nuclear subsidies

Natural gas fracking well in Louisiana

Fresh off of a financial crisis that risked throwing the US into a depression, my hope was that lessons would be learned.  Nothing dramatic, perhaps, but at least the basics on incentive structures in financial deals.  Like when you let people bet only with somebody else's money, they are far less careful about what they bet on, and how much they put at risk.  And the related issue that if you let investors take their own cash out of the game too quickly, the probability of project failure rises sharply.  And finally, if the one left fronting (or guaranteeing) all the cash is you, it is time to worry.

Worrying does not seem to be the strong suit of Senators Kerry and Lieberman (K-L) in their American Power Act (APA) proposal issued in May.  They have joined a line of political backers for nuclear power who want to give reactors a pass on the market test, adding to the already rich pot of subsidies that nuclear investors would receive.

I've just completed a detailed analysis of three of the nuclear tax subsidies within the APA for Friends of the Earth:  5 year accelerated depreciation for nuclear investments; a 10% investment tax credit; and an expansion of the nuclear production tax credit.  The full memo is available here; a summary by Friends of the Earth is here.

Keep in mind that the scope of this analysis was quite limited:  many other subsidies to nuclear in APA were not quantified; and the large set of existing subsidies to nukes also ignored.  But even so, it appears that through the 5 year depreciation and ITC alone, K-L have kicked in the final 20 percent to the "policy-enhanced  investing" that the industry seems increasingly to be relying on. 

This "20 percent" was the equity required to be at risk for nuclear projects that were getting the remaining 80 percent guaranteed by the feds under the Title 17 advanced energy loan program.  While the investors woudl still need to put in the equity at the beginning, the generous tax breaks effectively allow them to take most of it off the table within three years of reactor operation; and the full capital at risk (or nearly all in our low estimate using more favorable capital cost assumptions) within five.  After that, gentle taxpayer, it is you and I who bear the financial risk from projects going bad.  And no, we don't get to share in the upside if the project turns out well.

The main findings from the memo include:

  • K-L subsidies worth billions per reactor.  The new subsidies will be worth between $1.3 and nearly $3.0 billion per new reactor on a net present value basis.  This is equivalent to between 15 and 20 percent of the total all-in cost of the reactors, as projected by industry.
  • New subsidies will undermine equity requirements of the nuclear loan guarantee program.  Despite significant structural weaknesses in DOE's Title 17 loan guarantee program, the rules at least required investors to hold a 20 percent equity stake in the new project.  A key goal of this requirement is to ensure investors have a strong interest in the long-term success of the venture and feel substantial pain from its failure.  However, the K-L bill would in effect allow investors to recover funds equal to this equity share within the first few years of plant operation.  Financial risks from project failure would then rest almost entirely with taxpayers.
  • New nuclear subsidies on offer under K-L are worth 15 to more than 50 percent of the expected market value of power the plants will produce.  This is in addition to the many other subsidies the nuclear projects would already receive.
  • K-L “progress payments” allow ITCs to be claimed before reactor opens, greatly increasing taxpayer risks.  Bill language to recapture these credits is unlikely to be effective in a situation where a reactor project goes into bankruptcy.
  • Aggregate tax subsidies to new reactors could reach tens of billions of dollars (net present value) from K-L's two main tax breaks alone. The national cost of K-L's tax provisions can be benchmarked by evaluating two build-out scenarios:  6 reactors, matching the number likely to be supported under K-L's expanded nuclear loan guarantee pool; and 22 reactors, matching the number going through NRC licensing as of May 2010.  As not all reactors will be the same type, the calculations assume half are AP1000s and half Areva EPRs.  Under a 6 reactor scenario, K-L will add $9.7 to $15.6 billion in tax subsidies to nuclear power on a net present value basis.  Under a 22 reactor scenario, the net present value of subsidies on offer just through 5-year depreciation and ITCs reaches $35.7-$57.3 billion.  Unlike the PTC, neither of these other subsidies have any national caps, so the taxpayer cost scales linearly with reactor count.  

