsmouth, Ohio, another relic of the former U.S. government enrichment monopoly. The Portsmouth project is designed to supplant its inefficient and costly gaseous diffusion technology, created during the World War II Manhattan Project, with more advanced gas centrifuges, developed and abandoned by the DOE in the 1990s.

The USEC loan guarantees haven’t moved any more expeditiously than the large reactor funds. In early February, USEC announced a slowdown at the project in order to “conserve cash and reduce the planned escalation of project construction and machine manufacturing activities.” The company, based in Bethesda, Md., hinted that it would shutter the Ohio project if loan guarantees are not available. USEC CEO John K. Welch said, “Because our full application had been before DOE since August 2008, we were hopeful that DOE would make a selection before the change in administration.” Nope.

Pages: 1 2