I had the opportunity to be in the audience during the above talk. You might notice my impolite interjections; I have often been accused of being very poor at hiding my real reactions and feelings. There is a reason why I stopped playing poker during game nights on the USS Stonewall Jackson. I was losing my shirt.
Once again, I am not going to perform a point by point response to the numerous examples of misinformation provided by a rather typical Lovins talk. Instead, I will focus on one short example early in the presentation that contains at least three individually incorrect assertions in just 15 seconds (7:44-7:58). Here is the quote:
Amory Lovins – Since August ought 5, the US has offered 100 plus percent construction subsidies for new nuclear plants plus operating subsidies slightly bigger than wind power gets without making a single reactor financeable with private risk capital.
Let’s take each one of those individually.
“Since August ought 5, the US has offered 100 plus percent construction subsidies for new nuclear plants…”
Since Lovins specifically mentions August 2005, he is presumably referring to the nuclear incentives offered by the Energy Policy Act of 2005. That act includes provisions for a modest loan guarantee program that has so far resulted in a $6.5 billion dollar loan (not a subsidy, but fully repayable by the borrower) split between the Georgia Power Company (a subsidiary of the Southern Company) and Oglethorpe Power Corporation. Those are two of the three partners in the Vogtle units 3 and 4 nuclear power plant project, which is currently estimated to have a total project cost nearing $15 billion.
Surely, that loan guarantee program cannot be what Lovins was describing as a 100 plus percent construction subsidy. Perhaps he is referring to section 638 of the act, which is titled STANDBY SUPPORT FOR CERTAIN NUCLEAR PLANT DELAYS. That includes the following clause — subject to about half a page worth of conditions.
(2) INITIAL 2 REACTORS.—In the case of the first 2 reactors that receive combined licenses and on which construction is commenced, the Secretary shall pay—
(A) 100 percent of the covered costs of delay; but
(B) not more than $500,000,000 per contract.
That clause includes the 100 percent statement, but it is not exactly a “100 plus percent construction’ subsidy.
Here is the second misleading statement in the 15-second sound bite from Lovins’s Dartmouth presentation:
“..plus operating subsidies slightly bigger than wind power gets..”
This statement compares the clause in the EPA 2005 applicable to wind (Section 1301 – Extension and Modification of Renewable Electricity Production Credit) against the one that is applicable to advanced nuclear (Section 1306 – Credit for Production from Advanced Nuclear Power Facilities). Both sections include numerous terms and conditions; the one applicable to renewable electricity like wind is a modification of an existing law, specifically 26 U.S. Code § 45 – Electricity produced from certain renewable resources, etc. Here is what that section of the US Code says; it has been modified several times since 2005.
(a) General rule
For purposes of section 38, the renewable electricity production credit for any taxable year is an amount equal to the product of—
(1) 1.5 cents, multiplied by
(2) the kilowatt hours of electricity—
(A) produced by the taxpayer—
(i) from qualified energy resources, and
(ii) at a qualified facility during the 10-year period beginning on the date the facility was originally placed in service, and
(B) sold by the taxpayer to an unrelated person during the taxable year.
(b) Limitations and adjustments
(1) Phaseout of credit
The amount of the credit determined under subsection (a) shall be reduced by an amount which bears the same ratio to the amount of the credit (determined without regard to this paragraph) as—
(A) the amount by which the reference price for the calendar year in which the sale occurs exceeds 8 cents, bears to
(B) 3 cents.
(2) Credit and phaseout adjustment based on inflation
The 1.5 cent amount in subsection (a), the 8 cent amount in paragraph (1), the $4.375 amount in subsection (e)(8)(A), the $3 amount in subsection (e)(8)(D)(ii)(I), and in subsection (e)(8)(B)(i) the reference price of fuel used as a feedstock (within the meaning of subsection (c)(7)(A)) in 2002 shall each be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the sale occurs. If any amount as increased under the preceding sentence is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent.
That is a lot of words that will be difficult for most people to decipher; what it means in actual practice is that in March 2014, the date when Lovins made his comment, the wind energy production tax credit was 2.3 cents per kilowatt hour with a preplanned inflation adjustment. That credit also lasts for 10 years after a facility inservice date.
In contrast, the Energy Policy Act of 2005 section 1306 provides a production tax credit for advanced nuclear power facilities — defined in the act to be a nuclear power facility placed into service between August 2005 and January 1, 2021 AND with a reactor design approved by the Nuclear Regulatory Commission after December 31, 1993 — of 1.8 cents per kilowatt hour, with no inflation adjustment, for 8 years after the inservice date, with a 6,000 MWe capacity limit nationwide, and a per facility limitation of $125 million. Does that sound like a production subsidy slightly bigger than wind gets?
The third and final misleading statement in Lovins’s 15-second sound bite is the following:
“…without making a single reactor financeable with private risk capital.”
There is not one, but at least two reactor construction projects underway in the US that are financed by private investors using money borrowed from the traditional banks that have always financed electric utility construction projects. VC Summer units 2 and 3 have received no federal loan support and are 100% financed by the normal capital markets. The democratic process in the state of South Carolina has provided SCANA and its other partners with a guaranteed customer contract, but that is nothing new to the capital intensive electric utility industry.
I’ll leave additional deconstruction of the Amory Lovins March 28, 2014 talk at Dartmouth to the comment section.
PS (Added at 11:16 August 10, 2014) Starting at time mark 51:57, Dan Richter asks a question about natural gas price volatility. Though I disagree strongly with Lovins’s assumptions about unreliable energy supply systems and the potential for energy efficiency growth, I agree with his statements about the high risk of continued natural gas price volatility.