On February 12, President Obama announced the first nuclear facility to receive a loan guarantee under a federal program administered by the Department of Energy. The government has offered a conditional commitment of $8.3 billion in loan guarantees for the construction and operation of two new 1,100 megawatt reactors at the Alvin W. Vogtle Electric Generating Plant in Burke County, Georgia. The project is being undertaken by Southern Co., and its partners include the Oglethorpe Power Corporation (OPC), the Municipal Electric Authority of Georgia (MEAG) and the city of Dalton, Georgia.
“[I]nvesting in nuclear energy remains a necessary step,” Obama said when announcing the award. “What I hope is that with this announcement, we're underscoring both our seriousness in meeting the energy challenge and our willingness to look at this challenge not as a partisan issue but as a matter that's far more important than politics -- because the choices we make will affect not just the next generation but many generations to come.” According to the administration, the project will create an estimated 3,500 onsite construction jobs and 800 permanent jobs. Compared to a similar sized coal plant, the new reactors will avoid 16 million tons of carbon dioxide, 3,900 tons of nitrogen oxides, and 5,500 tons of sulfur dioxide. Southern Co.'s application for a license to build and operate the reactors is currently pending with the Nuclear Regulatory Commission.
The U.S. Department of Energy was authorized to issue loan guarantees to eligible new power generation projects that "avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases" and "employ new or significantly improved technologies” under the Energy Policy Act of 2005 (P.L. 109-58). While the entire program was originally funded at $4 billion, appropriations for FY 2008 designated $18.5 billion specifically for nuclear loan guarantees. The Obama administration’s FY 2011 budget requests a further increase in funding for a total of $54.5 billion in loan guarantees for nuclear projects. Currently, there are 19 applications pending for 21 reactors totaling $188 billion in loan guarantees, averaging $9 billion per reactor.
Federal loan guarantees provide financial security for borrowers in sectors that are often considered too risky for lenders. Critics have argued that loan guarantees for nuclear projects puts taxpayers' money at high risk. The Congressional Budget Office has stated the risk of default on such loans to be “well above 50 percent,” due to high construction costs, technical risks, and potential delays due to licensing and regulatory proceedings.
For more information on this topic, please see EESI’s 2009 briefing, “A Global Nuclear Renaissance: Is the United States Missing Out?” or our issue brief, “Loan Guarantee Provisions in the 2007 Energy Bills: Does Nuclear Power Pose Significant Taxpayer Risk and Liability?”