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 Fall 2009

UCS has shown that nuclear power—aside from its many safety and security risks—is simply too expensive. There are other ways to curb global warming and meet our energy needs.

By Elliott Negin

According to a multimillion-dollar energy industry public relations campaign, nuclear power is a clean, green, cost-effective solution for combating global warming. This is the industry's argument in support of the 26 nuclear power plant proposals it has submitted to the Nuclear Regulatory Commission (NRC), and the case made by one U.S. senator for building 100 new reactors over the next two decades.

Expanding nuclear power capacity in the United States beyond the current fleet of 104 reactors—which do not emit global warming pollution during operation—could potentially help combat climate change. Nuclear power currently generates about 20 percent of U.S. electricity, and building more plants could reduce the 50 percent market share held by coal-fired power plants (the nation's primary source of global warming emissions).

But is nuclear power a climate solution we can afford? The short answer is no, according to a new UCS analysis, Nuclear Power: A Resurgence We Can't Afford. As Ellen Vancko, nuclear energy and climate change project manager at UCS and author of the analysis, notes, "Even if you discount nuclear power's current security and safety problems, the skyrocketing cost of construction could be the industry's Achilles' heel."

The Hidden Cost of Nuclear Power

Why won't the industry build new reactors without billions of your tax dollars?

The nuclear power industry likes to say that its product has some of the lowest production costs of all energy resources. What it leaves out of most discussions, however, are the capital costs—those associated with paying back the cost of plant construction, including financing. Fortunately for the industry, federal and state governments have historically provided substantial financial assistance to the companies building these plants. This assistance takes the form of loan guarantees that shield utilities and investment firms from the staggering capital costs and the accompanying risk of default by shifting the burden onto taxpayers and ratepayers.

In 2005 Congress authorized $60 billion in federal loan guarantees for new electricity-generating plants. Of that amount, the Department of Energy (DOE) allocated $18.5 billion for new nuclear plants. But the industry claims this is not enough and wants more—a lot more. Thus far, the DOE has already received applications for $122 billion in nuclear reactor loan guarantees, and the industry says it will need guarantees for all the plants still on its drawing board.

A History of Financial Failure

Nuclear power was once touted as the energy source that would be "too cheap to meter." In the 1960s and 1970s the industry proposed to build some 200 plants, but as construction costs escalated, only about half were built. Taxpayers and ratepayers were left footing the bill—about $300 billion in today's dollars—for the abandoned plants, cost overruns for plants that were completed, and costs that were often higher than the wholesale market price of power. Since 1978, no energy company has ordered a new plant, and all plants ordered after 1973 were cancelled.

Why did the industry stop building plants? Because it reached the unavoidable conclusion that new plants are uneconomical. Forbes magazine in 1985 called the nuclear power experience "the largest managerial disaster in business history," and investors have stayed away ever since. In 2007, six of the country's largest investment firms told the Department of Energy in writing that they were unwilling to accept any risk for financing new reactors. Utility executives have also made it clear that they will not place their companies at risk by financing new nuclear plants. They would consider it, however, if taxpayers assumed the risk—in the form of federal loan guarantees (see the sidebar).

Nuclear Power's Uphill Battle

Taxpayers have more than one reason to be skeptical about such guarantees. First, projected construction costs have spiraled out of control. In 2002, the nuclear industry estimated it would cost $2 billion to $3 billion to build a typical 1,100-megawatt reactor, which can supply power for about a million homes. Since then, the projected costs have jumped as high as $9 billion.

Second, based on the industry's financial track record, the Government Accountability Office estimates that the average risk of default on a federal loan guarantee for nuclear plant construction is 50 percent. UCS used this rate of default and current cost estimates to assess the overall risk to taxpayers for guaranteeing nuclear plant construction loans. The total could range from $360 billion (to replace 100 plants operating today with new plants by 2040) to as much as $1.6 trillion (to build 300 plants, as some in the industry have advocated, with 50 percent higher costs).

Without a loan guarantee, no energy company has taken anything more than preliminary steps toward constructing a new plant. The NRC is not expected to approve any of the 26 applications that have been submitted to it until 2011, which means there will not be any new nuclear reactors operating before 2016 at the earliest.

The Economics of Climate Change

An April 2009 UCS report, Climate 2030: A National Blueprint for a Clean Economy, concluded that new nuclear plants would be one of the most expensive options for producing "low-carbon" electricity—even when the likelihood of cost overruns is ignored. The peer-reviewed study used a sophisticated model to demonstrate that the United States can reduce carbon emissions from electricity generation 84 percent by 2030, but it did not find new nuclear plants to be an economical part of the generation mix, at least beyond four new 1,100-megawatt reactors that would be covered by existing subsidies and loan guarantees. Instead, the model showed it was more economical to meet a stringent emissions cap with a mix of energy efficiency, renewable resources, and combined-heat-and-power plants fueled with natural gas.

"Fortunately," says Vancko, "there are many viable alternatives to nuclear power, such as efficiency, wind, biomass, and geothermal, which are not only more environmentally friendly and cheaper, but can be up and running much more quickly and at much lower risk to investors and taxpayers." Given nuclear power's track record and numerous risks, Vancko cautions against throwing more federal loan guarantees or other subsidies at the nuclear industry.

"The potential price tag of yet another public bailout of the nuclear industry would dwarf the previous ones," she says. "Congress should think twice about putting hundreds of billions of taxpayer dollars at risk to underwrite a new generation of costly reactors that Wall Street and even the industry itself are unwilling to finance on their own." The power source that was once promised to be "too cheap to meter" may now be too costly to revive.

Elliott Negin is the UCS media director.