Looks like another news outlet has noticed that the Vogtle Nuclear Power plant, currently under construction in Georgia, is the recipient of federal loan guarantees some 15 times larger than the widely trumpeted Solyndra bankruptcy. And yes, Vogtle is turning into a boondoggle. So the Christian Science Monitor became the latest major pub to carry the story.(see below)
Don’t look for this to become a nightly hobby horse for Fox News, talk radio, and conservative congressmen – because it does not fit the right wing narrative. That Narrative is that coal, gas and nuclear power are good American sources of energy, and renewable power, solar and wind, are part of a subversive, socialist, Kenyan plot.
That a nuclear project is off the rails should not be a shock. We ran that experiment in the 70s and 80s, and it turned into one of the largest economic disasters the nation had yet seen in those innocent times. More recently, the Congressional Budget Office noted that the risks of nuclear loan guarantees for taxpayers were prohibitively high.
Private lenders have declined to finance new reactors because of the enormously high cost of new nuclear power and the substantial risk that any such investment will fail. In 2003, the Congressional Budget Office (CBO) estimated that the chance of a loan for new nuclear reactor construction resulting in default would be “very high – well over 50 percent.”
The Obama administration’s proposed loan guarantee for Vogtle transfers the risk onto American taxpayers, who would pay up to $8.33 billion if Southern Company and its partners run into the same kind of trouble that is routine in the nuclear power industry—cost overruns, delays and project cancellations. And Vogtle does have a history that should trouble taxpayers worried about assuming responsibility for the massive loan guarantee: the original two reactors at the Georgia site took almost 15 years to build, came in 1,200 percent over budget and resulted in the largest rate hike at the time in Georgia.
Further, this loan is an expensive gamble on a technology with a long history of bankrupting utilities and soaking ratepayers. There is an extremely high risk that taxpayers will be on the hook if the Vogtle loan guarantee proceeds. The loan guarantee is an up-front bailout that will enable Southern Company to make an uneconomic investment.
Robert Baker, a former utility regulator, said he planned to ask Georgia’s Public Service Commission to adopt a plan that would trim the utility’s profits if the project comes in over budget. Because the monopoly is guaranteed a profit on every dollar it spends, Baker said it has a disincentive to control costs.
“There is now no way that this project can come in on-budget and on-time as has been stated repeatedly,” he said.
Several issues account for the delays. Southern Co. received its license to build from federal regulators months later than expected. The companies building the plant still have not agreed on an updated start-to-finish schedule.
Metal bars that will become part of the plant foundation were not installed exactly as required in plans, an error uncovered by federal inspectors. That required extra time and fixes. The Shaw Group Inc. in Lake Charles, La., experienced difficulty meeting stringent documentation and other quality rules required in the nuclear industry as it built parts for the facility.
So, you have all the ingredients that made the nuclear industry what it became in the 80s. Cost plus contracts – check. Sloppy foundation work – check. Steady drip of limited hang-outs about cost overruns and newly discovered screw-ups – check. The project is now a year behind and “hundreds of millions” over budget. You can be sure that will increase ten fold before this is over.
Construction of the first newly licensed US nuclear power plant in decades could become a “Solyndra-like” debacle thanks to billions in federal loan guarantees whose terms appear too weak to protect taxpayers, according to one group’s analysis of internal documents released by the US Department of Energy.
The two-reactor $14 billion Vogtle plant being built in Georgia is seen as a test of the US nuclear industry’s planned “renaissance” with a new nuclear reactor design and updated construction processes all aimed at cutting time and costs.
But two Massachusetts-based energy-consulting firms, Earth Track and Synapse Energy Economics, say the $8.3 billion in federal loan guarantees backing the project were crafted with excessively favorable financial terms for the recipient companies, weak federal oversight, and possible political interference in the loan-guarantee process.
The two firms analyzed hundreds of Energy Department e-mails and financial documents released earlier this month to the Southern Alliance for Clean Energy (SACE), a green-energy watchdog group that won access to them in a Freedom of Information Act lawsuit.
Officials for the Obama administration and Southern Company, the company that will operate the plants, say there’s nothing improper going on.
In their report, Earth Track and Synapse say the documents reveal:
- “Potentially troubling” conversations between political appointees and borrowers over loan terms and getting the deal done.
- Credit subsidy payments, the amount that companies pay in compensation for the government loan guarantees, that appear far too low to offer adequate protection to taxpayers in the event of a default.
- An “over-reliance on external contractors” for key risk evaluations.
- Continued tinkering with credit subsidy assessment tools even after credit subsidy estimate letters were sent to borrowers, leaving taxpayers with more risk than necessary.
What’s interesting, is the slanting of the Monitor article with phrases such as ‘Solyndra-like” – darkly insinuating – what? That, like the Solyndra non-story, there’s nothing to see here? It’s a little confirmation of how relentless poisoning of the info-sphere by bogus right wing news networks has a pervasive and corrupting effect on all news reporting.
The difference is, of course, that government loans make sense for emerging industries and cutting edge technology, and its easy to cite examples where US leadership was established with government support – for instance, jet engines, microchips, personal computers, the internet, GPS devices. It’s harder to make the case for a technology that should long ago have been mature enough to stand on its own. The fact is, that nowhere in the world is there any private capital that will invest in a nuclear project without government support or guarantees.
Solar energy is an area with huge potential and significant research still to be done, and is a completely appropriate use of taxpayer funds. Clearly, the nation that learns to run itself on fuel that is free will be the nation that dominates the coming century. The Chinese and the Germans know this. It’s not clear that we do, yet.
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