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New Nuclear Construction: Still on Hold

A number of factors point to expanded nuclear generation. But when?
Fortnightly Magazine - December 2003

support from the federal government. The industry's concern is that the first new plants-which will likely be new ALWR designs going through a new NRC licensing procedure-could be delayed because of licensing uncertainties as well as first-time engineering risks. Incentives such as a production tax credit, similar to the 1.7¢/kWh tax credit that wind energy plants currently enjoy, are likely to emerge from the energy bill negotiations now under way in a House-Senate conference. A major new report on nuclear energy from the Massachusetts Institute of Technology proposed a credit of $200/kWe of the construction cost of up to 10 "first mover" plants, paid out over a year and a half of full-power operation at a rate of about 1.7 cents/kWh. 16

Such credits are often criticised as unnecessary federal handouts to mature industries. However, it is important to recognize that the energy bills that have passed the House and Senate are loaded with stimuli for just about every other fuel type, amounting to about $18 billion in tax credits most heavily allocated to the oil and gas, renewable energy and alternative fuels industries. 17 To keep a level playing field, it would be necessary either to eliminate all production incentives or to keep a balanced mix.

Federal Role in Ensuring Capacity

It is increasingly clear that under deregulation, a federal role is necessary to ensure a sufficient overall level of generation nationwide as well as a diversity of new generation facilities, including baseload capacity. Federal action also will probably be necessary to provide sufficient incentives for this new capacity to be clean burning.

The most effective policy solution to achieve these goals would be an across-the-board stimulus to develop and install clean energy technologies. A carbon policy of some form would be the best means of accomplishing this. Further incentives may take the form of the reserve adequacy requirement in the FERC SMD, and other incentives to build, such as production tax credits, or portfolio standards specifying minimum levels of generation from desired technologies. Without such intervention, deregulated markets will continue to yield only the type of new plants having the quickest payback.

A national carbon policy would have the advantage of simplicity, in contrast with a complex regime of different production incentives for different electricity generation sources. The energy bill recently under debate in Congress cobbled together a patchwork of production incentives-not necessarily a bad approach as long as there is an emphasis on clean technologies, diversity, and long-term reliability.

Carbon constraints, or financial incentives for non-carbon technologies, would significantly improve the future of nuclear power generation. Clearly, the Bush administration's decision to scuttle new source review for aging coal plants will not help nuclear power's prospects in the near term, as power companies will be able to continue operating these plants inexpensively without installing costly pollution control equipment. Nonetheless, carbon constraints will become a reality as the decade progresses, based on state if not federal policies, as well as consumer pressure.

It is likely that new nuclear plants eventually will get built in the United States with or without