Last Wednesday, the Obama administration announced $8.3 billion in public loan assistance to three nuclear power producers.
The subsidies, in the form of a $6.5 billion loan guarantee and a second loan deal worth $1.8 billion, will go to help build two nuclear reactors at the Vogtle plant in Georgia — the first new nuclear-power construction in the United States in 30 years. The reduced-rate loans will go to the project co-owners: Southern Company’s Georgia Power subsidiary, Oglethorpe Power, and Municipal Electric Authority of Georgia.
Southern, which owns 46 percent of the venture, will also receive $2 billion worth of tax credits and other federal incentives.
Secretary of Energy Ernest Moniz said that the new plans for the Vogtle plant would help put the U.S. on a “path toward a low-carbon energy future.”
While that may be so, the loans are also unnecessary and costly, Wonkblog’s Steven Mufson writes.
The loan guarantees will save Southern $225 million to $250 million in tax-subsidized reduced interest rates, but those savings are not necessary for the project. Southern itself said that it didn’t need the loans, as it could have borrowed from a traditional commercial bank and received unsubsidized loans instead. The company now plans to pass on the millions in savings to ratepayers.
However, Mufson notes that those ratepayers are already funding much of the construction cost of the reactors in the form of increased rates once the plant is complete. So the “savings” the ratepayers will receive will come as a reduction of the amount their rates will increase once the reactors are on line. Instead of a rate increase of 12 percent, Southern is predicting a spike between 6 percent and 8 percent.
This government-subsidized funding comes shortly after a series of three blows to the nuclear industry. The continuing economic stagnation that began in the late 2000s, competition from low-priced natural gas, and safety concerns after the Fukishima plant reactor leak in Japan have combined to put this new nuclear plant on unsure footing.
The Vogtle project was already $737 million over budget as of last year. Some estimate that it is $1.6 billion over budget now. It will house two of five reactors being built around the country.
Around the country, four other reactors have closed down recently or will close down due to competition with natural gas and the prohibitive costs of upgrading and repair.
Both political parties have treated the nuclear industry to taxpayer-funded loans. In 2005, a Republican-controlled congress passed the Energy Policy Act, which provided $17.5 billion in nuclear loan guarantees.
The nuclear companies are arguing that this loan is not like that given to Solyndra or other failed “green” projects, which produced technology costs so high even generous subsidies couldn’t save them. Nuclear energy, on the other hand has been around for decades, and when functioning properly a nuclear plant produces high volumes of energy. But if the companies default, it will matter little difference that they are nuclear, not solar. The taxpayers will feel it all the same.
— Alec Torres is a William F. Buckley Fellow at the National Review Institute.