The big problem for new nuclear power plants is that they are very expensive initially—$6 to $8 billion for each reactor—and utilities are hesitant to commit to such an expensive plant. The 2005 Energy Policy Act provided for $18.5 billion in construction loan guarantees for nuclear plants, so they can get financing at good rates. The first of these loan guarantees for $8.3 billion went to Southern Company in 2011 to add two reactors to its existing plant in Georgia. The loan guarantee is for 70% of the reactor cost, so the utility has substantial “skin in the game” (13). The DOE loan guarantees are similar to those for renewable energy, and they can’t exceed 80% of the cost of the project. Furthermore, the nuclear developer pays the cost of the loan guarantee and the full cost of administering the DOE loan program, which is not the case for wind and solar guarantees (14).

Since new nuclear reactors are being designed for a 60-year lifetime (and some even for 100 years), a good way to think about the huge initial investment is a long-term mortgage on an expensive house. A very well-built house that will last for 100 years or more is going to cost more than an inexpensive house that may have to be rebuilt two or three times. Of course, the solid house is going to cost more but in the long run is a better deal, even though you have to take out a bigger mortgage in the first place. After 30 years, though, the mortgage is paid off and for the remaining years the cost is minimal—just upkeep and taxes. It is similar with a nuclear reactor compared to a solar or wind power project—the reactor will outlast several alternative energy projects but will cost far more upfront.

To be honest, nuclear power developers need these loan guarantees to commit to building the expensive power plants, especially until they prove they can build a few on time and at cost. This is one of Amory Lovins’s big complaints about nuclear power—he says they cannot attract private capital, in contrast to solar and wind (15). But this is disingenuous; solar and wind power projects do not attract private capital without subsidies either—witness the cries of alarm from the wind industry facing the possible end of the Production Tax Credit at the end of 2012. The market alone is unlikely to be able to support either renewable energy proj­ects or nuclear power projects because they are very expensive. But nuclear power alone has the potential to substantially reduce the CO2 emissions from coal used for baseload power, which neither solar nor wind can do. And, as I pointed out in Chapter 2, it is the most cost-effective per ton of avoided CO2 of any of the other power source alternatives. To me it seems like a good trade-off. And, of course, a loan guarantee does not mean that the money will be lost. Once a plant is built on time and at cost, the money is no longer at risk. Many nuclear power plants are owned by public utilities (that is the case with the Wolf Creek nuclear plant) rather than large businesses, and they are more responsive to public interests than those run by private industry, which are primarily responsible to shareholders. To my mind, it is a good thing for the government to be investing in its future needs. This is no different from long-term investments in highways, bridges, or even a space program.

One person’s subsidy is another person’s incentive. A comprehensive review of federal government incentives from 1950 through 2010 shows that incentives come in various forms: tax incentives, regulations, research and development (R&D), market activity, government services such as infrastructure, and direct disbursements. The total amount of energy-related incentives over 60 years was $837 billion. Tax incentives such as credits, exemptions, and deductions are the largest category, accounting for 47% of all incentives. Fossil fuels account for 70% of the total incentives, mostly through tax incentives, but coal also received a sub­stantial amount for R&D. Hydropower accounts for 11% of the total, primarily through regulating the electricity market. Nuclear power and renewable energy (mostly wind and solar) each accounted for 9% of the total incentives and the remaining 1% was for geothermal. Most of the incentives for nuclear power were for R&D, with a much smaller amount for design regulations through the NRC and other governmental agencies while most of the incentives for renewable energy were tax incentives and about one-third were for R&D (16). The policy of the US government for decades has been to incentivize various forms of energy, and that is not likely to change. Reducing our emissions of CO2 is in the national and global interest, and incentivizing nuclear power and renewable energy is a valuable tool to help achieve that.