Taxpayer Protection and the Nuclear Loan Guarantee Program

Testimony Before the Domestic Policy Subcommittee of the Committee on Oversight and Government Reform

SOURCE: AP/Focke Strangmann

The huge cost of nuclear power means that taxpayers will have to provide nuclear loan guarantees to finance new projects if the president and Congress are serious about building new reactors. The terms of these guarantees must include adequate protections for taxpayers.

By Richard W. Caperton | April 20, 2010

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CAP Action's Richard Caperton testifies before the House Committee on Oversight and Government Reform. Read the testimony (CAP Action)

Nuclear power currently generates about one-fifth of American electricity. At the Center for American Progress Action Fund, we strongly believe that nuclear power will continue as a low-carbon baseload power source that will play an important role in America’s clean energy future. It’s vitally important that we explore all potential energy sources and encourage the development of sources that reduce our carbon emissions. At the same time, we must keep in mind that every dollar that supports one fuel source is a dollar that can’t be used somewhere else. In an era of tight budgets and limited government resources, it’s important that every dollar be spent in a way that cost-effectively transitions America toward a clean energy economy.

Perhaps nowhere is this challenge of balancing carbon reductions with low spending more apparent than with nuclear power. Building a nuclear reactor today will involve dealing with tremendous financial uncertainty. Cost projections for nuclear plants keep rising because of variability in material costs, complex new technology, limited suppliers for key parts, and inevitable delays in construction projects. The projected cost for two new reactors in Canada shot from $7 billion to $26 billion in just two years. A new reactor built by Areva in Finland has run into widely publicized challenges, with construction costs going up at least 50 percent since construction began three years ago. And costs for two new reactors at the South Texas Project in the United States have ballooned from $5.4 billion to an estimated $18.2 billion since 2007. Neither of these reactors has been built, so there’s no way to predict what the final cost will be. But cost overruns are virtually certain in nuclear construction, which greatly increases the risk that the nuclear companies will default on their loans. Private lenders are well aware of the risks involved in building new reactors, which is why they’re unwilling to finance the projects without significant government support.

The huge cost of nuclear power means that taxpayers will have to provide nuclear loan guarantees to finance new projects if the president and Congress are serious about building new reactors. The terms of these guarantees must include adequate protections for taxpayers.

CAP Action's Richard Caperton testifies before the House Committee on Oversight and Government Reform. Read the testimony (CAP Action)