As Congress looks to slash spending to address a yawning budget deficit, one item that will be spared the cost-cutting ax is the federal nuclear loan guarantee program, industry observers predicted.
"My sense is that, as has been expressed here on this panel, the importance to have nuclear remain an option, to use more of it particularly in a carbon-constrained environment ... the loan guarantee does get renewed," Rick Boucher, a former Democratic member of Congress from Virginia and former chairman of the House Energy and Commerce Subcommittee on Energy and Air Quality, said at an Nov. 16 energy policy forum in Washington, D.C.
Boucher, who is the head of Sidley Austin LLP's government strategies group, was speaking at a post-election briefing hosted by EnergyBiz that examined the prospects for energy policy in President Barack Obama's second term.
Boucher recalled that the benefits of the program far outweigh the costs. He said that at less than 5%, the cost of the loan guarantee comes at a fraction of the guaranteed amount, while also providing a lifeline to utilities that would otherwise be hard-pressed to obtain the financing for building nuclear facilities.
In the case of Southern Co. subsidiary Georgia Power Co., the U.S. Department of Energy's planned $8.3 billion loan guarantee for the construction of Vogtle nuclear reactor units 3 and 4, when combined with other factors, is projected to reduce the costs paid by Georgia Power ratepayers by about $2 billion.
Georgia Power, however, said it has other options. Should the loan guarantee not come through, it has said, it could issue securities and request that new costs be recovered from ratepayers.
Clarence Albright, senior vice president of policy and government affairs at CenterPoint Energy Inc. and a former staff director for the House Energy and Commerce Committee, said security interests make the renewal of the loan guarantee compelling.
"It is certainly in our national interests, both from an energy security and from a national security standpoint, to ensure that the nuclear generation fleet is not just maintained but increased," he said.
Calls for loan guarantee program to be put under microscope Karen Harbert, president and CEO of the U.S. Chamber of Commerce's Institute for 21st Century Energy, took a perhaps less optimistic view of the prospect of the loan guarantees being reauthorized.
"I don't think we can assume that the loan guarantees are just going to be reauthorized all the time if it's not doing its job," said Harbert, a former assistant secretary for policy and international affairs at the DOE.
She said that with the development of nuclear energy "grinding to a halt" in the U.S. and "huge" increases in the cost of building reactors, policymakers need to re-examine the merits of the loan guarantee program. However, she added that the outlays by the federal government for the program are "very small."
More broadly, with the budget strains, she said, all energy subsidies and loan guarantees need to be on the table.
"I do think we need to take a serious look at what is the appropriate role for government in all forms of energy production - and that would be the production tax credit, it would be the loan guarantee program," Harbert said.
Harbert, however, conceded that from a national security and nuclear nonproliferation point of view, it is in the national interest to continue to be a part of the nuclear industry. Supplying components to nuclear facilities, she said, enables the nation to have "eyes" into the nuclear facilities that are being built all over the world and to keep tabs on containment of the waste that the facilities generate.