Nuclear Energy Industry Sees Its Fortunes Turning in Capital
The U.S. nuclear power industry -- at a virtual standstill for more than 20 years and looking particularly bleak after Sept. 11, 2001 -- could be on the threshold of a comeback.
Since 1973, no company has ordered a nuclear plant that it eventually completed. Now, energy legislation expected to clear the Senate within the next few weeks would provide federal loan guarantees for up to half the cost of building as many as six new nuclear power plants.
The federal loan guarantees would be just one part -- although an important one -- of a complicated economic and political puzzle that would need to be assembled before any nuclear plants are built. Wall Street still must be convinced of the economic viability of constructing such plants. And nuclear power remains controversial, with critics charging that the benefits aren’t worth the risks of a catastrophic accident.
Security concerns spiked after Sept. 11. Doomsday scenarios envisioned a hijacked plane crashing into one of the nation’s 103 commercial nuclear power plants, potentially causing radiation leaks. Government officials beefed up security at plants and distributed nearly 10 million potassium iodide pills, which can help protect the thyroid in case of an emergency, to residents near plants.
Supporters of nuclear power believe it is important that the industry move forward again.
The industry’s fortunes have improved under President Bush, who has made expansion of nuclear power a prime goal of his energy policy. They brightened more after Republicans gained control of both chambers of Congress in last year’s elections and Sen. Pete V. Domenici (R-N.M.) became chairman of the Senate Energy and Natural Resources Committee.
Domenici, whose home state was the site of the first test of an atomic bomb in 1945 and today is where two national nuclear laboratories operate, is the author of the Senate legislation. He is confident about the prospects for the measure, citing congressional approval last year for designating Nevada’s Yucca Mountain as the nation’s nuclear waste repository.
Along with the loan guarantees, the Senate bill would authorize $1 billion for building an “advanced” nuclear reactor in Idaho that would produce hydrogen, a fuel that Bush has championed for cars. “If the demonstration [project] succeeds, it could well initiate a major nuclear reactor renaissance,” said Jay E. Silberg, a Washington lawyer for nuclear utilities.
The Senate legislation and an energy bill approved by the House last month would extend a cap on the nuclear industry’s liability in case of an accident. And both measures would authorize millions of dollars for nuclear research.
Although the House energy bill does not include the loan guarantees, the issue is likely to be on the table when House and Senate negotiators draw up a final measure.
“Suffice to say America needs a strong nuclear power industry if we’re going to meet our energy needs in the 21st century,” said Ken Johnson, a spokesman for W.J. “Billy” Tauzin (R-La.), chairman of the House Energy and Commerce Committee.
Today, nuclear power generates about one-fifth of the nation’s electricity. But high construction costs, as well as public protests after the 1979 accident at the Three Mile Island reactor in Pennsylvania, stopped the industry’s growth.
Domenici has touted nuclear energy as a cleaner alternative to coal and oil. And he has argued that nuclear power is necessary to prevent the supply shortages and price spikes that occur from too much reliance on a single energy source.
Domenici has been one of the top recipients of campaign contributions from the nuclear power industry, receiving more than $67,000 from January 2001 through early 2002 in individual and political action committee donations from companies that own or build nuclear power plants, according to the Center for Responsive Politics, a political watchdog group. The industry gave nearly $9 million overall to congressional candidates and political parties, almost two-thirds of it to Republicans.
But the industry’s expansion still faces political opposition.
“Until there’s a [resolution] of the nuclear waste issue, it’s ridiculous to even talk about” expanding nuclear power, Sen. Harry Reid (D-Nev.) said. For instance, legal challenges to the use of Yucca Mountain for waste disposal are pending.
Additionally, he said, the public remains “scared to death” about nuclear power. “Where you going to put one [a plant]? Not in my backyard -- that’s what everybody’s going to say.”
Lisa Gue, an energy analyst for Public Citizen, a Washington-based consumer advocacy group, decried the Domenici-drafted legislation. “Here we see a piece of legislation that continues to prop up one of the most expensive and potentially most lethal forms of electric generation,” she said.
Under the measure, the government would provide loan guarantees or guarantee electricity purchases to spur the building of as much as 8,400 megawatts of production capacity -- enough for up to 8 million homes. Last year, nuclear plants generated electricity to power 70 million homes, according to industry officials.
“I think there is a bright future for this industry,” said John Kane, senior vice president of government affairs for the Nuclear Energy Institute, a Washington-based industry group. “We’re safe. We’re cheap. We’re clean. I can’t help but think we’re going to begin to build a new plant in this country in the next five to 10 years.”
Silberg, the utilities lawyer, said: “Utilities will certainly be in a better position to commit to new nuclear plant construction with the loan guarantees. But the utilities will ultimately have to be convinced that the construction of new plants makes economic sense.”
Other experts say that ultimately it will be Wall Street -- not Washington -- that determines the industry’s fate. Nuclear plants can cost at least two times as much to build as natural gas plants, though industry officials say nuclear plants are more economical to operate.
“Until the price of nuclear plants comes down, no one is likely to ask for the loans,” said Geoffrey Rothwell, a Stanford University economist.
Some lawmakers remain concerned about the security of nuclear plants. A Senate committee this month is expected to consider legislation that would impose new security requirements at such facilities. Industry officials contend that nuclear plants are safe.
On Capitol Hill, the loan guarantees also face opposition.
Domenici’s New Mexico colleague, Sen. Jeff Bingaman, a Democrat who regards himself as pro-nuclear, said he has “great difficulty” justifying loan guarantees to a mature industry.
Sen. Ron Wyden (D-Ore.) warned that the loan guarantees could expose the Treasury to a risk of as much as $30 billion, a figure that the industry disputes. Wyden has pointed out that the Washington Public Power Supply System in 1983 defaulted on $2.25 billion in bonds -- at the time the worst bond default in U.S. history -- after cost overruns and construction snafus forced cancellation of four of five planned nuclear plants in the Pacific Northwest.
“Private investors have stayed away from nuclear power because nuclear-fired electricity is much more expensive than coal- or gas-fired electricity,” said Keith Ashdown, vice president of policy for Taxpayers for Common Sense.
Supporters of the loan guarantees say the nuclear industry is only seeking the same kind of assistance that has been provided to other industries, such as the airlines and shipbuilders.
“The opponents of this just don’t want to see nuclear plants built,” Kane said. “Because I can’t think of any other reasons why you wouldn’t want to have emission-free [plants] that can produce great gobs of electricity very cheaply.”