Earlier this year, President Obama announced an $8 billion loan guarantee for the construction of a new nuclear power plant in Georgia, stating that “investing in nuclear energy remains a necessary step.” The President also included an additional $36 billion for new loan guarantees in his FY 2011 budget request.
It is hard to overstate the value of this sort of guarantee, which essentially makes the high-cost construction of nuclear power plants possible. The planned Southern Co. power plant that was the recipient of the guarantee announced back in February is the country’s first new nuclear power project in almost 30 years.
Earlier this month, the House of Representatives included $9 billion in additional loan guarantees in a supplemental spending bill for 2010 that could enable construction on additional new nuclear plants to go forward sooner. The $9 billion increase in guarantees for 2010 would be derived by accelerating access to a portion of the $36 billion President Obama requested as part of his budget for 2011.
While CEA applauds the recognition of nuclear power as a key component of a secure energy policy by both the Obama Administration and Congress – and the recognition that continued financial support of the industry through these sort of loan guarantees is key to getting new nuclear projects off the ground and seeing them through to a timely completion – the passage of the loan guarantee package in the House supplemental bill is only a first step.
By far, the largest component of nuclear power costs is the steep upfront expense of constructing the plant. The Nuclear Energy Institute says that loan guarantees are critical to project financing because the financing capability of the typical electric company is relatively small. It also stresses that these loan guarantees are not grants or subsidies; recipients are required to repay the loan in full.
But when a project has this kind of backing, it provides assurance to contractors, workers and other investors that it is not going to run out of money halfway through. That sense of confidence helps construction proceed smoothly and without delays.
And ultimately, consumers win. Because it is so costly to construct a nuclear power plant, anything that helps speed the construction process along will help to contain costs. In a highly competitive industry where so many alternative power sources are too expensive to be widely adopted, cost containment can make the difference between a niche power source and a mainstream one.
In order to unleash all of the positive economic and environmental benefits of new nuclear construction, Consumer Energy Alliance urges Congress to fully support the $36 billion for nuclear loan guarantees in President Obama’s FY 2011 budget request and to support the accelerated access of $9 billion in loan guarantees for this year. We can no longer afford to delay expansion of nuclear energy.