Continuing the subsidy-first mentality of today’s energy policy, Energy Secretary Ernest Moniz today announced the finalization of a $6.5 billion loan guarantee to Georgia Power and its partners, with an additional $1.8 billion pending for the Vogtle nuclear reactors, among the first being built after a 30-year dry spell in nuclear construction. The loan has been in the works since February 2010.
If investors aren’t willing to take a risk in a project, as was the case with Solyndra, why should taxpayers? But in the Vogtle case, investors were willing (as of 2012, Georgia Power reportedly had amassed $4.3 billion), and CEO Tom Fanning has said before that the company doesn’t need the loan guarantee. Further, construction has been underway since 2009 and is expected to be finished in 2018. Therefore, today’s loan guarantee amounts to nothing less than a handout to a company that was building on its own precisely what the subsidy was supposed to incentivize. Nevertheless, it didn’t take long for politicians to take credit for what otherwise would be accomplished by free enterprise.
Fanning has pointed to the $200 million in savings the company has secured its customers by the government-guaranteed loan. Customers can hope those savings weren’t consumed by the time, money, and personnel the company diverted to pursue the guarantee. Stephen Byrne, COO for the company constructing two reactors at the V. C. Summer site in South Carolina, saw the government financing scheme as problematic from the beginning. Byrne told The New York Times that private financing was far more attractive than complying with the disclosures and fees required for a federal loan.
There are also less measurable but no less insidious costs to loan guarantees: They doom the energy industry to slow growth and technological stagnation. They encourage political connections over innovation while hampering the ability of less politically favored companies and technologies to compete. And, as the nuclear waste drama aptly illustrates, strengthening the ties between an industry and policymakers in Washington is a sure way to turn questions best left to businesses and their customers into political quagmires.
A loan guarantee is not a step in the right direction for the nuclear industry. Instead, the federal government should free the nuclear industry to succeed (or fail) on its own merits.