Friday, March 5, 2010

Nuclear loan guarantees ~ next stop grassroots support

Obama lanhamNow that he actively supports the nuclear renaissance, the President needs all the help he can get to convince Congress to add $36 billion to the program

The Obama administration served up a welcome surprise Feb 16 with a well-honed speech supporting federal loan guarantees for new nuclear power plants. At the same time, the Department of Energy (DOE) awarded $8.3 billion, out of existing authority of $18.5 billion, to Southern’s Vogtle plant. The project plans to build two Westinghouse 1,150 MW AP1000 reactors at a site in Georgia. Another three reactor projects have been short-listed by DOE under the current program.

In the 2011 federal budget request to Congress, the President requested the authority to issue an additional $36 billion in federal loan guarantees for new nuclear power plants. (see video below)

Depending on who’s counting and how, there 12-18 new reactors with license applications in motion at the NRC. At an average price of $6 billion each, the President’s request would cover another six-to-eight new reactor projects.

Democrats had a mixed set of responses to the initial announcement and the budget request. The green wing of the party squawked loudly especially in the House. However, in the Senate, where climate change legislation is pending, some Republicans welcomed the proposal as an olive branch to gain bipartisan support for the bill.

How to get Obama grassroots support for loan guarantees

There are repeatable models in the world of Washington politics to gain support in Congress for bill money items. Even though the loan guarantees don’t involve actual spending, opponents will portray them that way.

Building grass roots support in as many congressional districts as possible is an effective counter measure to inside-the-beltway below the belt attacks by the anti-nuclear factions.

rocket scienceHere’s how one of them works. When a major defense corporation is pushing funding for a new weapons system, like a missile or fighter jet, it rounds up the suppliers for the system identifying them and the jobs in as many congressional districts as possible.

Then the defense contractors present their case on benefits in each congressional district, or state, with specific focus on members of the House and Senate Appropriations Committees. Sometimes it works, other times it doesn’t – depending on how much pork is involved relative to tactical readiness and capabilities.

This model could be applied to the loan guarantees. Unlike the defense case, there is no rocket science here. Just match the NRC license applications to the states and congressional districts where the plants will be built. Then fire up the building trade unions, steelworkers, the supply chain through the National Association of Manufacturers and similar trade associations. A list of NQA-1 qualified vendors would be another resource.

Thinking ahead to the 2010 mid-term elections

Hopefully, the nuclear industry is way ahead thinking through this strategy. The President is going to need a broad-based grass roots coalition of people who see the economic benefits of new reactors in the form of jobs and supplying components to the reactors.

By the time Congress gets around to voting on the new $36 billion in loan guarantees, the 2010 mid-term elections will be fast approaching. This is a big enough item that grass roots groups have an opportunity to ask candidates for office where they stand on the measure.

What are your thoughts on building grass roots supports for the new loan guarantees?

Video – NEI on loan guarantees via Clean Skies

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thinkblogonline said...

I believe that nuclear power is what we need to work towards in this country to end our dependence on foreign oil and decrease greenhouse emissions. What I don't understand is why does the government have to fund the new plants? Shouldn't any investor see this as a big opportunity and monetize from it? Why don't some of the energy companies step up and realize that we are going to move to nuclear energy whether or not they follow suit. There is profit to be made here for the utility companies if they would just accept it.

Rod Adams said...

@thinkblogonline - why do you think that the government is providing this money? The program is a loan guarantee, not a grant. All it means is that the government, with its vast amount of "full faith and credit" is standing behind a project that they have fully vetted. The government in this situation has more ability to evaluate AND CONTROL the financial risks associated with building a large, complex, multi-billion dollar project than banks do by themselves.

Most banks do not have a bunch of PhD's available to determine the technical viability of the project and they are understandably worried that the government could change its policy in support of nuclear energy AFTER the company building the reactor has spent BILLIONS. After all, that has happened before.

The US government is the one that established the market conditions that make the banks and the utilities demand a stand-by guarantee from the feds in order to proceed. We elected that government - and all the ones that preceded it to establish those conditions. That is why, if we want the benefits of nuclear energy in terms of energy security and avoiding greenhouse gas emissions, we have to be willing to assume some of the risks.

Mr._Ed said...

sorry Rod, your comments don't square with the reality of Yuca Mountain. The government ran the Yuca Mountain projects and the public utilities and ratepayers paid for it; and we don't even know how we're going to recover that! Your statement "The government ... has more ability to evaluate AND CONTROL the financial risks associated with building a large, complex, multi-billion dollar project than banks do by themselves" is just plain wrong. All the government does is make it more expensive and in the end it is the taxpayer/ratepayer that has to bail out every failed project. Loan guarantees might jump start some nuclear construction but there is a good chance that the seeds of its own demise are built into it.

Rod Adams said...

@Mr_Ed - I think you might have misinterpreted the point I was trying to make. Perhaps it was because I was not clear.

I agree that the government is not very good at controlling the cost of projects in the direction of reducing costs. However, government processes are quite good at policies that push costs ever higher through imposition of changing rules, enforced delays, capital requirements, set asides, etc.

I know that many do not think of this process as "controlling costs", but when the underlying goal of some participants is to drive up the cost of a competitor, that is exactly the kind of "control" their campaign contributions are designed to purchase.

My point in supporting loan guarantees that put the government on the hook if costs spiral up - out of control of the borrower, but under the influence of government decisions - is to discourage that kind of behavior by the bureaucrats and elected officials.

That explanation still might not be clear, but I am trying to illustrated that the reluctance of capital investors to get involved in large nuclear projects without government guarantees is NOT a condemnation of nuclear technology, but a condemnation of the established industry as governed by the current policies.

The basic technological advantages of using nuclear fission compared to fossil fuel combustion is why private capital IS investing substantial amounts of money into smaller projects that might avoid some of the government control levers that serve to inflate prices.