CBO estimate on nuclear loan guarantees
For this estimate, CBO assumes that the first nuclear plant built using a federal loan guarantee would have a capacity of 1,100 megawatts and have associated project costs of $2.5 billion. We expect that such a plant would be located at the site of an existing nuclear plant and would employ a reactor design certified by the NRC prior to construction. This plant would be the first to be licensed under the NRC’s new licensing procedures, which have been extensively revised over the past decade.
Based on current industry practices, CBO expects that any new nuclear construction project would be financed with 50 percent equity and 50 percent debt. The high equity participation reflects the current practice of purchasing energy assets using high equity stakes, 100 percent in some cases, used by companies likely to undertake a new nuclear construction project. Thus, we assume that the government loan guarantee would cover half the construction cost of a new plant, or $1.25 billion in 2011.
CBO considers the risk of default on such a loan guarantee to be very high—well above 50 percent. The key factor accounting for this risk is that we expect that the plant would be uneconomic to operate because of its high construction costs, relative to other electricity generation sources. In addition, this project would have significant technical risk because it would be the first of a new generation of nuclear plants, as well as project delay and interruption risk due to licensing and regulatory proceedings.
Note the price - $2.5 billion was to be only for the first plant. Future plants were, according to the assumptions provided by the nuclear industry, expected to have
lower costs as economy of scale resulted in savings.
In fact, since the report was written (2003), the estimated cost has risen to an average of about $8 billion.
Wonder what that does to the “risk is that … the plant would be uneconomic to operate because of its high construction costs, relative to other electricity generation sources”?
So the question is, does that risk diminish or increase when the price rises from $2.5 billion to $8 billion?Your assertions regarding Price Anderson are similarly misleading. The insurance held is basically enough to secure the assets of the nuclear industry. It effectively caps their probable liability for individuals seeking damages from a large scale accident at about $90 dollars per person.
That means the risk incurred related to making those people whole are transferred to the public sector. The way insurance works is that payments are made over time that reflect the total risk involved in a given activity.
When the largest part of the risk is transferred to the public, the payments to insurance that would otherwise be required are avoided by the industry. The PAA allows the industry to compete by avoiding costs that are levied on their competitors.
It is a very large subsidy that, if removed, would stop nuclear power in its tracks as no insurer would be willing (or capable) of assuming this risk.
If nuclear makes economic sense over its 40-100 year horizon, this subsidy would not be required.