The debate over nuclear power in recent months has revolved around taxpayer backed loan guarantees for new nuclear projects. Not only has the President announced $8.3 billion in federal loan guarantees for a two-reactor project in Burke County, Georgia, his budget proposal includes tripling the nuclear loan guarantee program from $18.5 billion to over $54 billion.
Unfortunately, some groups have used this debate to disguise their anti-nuclear agenda in anti-loan guarantee rhetoric. The basic construct of their argument is that nuclear energy is so risky and so expensive that using government backed financing subjects the taxpayer to unreasonable risk. The problem is that they often not only misrepresent facts about loan guarantees and what risks they pose, but also about nuclear energy broadly to make their case. Misrepresenting the facts not only undermines the legitimacy of their argument but takes away from a very important debate over whether or not loan guarantees are an appropriate tool for financing new nuclear (or any other energy source) projects.
While The Heritage Foundation is opposed to expanding the nuclear loan guarantee program, we believe that it is critical that the debate be informed by facts. The Nuclear Energy Institute’s 13-page report in response to some of the misleading rhetoric helps do exactly that. By answering in detail many of the unfounded criticisms used to advance the anti-nuclear agenda, NEI sets the stage nicely for where the debate should be: on the efficacy of loan guarantees.
The Heritage Foundation Position on Loan Guarantees
The Heritage Foundation has not opposed limited loan guarantees (those already authorized under the Energy Policy Act of 2005). If limited, the subsidy can provide a mechanism to establish predictability after years of erratic regulatory hurdles and government-imposed risk. Expanding government intervention into capital markets beyond current authorizations would simply distort long-term market integrity. At a minimum, they create taxpayer liabilities, give recipients preferential treatment, and distort capital markets. Further, depending on how they are structured, they can remove incentives to decrease costs, stifle innovation, suppress private-sector financing solutions, perpetuate regulatory inefficiency, and encourage government dependence.
If the loan guarantee program is to be expanded, it should be conditioned on: ending further loan guarantees, ensuring that recipients pay the full cost of the subsidy, making recipients privately refinance within five years of project completion, limiting guarantees to no more than two plants of any reactor design and limiting two thirds of the loan money to supporting a single technology.
The loan guarantee debate should not be a rehash of old arguments over nuclear power. That is largely over. The real debate should be whether or not the loan guarantee program ought to be expanded. We strongly believe the answer to that is no. However, we also believe that it is a debate worth having and one that should be based on facts.