Check out these links for more on subsidies in APA; and for an assessment of APA's loan guarantee retention fee.

Review of selected nuclear tax subsidies in the American Power Act

This memo evaluates three tax subsidies to nuclear power contained in the American Power Act (APA): 5-year accelerated depreciation for reactors; a 10% investment tax credit; and an expansion of a production tax credit for nuclear. The draft Act was floated by Senators John Kerry (D-MA) and Joseph Lieberman (I-CT) in May 2010. Subsidy costs were evaluated using prototype AP1000 and Areva EPR reactor characteristics, and a range of values for cost of capital.

Natural gas fracking well in Louisiana

John Rowe, Chairman and CEO of Exelon Corporation, gave a very interesting talk at Resources for the Future on May 12th.  He touched on a variety of important topics, including nuclear economics, appropriate energy policy, and energy subsidies.  Below are quotes I found important in his presentation:

On Government-led energy initiatives

Last fall, I testified before the Senate Environment and Public Wors Committee on climate change legislation.  Every member of the committee had their own proposal for how to build a lower carbon economy.  Some wanted more tax credits for renewables, others wanted more loan guarantees for new nuclear plants, others wanted more government funding for clean coal...All of these things amount to putting a de facto price on carbon, but in the least transparent and least orderly fashion.  This hodge-podge approach is done in a fashion that hides the real costs of our actions and fails to incentive the cheapest options.  (Page 4).

* * * *

Everyone in both political parties wants to throw money at their favorite bars on this [marginal cost of carbon abatement] chart. 

Some propose to do it through subsidies.  But after the federal spending binge of the last decade, there simply is no money left for frivolous energy policies.  The subsidies needed to make some of these technologies economically attractive will only worsen that situation.

Some propose to throw money at these technologies through mandates to buy uneconomic power.  But there is no free lunch, and those costs will be paid by consumers through higher utility bills or higher prices for needed goods or services. (Page 9).

On GHG controls and the economics of nuclear power

...we must have a market-based solution to the problem [of climate change].  Picking our favorite technologies in 2008 would have led to some good decisions, like energy efficiency and uprates and some very large, very expensive ones, like new nuclear plants and clean coal.  (Page 8).

* * * *

The shape of this [marginal cost of carbon abatement] curve has changed dramatically in just two years.  None of us is smart enough to predict how it will morph.  We need a price on carbon -- represented by the line [on the abatement curve] -- to focus us on the cheapest options first.  And we need a market-based solution to give us feedback as costs change.  (Page 9). 

* * * *

But pricing carbon is the only long-term, economically rational solution.  It will force us to the lowest cost solutions for customers and businesses.  It will avoid worsening the debt situation.  It will give us a dynamic solution that will adjust to the most efficient solutions as prices and economic conditions change.  And it can include provisions like a price collar that can be structured to keep costs to consumers and businesses from rising too high.  (Page 10). 

* * * *

In 2008: A new nuclear plant was far from the cheapest solution, but reasonable.
In 2010:  But new nuclear plants started to look very expensive.  This analysis led us to slow our plans to build two reactors in Texas.  (Page 6). 


From Exelon's marginal cost of abatement graphs:

  • Estimated cost in 2008, $/mt CO2e abated through new nuclear reactors:  ~$40
  • Estimated cost in 2010:  $100
  • Percentage reduction in 2010 abatement cost from government subsidies to nuclear: ~30%

It would be great if Rowe's ideas on neutral energy policy and market-based innovation using carbon pricing could replace the push for ever-larger government involvement in energy technology selection and funding.

My own thoughts on appropriate energy policy can be found here.

Natural gas fracking well in Louisiana

This is the first of what will hopefully be a series of posts looking at specific aspects of The American Power Act (APA) proposed by Senators John Kerry and Joe Lieberman. 

This one deals with the nuclear “loan guarantee retention fee” (section 1102), as an item I’d flagged an needing additional information in my initial review of  the Bill’s summary. 

