Nuclear Waste Commission, Yucca Mountain, and Loan Guarantees
First among the big news items related to nuclear power is the official naming by the Obama Administration of a much-anticipated Blue Ribbon Commission on America’s Nuclear Future to recommend a safe, long-term solution for used nuclear fuel and nuclear waste. The commission, announced on January 29, will issue its final report within 24 months. Energy Secretary Chu noted that the commission is not tasked with recommending a site for a long-term waste repository.
The release of President Obama’s fiscal year 2011 budget on Monday also had important implications for U.S. handling of used nuclear fuel and waste. In keeping with a campaign pledge from President Obama, the President’s budget calls for discontinuing funding for constructing a nuclear waste repository at Yucca Mountain in Nevada, and the Department of Energy will reportedly withdraw the license application submitted to the Nuclear Regulatory Commission (NRC) in 2008 for Yucca Mountain. In the last budget, a small amount of funding was left to continue the NRC license application process for Yucca Mountain.
The question of what to do with used nuclear fuel and nuclear waste has long been politically contentious. But the lack of certainty right now regarding a final disposal site for used nuclear fuel and nuclear waste is not likely a major obstacle to building new nuclear reactors (although a few states, such as California, have laws effectively prohibiting the construction of new reactors before a final waste disposal solution is available). Used nuclear fuel can be safely stored onsite at nuclear plants for decades even after a plant shuts down, so there is time to determine how to resolve the waste issue.
The major obstacle to a U.S. “nuclear renaissance” is financial. The operating costs of nuclear reactors are relatively low, and the cost of electricity from a new nuclear plant over its lifetime is estimated to be lower than that of several other non-emitting electricity generating technologies (e.g., wind and solar). However, new nuclear reactors are enormously expensive to build in terms of up-front capital costs (a new plant will cost several billion dollars). The cost of borrowing the money to build a new reactor has a big impact on the economic viability of a project. The construction of much of the existing nuclear fleet, however, saw significant cost overruns and delays, which makes financing the first new plants after a hiatus of several decades difficult.
This brings us to the final big news item related to nuclear power. The Energy Policy Act of 2005 created the Department of Energy’s (DOE) loan guarantee program, and Congress authorized DOE to guarantee up to $18.5 billion in loans for new nuclear plants. Despite a slow start to the nuclear loan guarantee program, DOE says it’s close to conditionally awarding the first such loan guarantees. President Obama’s new budget proposes tripling the amount of nuclear loan guarantees that DOE can award (amounting to a total of $54.5 billion) which could support construction of seven to ten new reactors. As Energy Secretary Chu said in an interview Monday, the idea behind these loan guarantees is to give companies a chance to demonstrate on-time and on-budget nuclear plant construction, after which point commercial lenders can finance subsequent nuclear plants.
While the country resolves the waste issue and federal loan guarantees enable first-mover nuclear plants to assuage lenders’ concerns about on-time and on-budget construction, what can drive a “nuclear renaissance”? The answer is a long-term carbon price such as a greenhouse gas cap-and-trade program will create. Putting a price on carbon will stimulate households and firms to make innumerable small and huge decisions that will reduce emissions—ranging from buying more efficient appliances to investing billions of dollars in new nuclear plants.
Steve Caldwell is a Technology and Policy Fellow