| February 4, 2009 |  |
UCS Says No to Federal Loan Guarantees for New Nuclear, Liquid Coal or Coal Gasification Plants
Congress urged to put dollars toward renewables, energy efficiency
The Senate Appropriations Committee has added an additional $50 billion in loan guarantees to the American Recovery and Investment Act of 2009 to support a range of energy technologies authorized under the Energy Policy Act of 2005. The Union of Concerned Scientists (UCS) sent a letter yesterday to the Senate warning that, absent strong guidance from Congress and the administration, the vast majority of this authorization could go to such technologies as nuclear power, liquid coal and coal-gasification power plants.
Under the current authorization, $18.5 billion, or almost half of the available funds, has been allocated to nuclear power projects. Furthermore, the nuclear industry has already requested $122 billion in loan guarantees to construct 21 new reactors. For the reasons enumerated below, UCS maintains that nuclear and coal loan guarantees do not belong in the economic stimulus bill. Congress should eliminate funding for them. Striking them from the loan guarantee program also would help reduce its proposed size by restricting any additional subsidies to appropriate, affordable, readily implemented green technologies.
NO IMMEDIATE ECONOMIC STIMULUS/BENEFIT: Neither the nuclear nor coal facility loan guarantees would provide immediate economic stimulus. The nuclear industry is not ready to build new reactors in the near-term. Even under the best-case scenarios for the industry, no new reactors would even be licensed for at least three years and it would take at least six more years to build them. Similarly, there are very few liquid coal facilities that can go forward today, and new coal gasification power plants take several years to go through permitting and construction. UCS fears that this provision could allow developers of these capital-intensive projects to apply for loan guarantees for future use, which could significantly reduce the amount of loan guarantees available for more immediate and achievable clean energy opportunities.
MAJOR TAXPAYER LIABILITY: Loan guarantees for these technologies would create a significant liability for U.S. taxpayers. The Congressional Budget Office (CBO), for example, estimates the likelihood of default for loans made to nuclear reactor developers to be "well above 50 percent." The same is true for liquid coal. Financial viability is contingent upon factors well beyond a facility's control, such as world oil price and proposed carbon dioxide regulations. According to the National Energy Technology Laboratory, these facilities are economically feasible when oil prices exceed $86 per barrel, assuming there is no price placed on carbon dioxide emissions. Therefore, oil market volatility would expose taxpayers to bad investments if they are forced to cover the cost of nonperforming loans.
HUGE CAPITAL COSTS: The nuclear and coal technologies under consideration entail enormous capital costs. Construction cost estimates for nuclear reactors have more than tripled since 2000. In October 2008, credit rating agency Standard & Poor's stated that costs continue to "soar" due to production bottlenecks, increasing costs of materials, and lack of trained workers and utility construction experience. Similarly, liquid coal facilities could cost as much as $125,000 per barrel of daily production capacity. A commercial-scale, 50,000-barrel-per-day facility thus could exceed $6 billion in capital costs. Meanwhile, coal-gasification power plants, which are even more expensive than traditional coal plants, could easily reach $2 billion per commercial-scale plant. Given the huge risks associated with nuclear, liquid coal development and coal gasification power plants, it is unacceptable to ask taxpayers to shoulder the risk for these costly energy sources when investments in renewable energy and energy efficiency could be made much more quickly, for much less money, and with little risk to taxpayers.
MEAGER JOB CREATION: Advanced coal and nuclear technologies would create few jobs in the two-year time frame of the stimulus bill. Nuclear jobs are expensive to create and many would go to foreign workers. Based on the current estimated costs for new reactors, each nuclear job would require an investment of at least $1.5 million, according to the Nuclear Energy Institute's own numbers. Standard & Poor's concluded that experienced personnel and management would have to be imported from other countries, such as France and Japan. There is little information on liquid coal job benefits since no commercial scale facilities have been built in the United States. However, the high cost of liquid coal facilities also means that jobs would be expensive to create. Estimates from a proposed liquid coal plant in Ohio suggest that each direct job would cost roughly $1.3 million. Investments in renewable energy and energy efficiency would create more domestic jobs faster and at less cost than nuclear power, liquid coal or coal gasification power plants.
RISKY TECHNOLOGIES: Loan guarantees for the nuclear, liquid coal and coal gasification industries represent subsidies for technologies with both demonstrated environmental liabilities and financial risks. Nuclear energy, for instance, is fully mature but demonstrably uncompetitive, with a history of multibillion dollar cost overruns for a single reactor. The nuclear industry has made it clear that it wants taxpayer loan guarantees for all of its proposed new reactors, itself an admission that the subsidies are not part of a market transformation strategy that moves toward self-sustaining economic viability.
Liquid coal, meanwhile, is an untested technology that produces nearly twice the lifecycle global warming pollution as conventional petroleum fuel. Coal gasification power plants built without carbon capture and storage would emit about as much global warming pollution as a new coal plant using more traditional technology. As such, each liquid coal plant or coal gasification power plant would represent a dangerous step in the wrong direction, directly undermining U.S. climate protection efforts and threatening our nation's ability to avoid the worst consequences of climate change. Additionally, deployment would dramatically increase coal mining and its attendant disadvantages, including groundwater contamination, habitat loss, and despoilment of natural landscapes.
If short-term green jobs and economic stimulation are this legislation's objective, it makes no economic sense to include support for nuclear power (which is high cost), liquid coal plants or coal gasification power plants (which are both high cost and high in carbon emissions), when numerous faster, cleaner and lower-cost energy solutions are available. UCS is urging Congress to ensure that any new stimulus dollars are targeted toward measures with proven economic and environmental worth, such as renewables, energy efficiency and conservation, which could be deployed in the near-term at low risk and lead the nation to a clean and sustainable energy future.
The Union of Concerned Scientists puts rigorous, independent science to work to solve our planet's most pressing problems. Joining with citizens across the country, we combine technical analysis and effective advocacy to create innovative, practical solutions for a healthy, safe, and sustainable future.
