Proponents of nuclear power in the 1940s and 50s said that it would be a source of energy “too cheap to meter” but in reality, nuclear power has been on the government dole since its inception. In the early zeitgeist spurred by President Eisenhower’s ‘Atoms for Peace’ speech, the US government directly subsidized the development of commercial nuclear reactors to the tune of billions. In 1957, Congress passed the Price-Anderson Act, creating taxpayer backed liability insurance for the industry in the event of an accident. All in all, from 1948 to 2003, the federal government spent $73.4 billion on nuclear energy research and development.1
Construction of nuclear reactors has consistently run over budget and failed to meet construction schedules. In the 1970s inflation rose, safety regulations improved, government subsidies decreased, and manufacturers opted not to offer the technology at huge losses as it had in the 1960s, which shot construction costs through the roof. Between 1966 and 1969, utilities underestimated the final costs of nuclear reactor construction by an average of 63% prior to construction and still off by 22% when the plants were almost finished. Between 1974 and 1977, estimates were worse with utilities underestimating costs by 72% before construction and 23% when almost complete.2 As new reactors orders were cancelled in the 1970s through the 1980s, Wall Street began to sour on nuclear construction as financial catastrophe after catastrophe, such as the WHOOPS (Washington Public Power Supply System) $2.25 billion default, which was the largest municipal bond default at the time, and the cancelation of the Seabrook reactor in New Hampshire, which resulted in the 4th largest bankruptcy in corporate history at the time showed an industry fundamentally unsound.
Now, the only viable option for the nuclear energy industry is to pursue massive government subsidies again. The Energy Policy Act of 2005 established a loan guarantee program (Title XVII), which enables nuclear reactors to get 100% taxpayer-backed loans for up to 80% of the cost of their reactor construction. According to the Congressional Budget Office, the default rate for new reactors is “very high — well above 50 percent”. Congress has authorized $18.5 billion in loan guarantees specifically for nuclear, which could cover the expenses of two to three reactors. Unsatisfied with the provisions in Title XVII, the industry is seeking numerous modifications that would enable them to get larger, riskier, unchecked loan guarantees and taxpayer loans with fewer (of the already minimal) safeguards for the taxpayer.
In states with regulation of the energy sector, the nuclear industry is also seeking access to ratepayer funds before new reactors are even licensed, through Construction Work In Progress laws (CWIPs). This means that utilities that want to build new nuclear reactors can pass on the expected construction costs directly to the ratepayer whether or not they actually build a new reactor. Florida recently allowed CWIPs for new nuclear reactor construction which on average raised rates 11% so far. CWIP laws for nuclear are under consideration in Missouri and Oklahoma, and have been passed in Florida, South Carolina and Georgia.
Even before the current credit freeze, Wall Street made it clear that it does not want to invest in the risky business of nuclear energy; the nuclear industry won’t build unless taxpayers take all of the financial risk. With the current global recession, the nuclear industry will need taxpayer and ratepayer funds in order to mitigate the enormous costs of construction.
1. Taxpayers for Common Sense, "Nuclear Subsidies Past and Present." December 12, 2008. (accessed 3/18/2009).
2. United States Department of Energy. Energy Information Administration. Analysis of Nuclear Power Plant Construction Costs. DOE/EIA-0485. Washington, DC: DOE, EIA, Office of Coal, Nuclear, Electric and Alternate Fuels, 1986, p. xvi.