A careful examination of the facts shows that the economic and environmental benefits from building new nuclear plants would be substantial
– By Bernard L. Weinstein –
Once again, energy policy is on the national agenda and nuclear power, in particular, seems to be enjoying a revival. More than a dozen power companies, mainly in the Sunbelt, have announced plans to add about 25 nuclear plants to their generation mix over the next decade. But will these plans materialize?
Let's hope so. A careful examination of the facts shows that the economic and environmental benefits from building new nuclear plants would be substantial.
Though the U.S. has 104 nuclear plants operating in 31 states, no new facilities have been ordered since the 1970s. Still, those 104 plants currently generate about one-fifth of the nation's electricity while emitting no greenhouse gases. By contrast, the nation's 600 coal-fired plants produce 36 percent of all U.S. greenhouse emissions and nearly 10 percent of the world's. And though oil imports have dropped slightly due to the current recession, the U.S. remains hostage to foreign suppliers for a huge percentage of our energy needs.
Renewables such as wind and solar have commanded much attention of late, but the reality is that only nuclear power can provide the sheer volume of reliable base-load electricity our nation will need to sustain economic growth while at the same time meeting the challenges of global climate change.
A decade ago, objections from environmentalists were the principal roadblocks to new plant construction. But most of the concerns over safety and waste disposal have been allayed while the environmental lobby now acknowledges that nuclear power generation is environmentally benign. Today, the potential hold-up to new plant construction is the availability of financing. In the current economic climate, industry executives are concerned that banks and Wall Street will not provide the money needed to build new reactors unless the loans are guaranteed by the federal government.
Under the Energy Policy Act of 2005, nuclear power is eligible for loan guarantees since it is considered a "clean" technology that doesn't emit carbon gases. To date, Congress has authorized a maximum of $18.5 billion in guarantees for nuclear power projects; and earlier this year, the U.S. Department of Energy selected four pilot nuclear plants to receive these guarantees. But an additional $90 billion has been requested by 17 companies wishing to build 26 new reactors.
The 2009 American Clean Energy and Security Act (Waxman-Markey), approved by the U.S. House of Representatives in June, would provide loan guarantees and other financial incentives for nuclear power and other advanced technologies. But the Act also includes a provision prohibiting any one energy source from obtaining more than 30 percent of the loan guarantees. Because the cost of a nuclear plant is high compared to the size and financing capability of most U.S. electric companies, this provision could impede the industry's planned expansion.
Unlike the House bill, a measure passed by the Senate Energy and Natural Resources Committee would not impose percentage limits on any particular energy source for loan guarantees. Instead, the Senate bill would create a Clean Energy Development Administration to funnel loan guarantees to viable nuclear, wind and solar projects.
Contrary to the claims of some pundits, energy loan guarantees are not subsidies. Unlike other federal loan guarantee programs, project developers are required to pay the full cost of the loan guarantee as well as the cost of administering the program. And because the loan guarantee allows a more highly leverage capital structure for power generators, this results in a lower weighted average cost of capital and a lower cost of electricity for consumers.
Investing in new nuclear power plants is good for the economy, good for the environment, and good for energy security. But to ensure that America's nuclear renaissance isn't derailed, members should reject the House restriction on loan guarantees for nuclear energy when the bill reaches the Senate floor. Nuclear energy can be the real legacy of our nation's effort to curb global warming.
Bernard L. Weinstein is Associate Director of the Maguire Energy Institute and an Adjunct Professor of Business Economics in the Cox School of Business at Southern Methodist University in Dallas. From 1989 to 2009 he was Director of the Center for Economic Development and Research at the University of North Texas.
Dr. Weinstein studied public administration at Dartmouth College and received his A.B. in 1963. After a year of study at the London School of Economics and Political Science, he began graduate work in economics at Columbia University, receiving an M.A. in 1966 and a Ph.D. in 1973.
He has taught at Rensselaer Polytechnic Institute, the State University of New York, the University of Texas at Dallas, and the University of North Texas. He has been a research associate with the Tax Foundation in Washington, D.C. and the Gray Institute in Beaumont, Texas. He has worked for several U.S. government agencies including the President's Commission on School Finance, the Internal Revenue Service and the Federal Trade Commission.
Dr. Weinstein has authored or co-authored numerous books, monographs and articles on the subjects of economic development, public policy and taxation, and his work has appeared in professional journals such as LAND ECONOMICS, CHALLENGE, SOCIETY, POLICY REVIEW, ECONOMIC DEVELOPMENT QUARTERLY, POLICY STUDIES JOURNAL and ANNALS OF REGIONAL SCIENCE. His work has also appeared in THE NEW YORK TIMES, THE WALL ST. JOURNAL, THE LOS ANGELES TIMES and a number of regional newspapers and magazines. He is a former member of the editorial board of SOCIETY magazine and currently serves on the DALLAS MORNING NEWS Board of Economists.
Dr. Weinstein has been a consultant to many companies, non-profit organizations and government agencies, and he testifies frequently before legislative, regulatory and judicial bodies. His clients have included AT&T, Texas Instruments, Reliant, Entergy, Devon Energy, the Nuclear Energy Institute, the U.S. Conference of Mayors, the Western and Southern Governors Associations, the Cities of Dallas and San Antonio, and the Joint Economic Committee of the U.S. Congress.
Dr. Weinstein was director of federal affairs for the Southern Growth Policies Board from 1978 to 1980 and served as director of the Task Force on the Southern Economy of the 1980 Commission on the Future of the South. From 1984 to 1987 he was chairman of the Texas Economic Policy Advisory Council and from 1987 to 1988 served as visiting scholar with the Sunbelt Institute in Washington, D.C. He is currently a panelist with the Western Blue Chip Economic Forecast. Dr. Weinstein is a member of the Dallas Association for Business Economics and is also a director of Beal Bank, the largest locally-owned bank in Texas.
Cox School of Business
Southern Methodist University
PO Box 750333
Dallas, TX 75275-0333
Email: bweinstein@cox.smu.edu