Obama offers loan to help fund two nuclear reactors
Wednesday, February 17, 2010
President Obama seized a key Republican energy initiative as his own Tuesday, promising $8.33 billion in federal loan guarantees for a pair of Georgia reactors that he said would give new life to the U.S. nuclear power industry and create a surge of high-skill jobs.
By helping to finance the construction of the reactors -- the first new U.S. nuclear power units in more than 30 years -- Obama is hoping to jump-start his efforts to pass comprehensive climate-change legislation, which has stalled in Congress in the face of GOP opposition.
The president is also casting the nuclear initiative as a centerpiece of his plan to produce clean-energy jobs, although construction on the two reactors would not begin for more than a year. Nonetheless, after touring a Maryland training facility for energy jobs, Obama said the competition for those positions worldwide will be fierce.
"If we fail to invest in the technologies of tomorrow, then we're going to be importing those technologies instead of exporting them," he said. "We will fall behind. Jobs will be produced overseas instead of here in the United States of America. And that's not a future that I accept."
Republicans, who have called for building as many as 100 new nuclear power plants, hailed the president's move as evidence that he has accepted their argument. Sen. Lindsey O. Graham (S.C.) called it a "good first step" that would pave the way for progress on climate and energy legislation.
But Obama's announcement set up a clash with environmentalists who remain worried about the safety of nuclear power and waste disposal. And it drew criticism from some conservatives who called it a risky move that could cost taxpayers billions if construction costs spiral, electricity demand sags and utilities default.
Nuclear power plants "are simply not economically competitive now, and therefore they can't be privately financed," said Peter Bradford, an adjunct professor at Vermont Law School and a former member of the Nuclear Regulatory Commission. "There are many cheaper ways to displace carbon, and there are many cheaper ways to provide for electric power supply."
Jack Spencer, a fellow at the Heritage Foundation and a supporter of nuclear power, warned: "Loan guarantees do not a nuclear renaissance make." He said the guarantees would "perpetuate the problems that have plagued nuclear energy for 30 years: the regulatory structure and nuclear waste [disposal] and too much government dependence."
The loan guarantees announced Tuesday would sharply lower borrowing costs to finance new reactors at the Alvin W. Vogtle Electric Generating Plant in eastern Georgia near the South Carolina border, where two units are being operated by the Atlanta-based Southern Co., a large utility. The loan guarantees would cover part of the $14 billion in financing needs; Japanese export loan guarantees would cover another portion. Southern, which owns 46 percent of the plant, and its partners would have equity interests as well. The companies would "definitely have skin in the game," said Energy Secretary Steven Chu.
Administration officials said that the loan guarantees would not cost taxpayers anything and that companies would pay fees to cover the risk of default. But critics said the administration was vastly underestimating the likelihood of the loans going bad.
Jobs would be created, but not right away. The nuclear units would require 3,500 construction positions and later 800 jobs for operating the plant. But Southern chief executive David Ratcliffe noted that the company would not draw the loan guarantees and begin construction until the NRC grants a license, which it does not expect until late 2011. Moreover, the Energy Department and Southern are still negotiating terms of the guarantees.
To deflect critics, the president promised efforts to make the technology even safer and asserted that nuclear power must be a significant part of global attempts to reduce reliance on polluting, carbon-based fuels.
"It's that simple," he said. "This one plant, for example, will cut carbon pollution by 16 million tons each year when compared to a similar coal plant. That's like taking 3.5 million cars off the road." The reactors would be able to power 550,000 homes, providing electricity to 1.4 million people.
Obama has long been amenable to new nuclear power and said throughout the presidential campaign that it had to be part of a comprehensive energy strategy. The loan guarantee he promised Tuesday would come from $18.5 billion in money authorized during President George W. Bush's administration under the Energy Policy Act of 2005. But in the latest budget proposal, Obama has proposed tripling that to $54.5 billion, an amount that Chu said could help jump-start seven to 10 new nuclear power reactors. The United States has 104 commercial nuclear reactors.
White House press secretary Robert Gibbs acknowledged later that the push for an increased use of nuclear power "might not make everybody in [the president's] party completely comfortable." But he said the announcement demonstrates to Republicans Obama's "willingness to be part of this dialogue."
The House passed climate-change legislation last year that included a cap-and-trade system that Republicans derided as a tax on carbon production. The legislation is stalled in the Senate, but Graham has been meeting with Sens. John F. Kerry (D-Mass.) and Joseph I. Lieberman (I-Conn.) in hopes of reaching a compromise.
"The president believed throughout the campaign, and said as much, that we need a balanced approach," Gibbs said. "He made good on that balanced approach today."
After a meeting with Republican leaders at the White House last week, Senate Minority Leader Mitch McConnell (R-Ky.) cited construction of nuclear power plants as one of the areas that "we might be able to work on together."
In his speech at a training center in Lanham run by the International Brotherhood of Electrical Workers, Obama called the new loan guarantees "just the beginning" and noted that his budget proposal calls for billions more in federal subsidies.
But he urged Republican supporters of nuclear power to "recognize that we're not going to achieve a big boost in nuclear capacity unless we also create a system of incentives to make clean energy profitable." He said that "as long as producing carbon pollution carries no cost, traditional plants that use fossil fuels will be more cost-effective than plants that use nuclear fuel."
That, he said, is why Congress should pass comprehensive energy and climate legislation. After talks last week with GOP congressional leaders, Obama said, "I believe there's real common ground here, and my administration will be working to build on areas of agreement."
Said Carl Pope, executive director of the Sierra Club: "We are pleased that President Obama reiterated the need to put a price on carbon and build a clean energy economy with more renewable energy and greater energy efficiency."
But, he said, the money would be better spent retrofitting buildings and reducing energy consumption. "The loan guarantees announced today may ease the politics around comprehensive clean-energy and climate legislation, but we do not believe that they are the best policy."