As part of the Energy Policy Act of 2005, the U.S. Department of Energy can issue taxpayer-funded loan guarantees for advanced energy technologies, including nuclear reactors. However, the Congressional Budget Office measures the likely failure rate for new reactors in the United States as “very high – well above 50%.” The Nuclear Regulatory Commission (NRC) has said that no new reactors will be licensed before 2012. Even when licensed, no new reactors are expected to produce electricity before 2016 at the earliest. Several U.S. utilities have cancelled or deferred plans for new nuclear reactors due to rising costs and lack of demand. Likewise, progress has been slow overseas with cost overruns and a deepening economic recession. The global financial crisis has made capital for high risk, multibillion dollar projects difficult to find. Policymakers are faced with weighing the risks and costs of energy technologies, including new nuclear power, as they make choices for the investment of limited taxpayer dollars.
On May 21, the Environmental and Energy Study Institute (EESI) held a briefing to examine the renewed interest in nuclear power globally and its prospects in the United States. Demand for energy coupled with the need to develop low-carbon sources has led some nations to focus on nuclear power. But even before the recent financial crisis, issues dealing with material shortages, untested designs and high default rates made nuclear energy a risky undertaking for private investors. This briefing addressed developments in the nuclear industry in Europe, projections for new nuclear power in the United States, and the financial risks associated with investing in nuclear power to address the urgent climate situation.
- Talk of a worldwide nuclear renaissance is premature. Financial risks, escalating costs, and conflicts with safety regulations still pose major problems. The current financial crisis has only made financing more difficult to obtain for new large-scale nuclear reactors.
- There are 426 nuclear reactors in service around the world today. Thirty-five more are under construction, but many of these are from orders decades old with outdated designs.
- The European record for nuclear power has shown mixed results.
- Finland ordered the Olkiluoto nuclear plant in 2004 with an export credit guarantee from the French and Swedish governments and two-thirds of the cost provided by bank loans. After four years, the plant is already three and half years late and 60 percent over budget.
- Nuclear power in France is government owned. It has two main nuclear utilities, EDF and Areva, which are 85 percent and 90 percent state-owned, respectively.
- Nuclear power is seen by many as the answer to the problem of climate change. A 10-15 percent reduction in CO2 emissions would require the construction of several hundred new nuclear plants.
- Paying a high price for a slow remedy for carbon dioxide emissions is harmful because it diverts resources from solutions that can be implemented more quickly, such as energy efficiency and renewable energy.
- The risk of loss from loan guarantees is demonstrable. Half of all construction permits granted in the United States has ended in cancellation and there have been year-long shutdowns at 51 nuclear reactors.
- Loan guarantees also distort power markets. To regulators and market operators, nuclear power is less expensive because risks have been shifted to taxpayers. However, loan guarantees hide the true cost from customers and encourage wasteful consumption.
- Waste reprocessing is troublesome. Reprocessing waste still leaves behind most of the radioactive materials and adds substantially to the cost of nuclear power.
- A sensible energy policy would recognize the value of all carbon reducing technologies, but would provide more incentives for those that are cost effective and quickly deployable.
- Good energy policy should also take the time to deal sensibly with waste and proliferation, rigorously prioritize energy options for research, and avoid funding the commercialization of plants as “research.”