Nuclear

Power Subsidies in Federal and State Legislation

Michele Boyd Director, Safe Energy Program SACE Webinar June 23, 2011

What is going to determine whether new reactors are built in the US?
Not:
Public acceptance, though it helps Streamlined licensing process, though it helps Permanent waste solution, though it helps

But rather: Moving the financial risk from the nuclear industry to taxpayers and ratepayers
Even before the economic crisis and the Fukushima disaster, Wall Street said new reactors are too risky

Historic and Projected Cost of Nuclear Reactors (Cooper, June 2009)

Cradle-to-Grave Nuclear Subsidies for New Reactors

R&D Subsidies Licensing Subsidies Construction Subsidies Operating Subsidies Radioactive Waste Subsidies Shut-Down Subsidies Energy Policy Act of 2005: More than $7 billion in subsidies for nuclear power, plus loan guarantees

Result of EPACT 2005

Even after licensing process was streamlined in 1992, no new licenses applications in the US in 30 years After Congress passed EPACT 2005 and authorized $18.5 billion of loan guarantees in 2007, NRC received 19 applications for licenses to build 28 new reactors Most of the proposed reactors are in the Southeastern US and in Texas

US Map of Existing and Proposed Reactors

Status of New Reactor Projects

NRC reviewing 12 projects to build 20 new reactors Nearly all proposed reactor projects have experienced one or more of the following: cancellation, suspension, delay, utility credit downgrade, and increased estimated costs.
8 Projects Suspended/Canceled: MO, AL, MS, LA, NY, TX, UT, ID More than 5 Projects Delayed: FL (2 projects), AL, SC, TX Utility Credit Downgrades: FPL (Florida), SCG&E (South Carolina), PPL (Pennsylvania), Progress Energy (Florida)

List of Proposed New Reactors

Site Name (# reactors) Vogtle (2) VC Summer (2) William Lee (2) Turkey Point (2) Levy County (2) Shearon Harris (2) Calvert Cliffs (1) Bell Bend (1) Fermi (1) South Texas (2) Comanche Peak (2) North Anna (2) State Georgia South Carolina South Carolina Florida Florida North Carolina Maryland Pennsylvania Michigan Texas Texas Virginia Design AP-1000 AP-1000 AP-1000 AP-1000 AP-1000 AP-1000 EPR EPR ESBWR ABWR US-APWR US-APWR Has CWIP & loan guarantee Has CWIP; in line for LG Has CWIP; delayed > 2021 Has CWIP; delayed > 2021 Has CWIP; delayed > 2021 Has CWIP; delayed In line for LG; No US partner Delayed No CWIP/LG In line for LG; No US partner In line for LG No CWIP/LG; Delayed

Meanwhile, Designs Arent Ready

AP1000: NRC recently raised new safety issues after closing public comment period EPR: NRC concerned that day-to-day and emergency systems could fail at the same time; Areva still revising design US-APWR: New seismic analysis being done; certification delayed by 6 months (more post-Fukushima?) ESBWR: Likely to get certified? Unlikely to get a loan guarantee? ABWR: Certification expires in 2012; no schedule for review of amended design

Design problems can lead to delays and cost increases

Nuclear Reactors Are Expensive

Even before Fukushima, cost estimates have soared (costs are for two reactors unless specified):
State Texas South Carolina North Carolina Florida Florida Maryland (1 reactor) Pennsylvania (1 reactor) 2008 $5.8B $5B $4.4B $5.6B $8B $4.5B $4B 2010 > $17B $11B $9.3B $17B $24B $10B $13-15B

Federal Loan Guarantees

Puts taxpayers rather than investors on the hook to pay back default on loans
CBO, 2003: Very high well over 50 percent default CBO, 2008: Not necessarily relevant today, but construction costs, technical risks, licensing delays no better now

In order to get a nuclear loan guarantee, the nuclear industry must pay a credit subsidy fee
Congressional Budget OfRice: likely to underestimate the fee, leaving taxpayers on the hook When a project defaults, taxpayers must pay the difference Nuclear industry wants 1% fee or less

Status of Title XVII Loan Guarantee Program

Congress has authorized:
$18.5 billion $4 billion $18.5 billion $8 billion Nuclear, ~2 projects (3-4 reactors) Uranium enrichment Renewable energy and transmission Coal

President Obama proposing to triple nuclear guarantees in FY2011 to $54.5 billion (~6-8 reactors) Nuclear industry wants a permanent Rinancing platform or at least $100 billion in guarantees

One Loan Guarantee Offered

$8.3 billion for two reactors at Vogtle in Georgia
Reactor design not yet approved; new safety issues raised No construction and operating license from NRC InsufRicient electricity demand to justify reactor Has ratepayer subsidy via CWIP

Program Mired in Secrecy:

Subsidy fee? Evaluation criteria? Environmental impacts of the project?