APA May 2010More resolution on other nuclear subsidies from detailed bill language

Before delving in to that specific item, the detailed APA brought a few other nuclear-related subsidies into greater focus than could be discerned from the summary alone.  Clearly, Kerry and Lieberman have some broader strategy behind their strong desire to shift more and more of the investment risk for an ever larger number of new reactors from investors to taxpayers.  Maybe it is pure politics (MA has MIT, a strong backer of nuclear; CT is the headquarters of General Electric); maybe it is some downpayment on a future climate deal; maybe they really do believe that nuclear power should be the anointed winner of the post-carbon energy world, without even having to compete. 

Whatever it is, however, the risk-reward balance is worrying (with taxpayers on the hook for so much of the investment risk, K-L don’t even give us any of the upside), as are the potential impacts on inter-fuel competition.

  • Nuclear delay insurance subsidy expansion is larger than was evident in the summary.  This is because the fixed number of contracts role to new facilities if no claims made.  Rather than "just" tripling the face value of the policies from $2 billion to $6 billion, and eligible reactors from 4 to 12, K-L also took allows all 12 available policies to be reused and reassigned to new projects if claims are not made on the inital plant.  This change greatly increases the likelihood of the government incurring losses under the program; and practically means that coverage will be available to any reactor that wants it during the period of delay insurance operation.
  • Near-current deduction of investment tax credits by counting them as “progress payments.”  The bill summary made it clear that K-L thought production tax credits for new nukes weren’t enough, and that they wanted investment tax credits as well.  ITCs in general dramatically shift performance risks from plant owners to taxpayers relative to production tax credits (which can’t be earned until a plant is actually producing).  The progress payments allow more rapid deductions on partially complete investments. 
  • Increased nuclear production tax credits (section 1124) – national cap is increased by 33%, from 6,000 MW to 8,000 MW.

A detailed look at nuclear loan guarantee retention fees

Including a retention fee is a de facto admission by K-L that federal loan guarantees for nukes will be among the cheapest money in the project.  I don't see this admission as a bad thing.  Quite to the contrary:  in any 12-step program, recognition is step 1.  Only by acknowledging the enormous value of the guarantees can K-L or others in Congress more directly assess their impact on the competitive dynamics of the energy industry.

For too long, the entire focus on the loan guarantees has been on whether or not they will default, not on the enormous distortions they will cause in energy investment patterns even if they don’t.  Look at the industry’s own cost models (which do not predict default and bankruptcy) and the loan guarantees top the list for most valuable “incentives”.  NEI also holds the guarantees at the top of their long and growing wish list of support.  This subsidy is what I refer to as the intermediation value of government loan guarantees – basically, the difference between what a true market transaction would price the risk at and the US Treasury’s cost of borrowing.

Loan guarantees generate subsidies even without default in two main ways.  First, they reduce the cost of debt substantially.  The higher the market risk of your project, the larger the cost savings from replacing “debt investor” with “taxpayer” as your funding source.  Second, because title 17 of the Energy Policy Act now allows 100% of the debt to be federally guaranteed (up to 80% of the total project cost), nuclear investors get to use far more debt than any true merchant structure would have ever allowed.  Debt is cheaper than equity, so the weighted average cost of capital on the new reactor goes down further.

This creates some uncomfortable facts for K-L, however.  The first is that less risky projects – even if they also get federal guarantees – will end up relatively worse off vis-à-vis nuclear than without the guarantees.  If these other projects are also less politically powerful, they may end up far worse off – an unfortunate outcome if they also happen to be quicker, more scalable, less expensive, and lower risk to the taxpayer-investors than a new reactor.  The second issue is that if the feds are the cheapest source of funding, there’s no reason for the nuclear borrowers to pay it off any sooner than they have to (potentially 30 years out). 

