Radioactive "Moral Hazard": DOE loans, and guarantees, $6.5 billion for two new reactors for a 0%, $0.00 credit subsidy fee!
Aerial image of Plant Vogtle Nuclear Generating Station - photo credit to High Flyer. The photo shows the operating Units 1 and 2, as well as the construction site for proposed new Units 3 and 4.Southern Alliance for Clean Energy reports in a press release entitled "New Documents Confirm Utility Giant Southern Company Gets Sweetheart Deal from Energy Department for Multi-Billion Nuclear Loan Guarantees for Vogtle Reactors":
"As revealed today in an Energy & Environment News story by Hannah Northey, the credit subsidy fee for utility giant Southern Company and its utility partner, Oglethorpe Power, for billions of dollars in taxpayer-backed federal loan guarantees, is nothing, $0. This shocking information was disclosed two months after the Department of Energy (DOE) finalized terms of $6.5 billion worth of loan guarantees that were offered as part of an $8.3 billion package to build two new nuclear reactors at Plant Vogtle in Georgia. A third partner in the project, MEAG, has yet to have their $1.8 billion loan guarantee finalized."
Please register your disapproval of this nuclear sweetheart deal, at taxpayer expense and risk, to President Obama, your two U.S. Senators, and your U.S. Representative! You can be patched through to your Members of Congress via the Capitol Switchboard at (202) 224-3121.
BACKGROUND
President Obama himself announced the $8.3 billion loan guarantee offer for Vogtle 3 & 4 in Feb. 2010. After four years of wrangling, the new reactor proponents have managed to convince Obama's DOE to provide the loan guarantees at no charge whatsoever.
The credit subsidy fee is supposed to be charged to the new reactor proponents so they have at least some "skin in the game," and to provide at least some meager protection to taxpayers if the project goes "belly up." Over a decade ago, the Congressional Budget Office reported that the history of new reactor projects reveals a whopping 50% risk of default.
In fact, of three dozen proposed new reactors targeted at the U.S. just several years ago, all but a handful are either indefinitely suspended, or outright canceled.
The only four actually under construction -- Vogtle 3 & 4 in Georgia, and Summer 2 & 3 in South Carolina -- have relied on gouging ratepayers through "Construction Work in Progress" surcharges -- or "nuclear taxes" -- on household and business electricity bills, a practice that is illegal in most states.
To that, Vogtle 3 & 4 now have added the advantage of federal nuclear loan guarantees -- which could leave taxpayers holding the bag for $8.3 billion. That's 15 times more taxpayer money than was lost in the Solyndra solar loan guarantee default -- only Vogtle 3 & 4 are at a much higher risk of defaulting that was Solyndra!
As Nomi Prins, a senior fellow at Demos, and author of All the Presidents' Bankers: The Hidden Alliances That Drive American Power, said on April 22, 2014 on KPFA's "Letters and Politics" (beginning at the 18 minute 27 second mark):
"...When money has no consequence, using it improperly has no consequence. Therefore, speculation or reckless activities with that money can create greater havoc for the broader population."
Economics refers to such dynamics as "moral hazards." With the Vogtle 3 & 4 proposed new reactors, the moral hazard comes with a radioactive twist. If the project simply defaults on its loan repayment, a total of $8.3 billion in taxpayer money could be lost to the U.S. Treasury. But if the two new reactors are actually built and operated, the public could bear costs not just to their pocketbooks, but also to their health, safety, security, and environment.
(Check out this op-ed Beyond Nuclear's Kevin Kamps submitted to public radio's "On the Media" in Nov. 2008, focusing on the habit of the media using nuclear metaphors to describe financial crises, but rarely covering literal nuclear risks or disasters themselves! Ironically, "On the Media" did not run with it. Nor did several other media outlets approached with similar op-ed ideas.)
In the form of the high-level radioactive wastes that would be generated, those risks would extend forevermore into the future. In fact, George W. Bush's DOE committed the U.S. taxpayer to ultimate liability for Vogtle 3 & 4's high-level radioactive wastes in his last day's in office, signing contracts with the nuclear utility just a day or two after Barack Obama won the presidential election, but before he took the oath of office.
