Nuclear Power: Still Not Viable
Without Subsidies
Mar 06,2011 - Doug Koplow, Earth Track, Inc. - EarthTrack.net
Conspicuously absent from industry press releases
and briefing memos touting nuclear power’s
potential as a solution to global warming is any
mention of the industry’s long and expensive
history of taxpayer subsidies and excessive charges
to utility ratepayers. These subsidies not only enabled
the nation’s existing reactors to be built
in the first place, but have also supported their
operation for decades.
This report (Full Report or Executive Summary) catalogues
in one place and for the first time the full range
of subsidies that benefit the nuclear power sector.
The findings are striking: since its inception more
than 50 years ago, the nuclear power industry has
benefited—and continues to benefit—from
a vast array of preferential government subsidies.
Indeed, as the report shows, subsidies to the nuclear
fuel cycle have often exceeded the value of the power
produced. This means that buying power on the open
market and giving it away for free would have been
less costly than subsidizing the construction and
operation of nuclear power plants. Subsidies to new
reactors are on a similar path.
The most important subsidies to the industry do
not involve cash payments. Rather, they shift construction-cost
and operating risks from investors to taxpayers and
ratepayers, burdening taxpayers with an array of
risks ranging from cost overruns and defaults to
accidents and nuclear waste management. This approach,
which has remained remarkably consistent throughout
the industry’s history, distorts market choices
that would otherwise favor less risky investments.
Although it may not involve direct cash payments,
such favored treatment is nevertheless a subsidy,
with a profound effect on the bottom line for the
industry and taxpayers alike.
Future choices about U.S. energy policy should be
made with a full understanding of the hidden taxpayer
costs now embedded in nuclear power. To accomplish
this goal, we offer the following recommendations:
* Reduce, not expand, subsidies to the nuclear
power industry. Federal involvement in energy markets
should instead focus on encouraging firms involved
in nuclear power—some of the largest corporations
in the world—to create new models for internal
risk pooling and to develop advanced power contracts
that enable high-risk projects to move forward without
additional taxpayer risk.
* Award subsidies to low-carbon energy sources on the basis of a competitive
bidding process across all competing technologies. Subsidies should be awarded
to those approaches able to achieve emissions reductions at the lowest possible
cost per unit of abatement—not on the basis of congressional earmarks
for specific types of energy.
* Modernize liability systems for nuclear power. Liability systems should reflect
current options in risk syndication, more robust requirements for the private
sector, and more extensive testing of the current rules for excess risk concentration
and counterparty risks. These steps are necessary to ensure coverage will actually
be available when needed, and to send more accurate risk-related price signals
to investors and power consumers.
* Establish proper regulation and fee structures for uranium mining. Policy
reforms are needed to eliminate outdated tax subsidies, adopt market-level
royalties for uranium mines on public lands, and establish more appropriate
bonding regimes for land reclamation.
* Adopt a more market-oriented approach to financing the Nuclear Waste Repository.
The government should require sizeable waste management deposits by the industry,
a repository fee structure that earns a return on investment at least comparable
to other large utility projects,and more equitable sharing of financial risks
if additional delays occur.
* Incorporate water pricing to allocate limited resources among competing demands,
and integrate associated damages from large withdrawals. The government should
establish appropriate benchmarks for setting water prices that will be paid
by utilities and other consumers, using a strategy that incorporates ecosystem
damage as well as consumption-based charges.
* Repeal decommissioning tax breaks and ensure greater transparency of nuclear
decommissioning trusts (NDTs). Eliminating existing tax breaks for NDTs would
put nuclear power on a similar footing with other energy sources. More detailed
and timely information on NDT funding and performance should be collected and
publicized by the NRC.
* Ensure that publicly owned utilities adopt appropriate risk assessment and
asset management procedures. POUs and relevant state regulatory agencies should
review their internal procedures to be sure the financial and delivery risks
of nuclear investments are appropriately compared with other options.
* Roll back state constructionwork-in-progress allowances and protect ratepayers
against cost overruns by establishing clear limits on customer exposure. States
should also establish a refund mechanismfor instances in which plant construction
is cancelled after it has already begun.
* Nuclear power should not be eligible for inclusion in a renewable portfolio
standard. Nuclear power is an established, mature technology with a long history
of government support. Furthermore, nuclear plants are unique in their potential
to cause catastrophic damage (due to accidents, sabotage, or terrorism); to
produce very long-lived radioactive wastes; and to exacerbate nuclear proliferation.
* Evaluate proliferation and terrorism as an externality of nuclear power.
The costs of preventing nuclear proliferation and terrorism should be recognized
as negative externalities of civilian nuclear power, thoroughly evaluated,
and integrated into economic assessments—just as global warming emissions
are increasingly identified as a cost in the economics of coal-fired electricity.
* Credit support for the nuclear fuel cycle via export credit agencies should
explicitly integrate proliferation risks and require project-based credit screening.
Such support should require higher interest rates than those extended to other,
less risky power projects, and include conditions on fuel-cycle investments
to ensure the lending does not contribute to proliferation risks in the recipient
country.
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