The retention fee attempts to deal with this second issue.  It partially calls industry's bluff that they need financing only during the construction phase -- though even with the retention fee, low cost credit lasts well into the plant's operating life -- and possibly for the full duration of the loan.

Retention fee mechanics

Assuming a 4 year construction period (admittedly ambitious), you have the following schedule of retention fees (longer construction times would delay the year in which the retention fee kicks in) that escalate the cost of borrowing over time:

  • Years 1-4: no retention fee due to construction period
  • Years 5-9: no retention fee due to 5 year grace period
  • Year 10: 0.5% fee added to whatever base rate the borrower is paying
  • Year 11: 1.0% fee added (escalating 0.5%/year through year 14)
  • Year 12: 1.5% fee added
  • Year 13: 2.0% fee added
  • Year 14: 2.5% fee added
  • Year 15: Rate jumps to 5.0% above original note interest rate; this occurs no more than 10 years after operations begin, and stays there until the normal expiration of the note.

Will the retention fee accelerate repayment of government guaranteed debt?

For the borrower to want to pay off the federal debt earlier, the cost of that funding must rise higher than alternative sources of debt.  This is possible – if, for example, the reactor comes in on-time and below budget, and interest rates stay low, the jump to a 5% retention fee might trigger refinancing in year 15 instead of year 30. 

But there are also many scenarios where the refinancing is unlikely:

  • Default.  The risk of default is highest during the construction phase.  With no fee until at least year 9, the majority of defaults will kick in prior to any impact from the retention fee.
  • Financial stress.  If the reactor is under financial stress due to construction delays, cost over-runs, or an expectation that break-even power rates will not be achievable when the plant goes live, there will likely be no capacity to repay any of the debt lines early. If there is, the government debtor is likely to be more easily lobbyed for relaxed repayment terms than is a bank.  This would especially be true in a situation of systematic financial stress across the nuclear sector, as would occur following a reactor accident somewhere in the world; or from structural changes in electricity markets that alter the economic benefits of large scale, centralized power generation.
  • Federal credit is still cheaper.  Even with the retention fee premium at 5%, it is quite possible that the alternative sources of credit will be more expensive.  This outcome could arise in two situations.  If the market situation is not great for nuclear, industry promises about take-out financing once the plant is built may not materialize inexpensively.  Second, replacing the Federal Financing Bank with a private lender, even if the initial interest rate seems lower, could well be far more expensive if the 80% debt structure of the project needs to be ramped down to 40 or 50% to meet private lender debt covenants. 

Unknowns

There are also a variety of unknowns in how the sketchy language on the retention fees would be deployed.  These include:

  • Impact on existing $18.5 billion nuclear pool.  Though K-L want to amend the title 17 statutory language, it seems unlikely that they could retroactively institute this fee on guarantee applicants for the first $18.5 billion.  What is unknown is whether there would be any restrictions in modifying the terms of a program to which $122 billion in applications have already been submitted under the old rules.
  • Retention fees versus credit subsidy and administrative fees.  While it is rational to assume that retention fees are in addition to, rather than in partial lieu of, credit subsidy and administrative fees, this is not explicit in the proposed language.  In the high stakes world of nuclear lobbying, nothing should be taken as a given.
  • Cash cow for DOE?  Under title 17, the interest and principal goes directly back to Treasury.  Fees, on the other hand, appear to go to Treasury but remain available to DOE for subsequent use.  This is a very interesting potential wrinkle.  Consider that were this this interpretation is correct, the retention fees would create a return of up to $5 billion per year (5% of $100 billion in total authorizations) that would flow to DOE rather than to the general taxpayer.  If we further assume that DOE pools the money to support additional guarantees, this might create a revolving-fund like structure similar to what the CEDA legislation would have done, without the need to pass CEDA.  Any lawyers out there who can evaluate whether this type of an outcome would be possible?
Natural gas fracking well in Louisiana

Yes, I'm all in favor of world peace.  And harmony.  And justice too.  I'm just not convinced we can have a big group hug and conclude the issue has been solved. I'm also in favor of making cleaner energy available to the world even if we have to sometimes subsidize energy access to the very poor. 