Several years ago, when Obama's DOE demanded an 11-12% credit subsidy fee (amounting to $880 million) from Unistar Nuclear (a partnership between Constellation Energy and Electricité de France) to build a giant French Areva reactor on the Chespeake Bay in Maryland at Calvert Cliffs nuclear power plant, Constellation not only walked away from that particular project -- it got out of the new reactor biz altogether! The U.S. Nuclear Regulatory Commission was forced to end the licensing proceeding when the French partner could not find a new American partner, due to prohibitions on majority foreign ownership of reactors in the U.S. under the terms of the 1954 Atomic Energy Act.
Another top contender for federal loan guarantees were the proposed new Units 3 & 4 at South Texas Project nuclear power plant. However, its major foreign partners were Japanese, including Tokyo Electric Power Company. Shortly after the Fukushima nuclear catastrophe began at TEPCO's Daiichi nuclear power plant in March 2011, the U.S. partner, NRG of New Jersey, withdrew from the project. The Japanese consortium, including Toshiba, Hitachi, and the Japan Bank for International Cooperation, could not entice a new American partner to join the scheme.
Beyond Nuclear's Kevin Kamps attended (and took notes on, including making commentary) the giddy DOE-Southern Co. press conference featuring Energy Secretary Moniz announcing the $6.5 billion loan guarantee deal at the Vogtle 3 & 4 construction site on Feb. 20, 2014. Moniz said he looked forward to Vogtle 3 & 4's operation commencing “In four years, [although] I wish you could accelerate it by a year.” (Although DOE promoted the press conference on its own website, Georgia Power's PR department, a division of Southern Co., actually ran the press conference. Talk about a "private-public partnership" to promote nuclear power!)
A Southern Co. senior executive, perhaps not realizing the microphone was still on, joked back at the conclusion of the press conference “It would take me two hours to tell you why we can’t go faster.”
All joking aside, nuclear power is very slow to deploy. The last reactor to come online in the U.S. took 23 years to build! As Brice Smith of IEER wrote in his seminal 2006 book Insurmountable Risks: The Dangers of Using Nuclear Power to Combat Global Climate Change, nuclear power is not only too astronomically expensive, it is also too glacially slow, to solve the accelerating climate crisis.
Vogtle 3 & 4 have already experienced significant cost overruns, as well as schedule delays, in the past several years of construction.
Moniz spoke at the press conference of "$30 billion out, $40 billion yet to play" in terms of federal energy loan guarantees (emphasis added: note the gambling metaphor!). That includes another $10.2 billion for new atomic reactors, and $4 billion for new uranium enrichment, authorized several long years ago now.
Moniz also spoke enthusiastically about Small Modular Reactors (SMRs). DOE, on his watch, has granted nearly half a billion dollars of taxpayer money towards SMR R&D, despite SMR consortia putting their grand schemes on indefinite hold for lack of interested customers!
Urge Energy Secretary Moniz to direct federal support towards safe, clean, and cost-effective renewables such as wind and solar, not dirty, dangerous and expensive nuclear power!
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In response to the news that Vogtle 3 & 4's credit subsidy fee for a $6.5 (and perhaps soon $8.3) billion nuclear loan guarantee will be a big fat ZERO, Mike Jacobs, senior energy analyst in the Climate & Energy Program at Union of Concerned Scientists has posted a blog, "When Should Nuclear Power Pay for Risk? Is Never Good for You?"
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Southern Alliance for Clean Energy (SACE) has posted a blog linking to a CREDO petition initiated by NIRS, calling on U.S. Senators Boxer (D-CA) and Markey (D-MA), strong nuclear power watchdog who, respectively, chair and serve on the Environmental and Public Works Committee, with jurisdiction over nuclear power matters, to request a Government Accountability Office (GAO) investigation into the ZERO credit subsidy fee "no money down" scandal. At the bottom of the CREDO petition site is a link to NIRS' GreenWorld blog post about the Vogtle 3 & 4 sweetheart deal, at taxpayer expense.
The SACE blog also links to a clever and insightful "by the numbers" blog written by Sue Sturgis, Institute for Southern Studies Editorial Director.