Energy Secretary Chu has testiRied that DOE will have to reassess fee based on Fukushima

Photo by Digital Globe

Troubled Projects for Next Loan Guarantee

Calvert Cliffs, MD:
Constellation rejected $7.5 billion guarantee; sold investment EDF has no legally-required US partner French report: EPR expensive/complex

South Texas, TX
NRG Energy pulled out, leaving Toshiba without US partner San Antonio pulled out of 85% of investment TEPCO unlikely to invest as planned Market monitor report: cost exceeds revenue by 33-52%

VC Summer, SC
SCG&E credit rating downgraded Munis want out of 40% investment SCE&G is looking for other investors; low-ball cost estimate

Legislative Vehicles for More Nuclear Subsidies

FY2012 Appropriations Loan guarantees R&D Debt Ceiling Negotiations? Senate Energy bill? Clean Energy Standard Clean Energy Deployment Administration (CEDA) House Energy Bill? Further undermining Nuclear Regulatory Commission public health and safety regulations

FY2012 Appropriations
FY2012 begins on October 1, 2011 President Obamas FY2012 budget request to Congress includes:
$54.5 billion nuclear loan guarantee authority $67 million $30 million licensing small modular reactors research on small modular reactors

$377 million research on Generation IV reactors and fuel cycle technologies

House Committee bill does not include more nuclear loan guarantees Senate has not acted on the bill yet

Clean Energy Standard

CES = Mandate that a state or utility produce or purchase X% of clean energy by year Y President Obama supported an 80% CES by 2035 in his 2011 State of the Union address
Clean is deRined as nuclear, coal with carbon capture, natural gas, and renewable energy

No bill has been introduced yet; Unclear whether an unfunded mandate can pass Congress

Clean Energy Deployment Administration

Purpose of CEDA: To promote access to affordable Rinancing for accelerated and widespread deployment of clean energy, energy infrastructure, energy efRiciency, and manufacturing technologies Nuclear power and coal are deRined as clean energy technology Allows for unlimited nuclear loan guarantees and fails to require that projects reduce greenhouse gases Vote in Senate Energy Committee delayed

CEDA, cont
Allows for unlimited self-pay loan guarantees
CBO: DOE would have permanent authority to guarantee [self- pay] loans without further legislative action or limitations, which would beneRit large capital projects (ie, nuclear and coal) Renewable/efRiciency projects are limited by CEDAs capital (proposed $10 billion) NEED: Legislated limit on taxpayer liability

Allows one technology to get the lions share Does not require greenhouse gas reductions Allows DOE Secretary to waive independent credit rating of applicant or project Specifically makes nuclear parts manufacturers and small modular reactors eligible for guarantees

Why Does the Nuclear Industry Have So Much Support in Congress?

Spent $600 million on lobbying and nearly $63 million on campaign contributions over the past decade Increased campaign contributions to Democrats
President Obama and Energy Secretary Chu strongly support new reactors

Support of 21 unions by promising future union jobs Recruited new champions such as Sen. Murkowski (R-AK) Continuing to package nuclear subsidies with renewable subsidies

Advanced Cost Recovery

Utilities can recover construction costs from ratepayers before the construction and operating license is granted Also known as Construction Work in Progress States with CWIP: FL, GA, LA, MS, NC, and SC Industry looking for CWIP in other states
MidAmerican CWIP in Iowa AmerenUE mini-CWIP in Missouri Duke Energy SuperCWIP in North Carolina

State Moratoria on New Reactors

16 states have some type of state-legislated moratorium on the construction of new reactors (bolded states = legislative efforts in the past 3 years to overturn moratorium):
Minnesota Wisconsin Kentucky Illinois Hawaii West Virginia Montana California Maine Massachusetts Pennsylvania Connecticut New Jersey Oregon Rhode Island Vermont

Moratoria requires one or more of the following:

Waste solution Cost competitiveness Legislative approval Voter approval

All These Subsidies Arent Enough to Convince Wall Street

Standard & Poors (Jan 2006): Moodys (June 2009):
from a credit perspective, these legislative measures may not be substantial enough to sustain credit quality New reactors are a bet the farm investment Three risks from new reactors could each bring even the largest utility company to its knees financially Fukushima accident was the most serious ever for the credibility of nuclear power. Fukushima is casting doubt on whether even an advanced economy can master nuclear safety.

Citigroup (Nov 2009): UBS (April 2011):

Bottom Line: Nuclear Cant Compete

Rising cost of new reactors; Decreasing cost of competition
Low-price natural gas expected until at least 2030

Decreased demand growth of electricity EfRiciency potential (3 cents per kWh):

US uses more electricity per capita than other industrialized nations

Large renewable resources cheaper than nuclear (5 to 10 cents per kWh)

What Can YOU Do?

Meet with your Senators and Representative during August recess Meet with your Public Utility Commission, state elected ofRicials, Governor, etc. Write to President Obama Participate in 2012 election events (federal and local) and ask candidates about their position on nuclear subsidies Organize sign-on letters, public meetings, house-parties, meetings with reporters/Editorial Boards Find new allies in your community Participate in online discussions/blogs