Nuclear Power Needs Government Incentives, Says Task Force

A high-profile US government task force says it is in the national interest to use nuclear power as a clean and increasingly economical way to meet the growing demand for electricity.

Citing economics, climate change, and the projected growth in global energy demand, a US Department of Energy (DOE) task force cochaired by former Nuclear Regulatory Commission (NRC) chairman Richard Meserve and former New Hampshire Governor John H. Sununu has recommended that the federal government help revitalize the US nuclear power industry by sharing the up-front costs of the first few of a new generation of nuclear power plants. After citing three decades of increasing efficiency, decreasing operating costs, and solid safety records at the 103 existing US nuclear power plants, the task force noted that "despite this . . . achievement, and the fact that nuclear power generation does not result in greenhouse gas emissions, no new US nuclear power plants have been ordered and subsequently built since 1973."

To restart the nuclear industry, the authors of the report—the nuclear energy task force of the Secretary of Energy Advisory Board (SEAB)—say "there should be government-supported demonstration programs and financial incentives to overcome the uncertainties and economic hurdles that would otherwise prevent the first few new plants from being built." Their key recommendation is a cost-sharing program for "first-of-a-kind engineering" (FOAKE) costs "inherent in building the first facility of a new design."

The task force recommended fifty-fifty cost sharing up to a maximum of $200 million in government money "for each of three major competing design types, with the secretary of energy being given discretion to select the types to be supported." While the report does not call the cost-sharing program a government loan to industry, it does say that much of the money could be repaid from the profits of future nuclear power plants built using the designs.

Although the report is essentially a document making an economic case for government subsidies to restart the US civilian nuclear power industry, task force member C. Paul Robinson, the former director of Sandia National Laboratories in Albuquerque, New Mexico, said the economic arguments "are just becoming very timely in terms of electrical needs. We have looked at all the alternatives and certainly if you believe in the threats of greenhouse gases, then it is important to have something that can produce electricity with good efficiency and cost, and be emission free."

Another task force member, physicist Burton Richter, former director of SLAC, said that the FOAKE recommendation for cost sharing came because it "looks very much as if, once you get past the extra costs of a first-of-a-kind plant, then the costs of nuclear power are competitive with coal. That's a surprise to most people. If you can replace coal, you do good for air pollution, the economy, energy supply, and competitiveness."

Richter noted that the US, along with the rest of the globe, is "due for a big expansion in electricity demand, and we're better off for environmental and other reasons if we do it with nuclear power instead of coal. Government should lead industry to do the right thing rather than the wrong thing."

In addition to urging legislative support and funding for FOAKE, the task force made two other recommendations to help rejuvenate the nuclear power industry:

• Early site permit and combined construction and operating license demonstration programs jointly funded by DOE and industry. In the past, one of the more significant barriers to new nuclear power plant construction was the two-step licensing process. The NRC issued a construction permit, and only after construction was substantially completed was an operating permit issued. Outside parties had numerous opportunities to intervene and delay or halt a project, which made the process of building a nuclear power plant a risky, high-stakes affair. The NRC has established a streamlined combined licensing procedure that significantly cuts the financial risk of building a nuclear plant, but the procedure has never been tested. The report recommends that DOE share the licensing costs with early applicants so that a real-world model can be developed.
• A "basket of support programs for the first few reactors of each new supported design to provide efficient financial options." This basket would include secured loan guarantees, tax credits, accelerated depreciation, and other economic incentives from which a nuclear power plant builder could pick and choose. The incentives package could not exceed $250 million in government money for each nuclear reactor.

In the leadership issues section of the report, the task force warns nuclear-industry leaders that they must "recognize that the federal government should not and cannot eliminate all the risks and vagaries of the energy markets for them." The nuclear industry, the report says, "must clarify its needs and prioritize its requests" and "must also convey information to federal policymakers in clear, sharply defined terms with specific recommendations."

Richard Myers, senior director of business and environmental policy at the Nuclear Energy Institute, said the task force report was a "well thought out piece of work." The nuclear industry, which NEI represents, is looking at $400 to $500 million as the FOAKE cost of a new nuclear plant, he said, so the report's fifty-fifty cost-sharing proposal with a $200 million limit was reasonable. "We think the report, on balance, is pretty sensible.. . . Once the first ones are done, we think Wall Street and the companies will recognize the licensing process is manageable, costs are predictable . . . and we can move forward from that point on and finance them conventionally."

Policymakers in both the administration and Congress must develop "a clear commitment to a national energy policy" that gives nuclear power a strong role, the report says. "We urge that the president identify this as a critical priority for the nation and that Congress take the necessary steps to meet this priority." The report doesn't mention the controversy surrounding the Yucca Mountain radioactive waste storage project in Nevada (see the story on page 32), but it does say the waste storage problem must be resolved. But the authors make clear that "the absence of a licensed repository is not a valid reason for postponing additional nuclear construction."

Another critical aspect of encouraging a new generation of power plants is the concern over nuclear proliferation, especially in the wake of September 11th. The task force's bottom-line conclusion is that the rest of the world is going to move forward with energy generation from nuclear power regardless of what the US does, and the US would be better off participating than sitting on the sidelines.

An increase in the use of nuclear power in the US would actually "serve our non-proliferation objectives," the report says, because "one of the most efficient and certainly the most thorough ways of disposing of that nuclear material is to burn it as fuel in commercial nuclear reactors."

Robinson said task force members "had several discussions with the folks over at the White House to understand what the traffic would bear" in terms of government support for the nuclear industry. "We've been getting the right words to do at least one such [reactor construction and startup]." That would shore up the confidence that all of the work that was done to speed up the regulatory process has worked, he said. "The object is . . . to show that nuclear power is a good investment."

And it is economics, not safety, that killed nuclear power development in the US, Robinson said. "Nuclear power was grossly overbuilt because of predictions that energy growth was going to double every seven or eight years," he said. When that didn't happen, it became uneconomical, especially with the uncertain licensing procedures, to invest in nuclear power, he said.

"So it's going to take a big infusion of courage for the next person in the finance community to take the first step," he said. That courage will be easier to find if it is bolstered by a federal cost-sharing program, the report concludes.

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