Letters to the Editor
To the Editor:
Many of the benefits of nuclear power were well highlighted by John Sillin in the cover story "Nuclear Showdown: The Upcoming Renaissance of Nuclear Power" : stable, high quality power close to loads with low marginal fuel costs, not dependent on weather and without emissions. What's not to like? Opponents are skeptical about operating accidents, safety against terrorist attack, and nuclear spent fuel transport and disposition. As Center for Strategic and International Studies President John Hamre concluded after their de-fense simulation exercise in October 2002, "Nuclear power plants are of great concern to everybody, but they are probably our best defended targets." The other 80 percent of our electricity infrastructure is more vulnerable. But the anti-nuclear crowd has reached a point where they oppose any large-scale energy project just to stop development.
Meanwhile, utility boardrooms, bankers, and rating agencies are worried most about high capital costs (>$1,600 per KWe for the first units), regulatory uncertainty with the NRC and FERC, and transmission bottlenecks. Putting out 780 billion kWh in 2002 (20 percent of U.S. supply), the U.S. nuclear fleet has tripled its volume of electricity since 1980. Nuclear power is back on the energy landscape because several of the key factors that crippled construction in the 1980s have remarkably turned around. Interest rates on capital are much lower than in the 1980s, natural gas prices are higher and more volatile, while nuclear fuel prices are stable and low (<$5 per MWh), safety and operating records have improved markedly, and more than two dozen reactors can be added at current sites in the United States where communities support them.
More than 30 light water "Generation III" reactors are now under construction worldwide (totaling >26,000 MWe), according to the World Nuclear Association, but not in the United States. Still, North American companies-GE, Westinghouse, Atomic Energy of Canada, Bechtel, Sargent & Lundy-are involved in those projects, and can bring that experience to add reactors to a few of the current sites in the United States. Toshiba, Hitachi and Framatome ANP have also recently shown keen interest in building units here.
Specific financing provisions approved in the original Senate energy bill (S.14) were not included in the version the Senate passed on July 31, because the whole bill was swapped out at the last minute for the old bill used last year (S.517). Federal credit remains an option in the future as the conference committee deliberates this fall. Indeed, analysis in the "Business Case for Nuclear Power" concludes that government financing is required for the first few reactors to address specific risks controlled by the government, notably: commissioning and regulatory risk with the NRC, waste disposal by DOE (slated for Yucca Mountain, Nev.), and capturing the public value of the air pollution savings to help offset the higher capital costs of first reactors.
Opponents of nuclear power deliberately muddled the figures in recent Senate debate on the energy bill. The loan guarantees and power purchase provisions originally proposed in the energy bill (S.14) could in no way approach the $16 billion figure put forward by the congressional analysts and claimed as too costly. A bare majority of senators saw through the distorted numbers, defeating a proposed amendment to eliminate the nuclear provisions in a close 50-48 vote on June 10, ably led by Sen. Pete Domenici.
To clarify, the federal credit approach does not automatically grant loan guarantees for reactors. Instead, based on the Federal Credit Reform Act of 1990, a federal agency can be authorized by Congress to negotiate financial assistance, subject to independent credit evaluation (by Moody's or S&P). DOE has some limited loan guarantee authority under its acquisition regulations (DEAR 932.70). Projects with a 50 percent default rate presumed by the Congressional Budget Office (CBO) and nuclear opponents simply would not be approved by either industry or the federal agency. Instead, different terms would be negotiated. In the name of caution and outdated analysis, CBO incredibly rated reactor construction projects here on a level with Argentina's economy.
Already, many U.S. government agencies, such as DOA and DOT, use federal credit for rural utility projects, transportation infrastructure, and water resource development. Federal loans are not "bailouts," nor are they full subsidies from the Treasury like tax credits or grants, as ladled out for solar, wind, and ethanol. Loan agreements can be better tailored to specific projects, and are always combined with private funding. Moreover, estimates quoted by CBO and CRS in evaluating the outlook for reactors were based on projects 20 to 30 years ago, and fail to incorporate any engineering advances and current construction experience abroad. A prudent 10 percent to 20 percent default rate on $1 billion in federal loan assistance would trigger $100 million to $200 million in budget exposure, not a wildly inflated $16 billion figure!
Recent analysis for the American Nuclear Society by John Redding of GE Nuclear shows that with the first advanced boiling water reactors built in Japan in the 1990s, the United States could benefit from construction learning curves, such that reactors could be built after 2010 in the $1,800 to $1,400 per KWe range, and then brought into the range of $1,200 with multiple orders. The timing would coincide very well with replacing over 120,000 MWe of aging coal plants in the United States, which by 2010-2015 would exceed 40 years in operating life and likely face stiffened emissions requirements before then. But, with substantially higher demand, plus transportation constraints, natural gas prices in the United States have moved to a $4 to $6 range with higher price spikes. Hence, the first few reactors with capital costs in a range of $1,600 to $1,750 could be close to competitive, particularly in regions where regulated long-term electric contracts are more the norm, and with some federal credit.
Federal credit helps fulfill the public sector objectives of curbing air emissions and improving energy security through a diverse national generation portfolio. Financing for nuclear power deserves to be in the energy bill, with federal support for national benefits.
To the Editor:
New construction starts in nuclear power will certainly require overcoming the issues Michael Burr describes, but that is occurring ("The Nuclear Non-Starter," June 15). Yes, there will be no new plants constructed unless capital costs together with operating costs yield a per-kilowatt price that is competitive. The question is, competitive with what? Today's coal-generated power is the low-price benchmark and hard to beat. New coal plants, however, will need to meet continually more stringent air quality requirements, and that will mean higher capital and operating costs. Natural gas, the current fuel of choice for power production, is already costly and projections indicate serious supply problems, and thus price runups.
The disposal of nuclear waste, while a political hot potato, is moving toward closure. The Yucca Mountain repository continues to progress, with the 49 states that are not Nevada looking forward to sending their waste to the site. A negative effect on new construction is hard to imagine given that the issue must be dealt with even if we never generated another nuclear kilowatt.
Finally, proliferation concerns have no place in the debate on nuclear power in much of the world. The global trade in commercial nuclear power technology has not led to nations acquiring weapons. They seem to be able to do that much more efficiently through non-power technology means.
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