Loan Guarantees for Safer Buggy Whips?

05/05/2010 05:12 am ET | Updated May 25, 2011

Montpelier, VT -- A few weeks ago the Vermont State Senate voted to block operation of the Vermont Yankee nuclear power plant beginning in 2012. The vote followed a series of blunders in handling safety issues surrounding a leak of radioactive tritium at the 38-year-old plant. Industry officials testified twice that all of the pipes at Vermont Yankee that could leak tritium were aboveground so that leaks could be detected -- but it turned out they were wrong about this fundamental design feature of their own facility. "If the board of directors and management of Entergy were thoroughly infiltrated by antinuclear activists, I do not think they could have done a better job of destroying their own case," said one senator, Randolph D. Brock III.

Meanwhile Entergy has been trying to spin off Vermont Yankee and other reactors, including New York's equally dubious Indian Point plant, into a new company, which would sell stock and borrow funds to pay off Entergy -- and then be stuck with the potentially huge liabilities for any future problems. (Does this sound familiar? It gives "toxic assets" a whole new meaning.)

The Vermont Yankee debacle highlights a core reality. If you really want to save nuclear energy as an energy option (and I don't, particularly; as Amory Lovins likes to say, it's a complicated, expensive, and dangerous way to boil water), then you may have to kill the nuclear industry first. Regardless of what exciting ideas Bill Gates might offer for fundamentally different ways of using radioactive materials to generate electricity, handing them over to the world's existing nuclear power industry for implementation would be a pretty sure guarantee of disaster. This is truly the gang that can't shoot straight -- and we shouldn't be loading them up with newer and even more powerful artillery.

Let's look at the two new nuclear plants in Georgia for which the Obama administration want to offer loan guarantees. These are not fundamentally different nuclear designs. They do not solve the problems of waste disposal, safety or non-proliferation. The industry-friendly Nuclear Regulatory Commission has refused to certify the safety of the plant design.

So WHY are we building them? Jobs? The United Steelworkers are complaining that parts for the plants will actually be manufactured in China, South Korea, and Japan. The company that will build the plants, Westinghouse Electric Company, says the work cannot be done at U.S. steel mills -- but that company is owned by Toshiba, so its incentive to create a U.S. supply chain is unclear.

Good economics? The stock of the Southern Company, which would receive the loan guarantees, fell  24 cents a share on  the day the guarantees were announced. When investors don't like it when a company gets free money, that's a bad sign.

Even John Rowe, the head of Exelon, which owns the biggest fleet of nuclear reactors in the U.S., says there is no nuclear renaissance on the horizon.

Citibank has been similarly skeptical of claims that Britain can launch a new nuclear power generation.  It scathingly points out that while the British government has agreed to fast tracking of permits, it hasn't offered to provide direct financial support:

The government still seems to expect the private sector to take an unacceptable level of risk, in our view....Three of the risks faced by developers -- Construction, Power Price, and Operational -- are so large and variable that individually they could each bring even the largest utility company to its knees financially...Government policy remains that the private sector takes full exposure to the three main risks ... Nowhere in the world have nuclear power stations been built on this basis. .... We see little if any prospect that new nuclear stations will be built in the UK by the private sector unless developers can lay off substantial elements of the three major risks...

Basically, both the banks and Wall Street think that the nuclear power industry is a really, really bad investment.

So the Sierra Club and other U.S. environmental groups are in good company in urging Congress to reject the proposed $36 billion increase in nuclear loan guarantees being asked for by the Obama administration. In a letter to the House Appropriations Committee, the groups wrote:

We urge you to oppose $36 billion in additional nuclear loan guarantee authority under the Department of Energy's (DOE) Title XVII Loan Guarantee Program. This would triple DOE's current nuclear loan guarantee authority from $18.5 billion to a whopping $54.5 billion. Given the industry's history of cost overruns and default and the fact it is showing no sign of bringing projected costs for new reactors under control, assuring the safety of its technology, or resolving interim or long-term waste storage issues, burdening U.S. taxpayers with tens of billions dollars of additional liability for uneconomic new reactors is both risky and unwise.

Wall Street and the banks are unpopular for good reasons -- they took outrageous risks with other people's money. But when they refuse to take risks with their own money, Congress ought to listen.