The Department of Energy has provided almost $10 billion in loan guarantees for two nuclear and three solar power plants in just the past week.
The moves mark a new DOE strategy to finance the large-scale deployment of low-carbon technologies in the United States.
The Oakland-based company BrightSource will conditionally receive $1.4 billion in loans for a solar complex in the Mojave Desert, while a consortium led by the Southern Company will get a whopping $8.33 billion to build two new nuclear reactors in the city of Burke, Georgia.
The dual moves would have been almost unthinkable for all the administrations since Reagan took office in 1981. Traditionally, promoting nuclear power has been seen as a right-wing issue, while the left has preferred solar.
“What I hope this announcement underscores is both our commitment to meeting the energy challenge – and our willingness to look at this challenge not as a partisan issue, but as a matter far more important than politics,” Barack Obama said in a release Feb. 16 announcing the nuclear power plant funding.
Loan guarantees are one of a series of indirect financial incentives that could accelerate the introduction of new energy technology. The 2005 Energy Act gave the DOE authorization to make such moves. By making the loan guarantees, the government ensures the projects will get money through the Federal Financing Bank at a below-market rate.
Some policy wonks argue that providing loans to private companies to build innovative new plants is essential for commercializing technologies that are trying to make the jump from small demonstration plant to full-scale facility.
It’s a risky step, so such subsidies may be necessary to deploy new types of plants. Most of our electrical infrastructure depends on technologies developed before 1970. Seventy percent of electricity in the United States is generated by burning fossil fuels to create heat which can be converted into electricity. The fundamentals haven’t changed for a century.
The Obama Administration has made it clear that technologies with substantially lower carbon-intensity are a major priority. Both nuclear and renewable technologies fit the bill, although both types of power have their detractors. BrightSource has encountered opposition from environmentalists concerned with the impact the solar plant may have on the desert tortoise. Organized opposition to nuclear power generally focuses on the plants’ radioactive waste issues or fears of catastrophic plant failure or terrorist attack.
Energy Secretary Steve Chu recognized that the Democratic administration’s support for the new nuclear plants was particularly controversial and responded on his Facebook page with his rationale for supporting a form of energy that has not been popular on the American political left.
“The sun isn’t always shining, and the wind isn’t always blowing. Without technological breakthroughs in efficient, large-scale energy storage, it will be difficult to rely on intermittent renewables for much more than 20 to 30 percent of our electricity,” Chu wrote in a post entitled Why We Need More Nuclear Power.
“To overcome this problem, we are pursuing breakthrough approaches to grid-scale energy storage as well as stimulating the widespread adoption of known technologies such as pumped hydro energy storage,” he wrote. “But nuclear power can provide large amounts of carbon-free power that is always available.”
The two new nuclear plants would be the first reactors built in the United States in almost 30 years. In the intervening decades, the performance record of nuclear power plants has improved a lot. In the late ’70s, the average plant was out of operation four out of every 10 days. Now, the plants are online 90 percent of the time.
Nuclear advocates celebrated the new guarantees as a sign the long-awaited “nuclear renaissance” might begin under Obama. His new budget proposes more than $54 billion in funding for nuclear loan guarantees.
Wall Street banks have been loathe to invest in nuclear power plants since the industry’s grisly collapse in the ’70s and ’80s when about 100 projects were abandoned during construction. Plant designers say they’ve eliminated many of the problems that plagued the first nuclear era, but the perceived high risk involved in plant construction makes borrowing the money to build new reactors expensive or impossible. Government financing doesn’t eliminate the risk of construction issues; it shifts the burden onto taxpayers if anything goes wrong.
A 2006 paper in Environmental Science and Technology authored by Dan Kammen, an energy specialist at UC Berkeley, and two colleagues, looked at the costs of almost all the reactors built in the United States. Many plants were actually completed within a reasonable time frame, but there was a troubling clump of very overbudget projects. Kammen argued that new plants may be subject to cost “surprises.”
But until new plants get built, optimistic or pessimistic speculations about their costs and build times will remain just that.