But the recent energy security summit promoting the subsidized expansion of civilian nuclear energy throughout the world at the same time we are to be curbing the risk of nuclear "incidents" got me thinking about rainbows and unicorns.  A delusional non-sequitor, you say?  Hardly.  I'm talking about Superhero Rainbow, an integral part of Phineas and Ferb's Team Improbable.  Her power is to "Harness the power of rainbows, unicorns, and sweetness to defend all that is just."

Turns out, I wasn't the only one to feel a bit of a discontinuity here.  National security writer Rowan Scarborough has a good op-ed on the topic, and quotes as well Henry Sokolski, Executive Director of the Non-Proliferation Policy Education Center.    Don't see a link between civilian power and proliferation? This paper by Victor Gilinsky, Marvin Miller, and Harmon Hubbard provides a detailed look at the concerns. 

It's one thing if nuclear power were the only option to save civilization.  Despite industry claims that it is, there are hundreds of things that provide energy services with much reduced greenhouse gases -- and at a much lower total (that means private investment plus government subsidies) cost.  Seems very silly to subsidize the expansion of a very gnarly security problem.

OK; perhaps I'm over-reacting.  The folks at the nuclear security summit were also thinking about states that might sell nuclear know-how where they shouldn't.  Team Improbable has this under control too.  French President Nicholas Sarkozy, who has personally been actively promoting the sale of French reactors to a wide array of countries,  has proposed to try such renegades in an international court.  Because the International Court has been doing such a grand job of dealing with war crimes in the former Yugoslavia; and the IAEA and UN Security Council have proven agile and efficient in dealing with the Iranian nuclear program.  Yet, despite these minor hiccups, a number of other countries seem to agree that the international court approach is a good way to go.  Group hug anybody?

Natural gas fracking well in Louisiana

I've just posted the slides from a presentation I gave at the New America Foundation in December.  The discussion provides some additional detail on why I am so critical of the Obama administration's push for massive loan guarantees to energy facilities. 

There are three main issues here.  The first, as illustrated in the chart reproduced below, the scale of lending is far larger than other similar programs the federal government has undertaken in the past.  Title XVII of the Energy Policy Act of 2005, in combination with stimulus spending, is now well over $100 billion in authorized credit support.  The Clean Energy Deployment Administration (CEDA) -- thankfully still only a proposed law -- could be even larger.  The idea that experience from existing export credit agencies or subsidized loans to rural energy facilities can serve as a sound model for running these much larger programs is, in my view, misguided.  Steps to boost review, staff skills, and incentive alignment appropriate for a program of this scale do not seem to have been taken.  In fact, the information I've received from people more closely linked than I to the agencies involved with assessing the risks of the loan guarantees indicates that political pressure to minimize the estimates of financial risk (and hence any required credit subsidy prepayments) continue unabated.

The second important issue is that the lending programs are focused primarily on energy technlogy development, with the mistaken assumption that if you build it, they will come.  Yet, experts such as Innosight, LLC (Clayton Christensen's firm) that focus on disruptive transformation of industries, identify the technology as only one of four key attributes needed for success (see slide 4).  In fact, when a political process drives capital allocation, the most heavily funded groups tend to be the most politically powerful, not the sectors most able to deliver carbon reductions at low cost (slide 5). 

Finally, the presentation identifies a number of key program attributes that are likely to contribute to a higher or a lower chance of success.  When the CEDA program is evaluated against these criteria (slides 6-8), the deficits in program structure and control become all too evident.

Scale of Lending

Obama's nuclear power policy: a study in contradictions?

"President Obama has followed up on his support for 'a new generation of safe, clean nuclear power plants,' laid out Jan. 27 in his State of the Union speech, by proposing to triple public financing for nuclear power...

"Budget hawks have a different set of concerns. They oppose government 'subsidies' to the industry (in the form of federal loan guarantees), saying taxpayers assume a huge risk given the industry's track record of cost overruns – and loan defaults – in the 1980s.

