Harvey Wasserman, a long time professional antinuclear energy campaigner, is once again on Huffington Post, claiming that the repeatedly announced increase in the nuclear loan guarantee program is a “giveaway.” He is dead wrong on so many levels.
Aside: Please do not be confused by the numbers you read. The recently announced attempt is just one more attempt to make the same amount of money available as has been tried since the FY2007 budget. The current total remains one loan for $8.3 billion awarded with $10.2 billion of the $18.5 billion authority originally provided in the Energy Policy Act of 2005 remaining to be awarded. The increase of $36 billion requested will make the total roughly $54 billion, which is the same number requested three years ago and also the same number requested four years ago. End Aside.
First of all, a nuclear project that agrees to accept a federal loan guarantee will pay the government an up front fee called the Credit Subsidy Cost (CSC) that is roughly equivalent to the Private Mortgage Insurance that homeowners who cannot afford a 20% downpayment often have to pay in the early days of their loan while they are building up sufficient equity in their home to reduce the risk of “walk away” defaults.
Secondly, the nuclear borrower will also be required to provide at least 20% of the project cost as an equity downpayment. In the great nuclear tradition – the loans are doubly safe with both belt and suspenders – PMI and a downpayment. They are a source of revenue for the federal government in the same way that a mortgage is a source of revenue for a savings and loan.
The borrower also does not see a dime of the guaranteed loan until after they have passed through what may be the most difficult and time consuming part of the process of getting a plant built in the US – the guarantees are only “contingent” until after the borrower has obtained a Combined Operating License that says that the Nuclear Regulatory Commission has evaluated their site, their design, their construction quality assurance program and their operational plans and issued a Final Safety Analysis Report (FSAR). Only then will the borrower – who has probably spent a few hundred million of private capital getting that far – be able to access the loan proceeds.
The reason that electric power generators are reluctantly willing to jump all of these hurdles is that the numbers driven project evaluators have determined that building new nuclear plants is in the company’s best interest and in the case of regulated utilities, that determination was also made by the duly appointed Public Service Commissions that are charged with ensuring that the project is a good deal for the customers as well.
I made presentations and took questions from a large number of funding sources during the period that I was trying to raise capital for Adams Atomic Engines, Inc. so I have a pretty fair idea what discourages financial types from backing new nuclear projects. The word that strikes fear into them is not “Chernobyl” or “TMI”, it is “Shoreham.”
After a lot of initial interest, careful attention to my presentation and hard questions about various aspects of the technology, the questions that generally ended the conversation went something like this. “Excellent presentation. So how sure are you that the government will allow you to finish the project and start earning revenue? What happens if a local, state or federal official or agency tells you that you will not be allowed to operate even if you complete all requirements along the way? How will we get our money back in that case?” The reason I am not a rich entrepreneur is that I could never provide a satisfactory answer to the question.
One of the reasons that the nuclear industry has been pushing the loan guarantee program is to help answer that question. They are a lot better organized that AAE was and deserve the backstop against bad behavior that the loan guarantees provide. The government should have some “skin” in the game because they have demonstrated in the past that they can be swayed by people with a financial interest in preventing nuclear energy from competing in the market.
Here is the comment that I posted on the Huffington Post in response to Wasserman’s opinion piece.
Harvey does not seem to understand the difference between a “giveaway” that takes money away from other programs and a loan guarantee that results in immediate revenue to the federal government plus the opportunit y for 30 years of above average interest payments as the loan is repaid.
Nuclear energy is such a good investment that the German government recently decided to allow its nuclear plants to continue operating so that it could collect a new tax of $2.3 billion marks against just 17 plants. Though the owners were not terribly happy about paying extra taxes, the certainty that they would be allowed to operate their well-built , carefully maintained facilities has resulted in a subsequent announceme nt that two reactors that were shut down a few years ago because they needed some minor investment s will soon be restarted.
The only real risk that has kept many financial sources away from loaning money to nuclear plants is one that Wasserman himself helped to add to the mix – the “Shoreham syndrome”. That is my own name for the risk that a nuclear plant can be completely built and licensed – at the cost of several billion dollars – and then prevented from operating and earning revenue by the political act of a hack who owes his career to the fossil fuel companies who supported his campaign.
Publisher, Atomic Insights