Obama advances nuclear resurgence with US loan guarantees

In announcing $8.3 billion in loan guarantees for the first new nuclear reactors in the US in 30 years, Obama is setting the stage for a nuclear power comeback. But many challenges lie ahead.

President Obama greets guests at the jobs training center at the International Brotherhood of Electrical Workers Local 26 headquarters in Lanham, Md., on Tuesday.

President Obama announced Tuesday that his administration has agreed to provide an $8.3 billion loan guarantee for an Atlanta-based utility and its partners to build two new nuclear reactors at its Vogtle generating station near Augusta, Ga.

The announcement comes at a time when the administration is seeking to reduce America's dependence on fossil fuels – a critical step in combating global warming – and in an economic climate hungering for job creation.

The loan guarantee is conditional. It hinges on the utility, the Southern Co., receiving a license from the US Nuclear Regulatory Agency to build and operate the new reactors. Based on the current timeline, the utility expects to receive its license during the second half of 2011, says David Ratcliffe, its chairman and chief executive officer.

With an estimated construction cost of $14 billion, the new reactors would add a combined 2,200 megawatts of generating capacity to augment the two reactors that have been operating at the Vogtle nuclear plant since 1987 and 1989. These two reactors are rated at 1,100 megawatts apiece.

In announcing the effort during a visit to a union job-training facility in Lahnam, Md., Mr. Obama acknowledged lingering concerns over the safety and reliability of nuclear energy as well as the need to solve the longstanding problem of disposing of highly radioactive waste from nuclear plants.

Still, he said, "investing in nuclear energy remains a necessary step" in weaning the United States from its dependence on fossil fuels for energy.

Nuclear reactors generate roughly 20 percent of the nation's electricity but represent 70 percent of the carbon-free energy it produces, the Obama administration said Tuesday. Thus, nuclear power represents one important approach to reducing reliance on fossil fuels, the main contributor to global warming, supporters say.

Moreover, the White House estimates this project will lead to 3,500 construction jobs and 800 long-term jobs once the reactors begin operation.

Nuclear industry representatives hailed the administration's move.

Marvin Fertel, president and chief executive officer of Washington’s Nuclear Energy Institute, called it "a major milestone" in providing loan guarantees under a program established in the Energy Policy Act of 2005.

Beyond the $8.3 billion for the new reactors, the White House is asking for an additional $36 billion for the nuclear loan-guarantee program in its fiscal 2011 budget proposal, according to US Secretary of Energy Steven Chu.

Others are less enthusiastic. Preparing to boost loan guarantees by $36 billion could end up pouring good money after bad, skeptics argue.

The guarantees represent money for "a limited set of reactors from a small number of first-movers," says Ellen Vankco, a specialist on energy issues with the Union of Concerned Scientists in Washington.

She notes that in Finland, for instance, efforts to build a power plant using one of several new, purportedly safer designs are running substantially over budget and behind schedule.

Moreover, the US Nuclear Regulatory Agency has raised issues with the adequacy of the containment structure used in the type of reactors Southern Co. has tapped for Vogtle, according to NRC documents.

"The industry has a lot to do to prove it's a viable option," she says. "We can't ignore its history in evaluating its future."

For its part, the industry is looking to build new nuclear capacity, although its steps are tentative. As of Jan. 4, the NRC had received construction applications for 28 new reactors at 18 power stations around the country.

In effect, the $8.3 billion guarantee represents an enormous experiment, according to John Parsons, executive director of the Center for Energy and Environmental Research at the Massachusetts Institute of Technology.

No new power reactors have been built in the United States in more than 30 years, following the industry's troubled start. Plants were rising across the country when in 1979 a reactor at the Three Mile Island Nuclear Generating Station outside Harrisburg, Pa., lost coolant, leading to a partial meltdown of its core.

The accident and subsequent changes to regulations governing plant design drove up costs, as plants under construction had to redesign to new specifications on the fly. In addition, public-safety concerns prompted demonstrations and lawsuits that further slowed, and in some cases abandoned, reactor projects.

Seven years later, the reactor at the Chernobyl nuclear plant in what is now the Ukraine exploded during an unsanctioned operating experiment. The explosion and resulting fire released an enormous plume of radioactive fallout. While no commercial reactor in the US used the Soviet design, the accident deepened doubts in some circles regarding nuclear energy's safety.

Since then, reactor makers such as Westinghouse, General Electric, and others have developed designs they claim are safer because they require less intervention from reactor operators to activate safety systems in the event of an accident.

In addition, the NRC has streamlined its licensing procedures. It issues a single construction and operating license, rather than a separate license for each. And it now certifies standard reactor designs, rather than approving custom-tailored ones built to a utility's specifications.

The industry supported these moves. But it also has drawn fire from environmental groups, which argue that the streamlined process has reduced opportunities for public input into the license approval process.

The government's support for the new Vogtle 3 and Vogtle 4 reactors represents an effort to provide a real-world test of the changes in technology and regulations developed over the past decade or so, Dr. Parsons says.

For the companies, the question is of their ability to deliver reactors billed as safer and more reliable on time, on budget, and at a reasonable cost to ratepayers, he says.

The government has something to prove as well. "For the government to take a clear position that it's going to get the industry started provides confidence to other investors that the government will follow through on its half of the bargain," Parsons says.

But a loan-guarantee program needs to have a time limit, he continues.

"Economically, it doesn't make much sense long term to be giving subsidies to any specific technology," he says. "If the target is to have a low-carbon future," in which economies increasingly rely on ways to generate energy without increasing emissions of heat-trapping carbon dioxide and other greenhouse gases, "we can put a cap on carbon, put a price on carbon emissions, and then let all technologies compete."

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