Natural gas fracking well in Louisiana

With federal guarantees already on the table for up to 100% of project debt for new reactors ($18.5 billion) and front-end enrichment investments ($2 billion), the Obama administration's decision today to push for an additional $36 billion in loan guarantees to new reactors is puzzling.  Taxpayer investments in a single reactor could approach $8 billion based on recent cost estimates.  While such an amount may seem unspectacular given recent bailouts to insurers and banks, it is actually an unprecendented stake in a single-asset private commercial entity. 

There is more than just the scale of investment at play here; program structure is also quite weak.  In fact, basic lessons on poor incentive alignment so evident in the mortgage industry meltdown are going unheeded in this latest foray of "free" money to private nuclear firms.  Subsidies to new reactors are large enough so taxpayers will actually be putting more capital at risk in the new plants than the owners themselves.   Alas, should the risky investment into new reactors prove successful, taxpayers will not share in the upside.  In addition, the handful of decision makers selecting the nuclear lottery winners within DOE have no private capital at risk and no financial stake in the ultimate long-term success or failure of their decisions.

The Wall Street Journal quotes DOE Secretary Steven Chu as stating that "I personally think that nuclear power has a place" because "it is carbon-free."  Having a "place" in the future of energy is hardly the issue at hand.  I'm all in favor of nuclear having a place -- but not with me footing the bill.  Let them pay for their own investments and bear the risks of those investments -- financial and otherwise -- rather than dumping them on the taxpayer.

What is really at stake here is whether we will have an energy industry that rewards technological innovation and prudent risk taking as we seek to innovate our way towards lower carbon; or whether we allow the federal government to increasingly socialize our energy investments based on their own personal views of the best way forward.  More on the importance of pricing here

Somewhere inside of DOE there must be a model looking at the expected total cost (private investment plus public subsidy) per mt CO2e abated; and hopefully the timing and certainty of those abatements as well. Perhaps Secretary Chu ought to look at it, and focus on building a neutral policy environment that forces carbon mitigation solutions to compete against one another rather than filling one trough after another with cash for the chosen.  More on how to use government effectively in energy markets here.

 

 

 

 

 

Natural gas fracking well in Louisiana

Like favorite sports teams, affinity for particular energy types seems to run deep.  Geography clearly plays a role:  it is not surprising that Senators Tom Harkin (Iowa) and Richard Lugar (Indiana) have long been staunch supporters of biofuels, and corn ethanol in particular.  The two have proposed increasing renewable fuel mandates to 60 billion gallons per year, a move that would result in more than a trillion dollars in subsidies to the biofuels sector over the policy's tenure.   For wind energy, there is T. Boone Pickens who has proposed a surge in wind energy to free up natural gas for use in the transport sector (albeit not in our current vehicles which are unable to use natural gas), thereby eliminating the need for much of our imported oil.

Thus, it is hardly unexpected that nuclear power also has its cadre of boosters.  What is interesting, however, is how often these folks tip their hats to France as the model for what the US should do.  Senator Lamar Alexander (Tennessee) points to France as he advocates for building 100 new reactors in the country.  Alexander, no fan of wind energy, refers to federal supports to the energy resource as "subsidizing sailboats," though assumedly all of his 100 reactors would sport shiny federal loan guarantees on their cooling towers in order to be able to attract financing.

Senator Lindsey Graham of South Carolina likes the French model as well.  And John McCain.  And of course the key French government officials are also believers, keen to export their technology not only to the US, but throughout the developing world as well. 

Moving beyond generalities of energy independence through nuclear into actual data on the French program is not easy.  There is much overlap between military and civilian operations, and the country has not had the degree of transparency on nuclear fuel chain economics necessary to evaluate the cost-efficiency of their nuclear bets. A handful of reports have begun to squeek out providing a broader picture of the French program.  Turns out, the model has some flaws that ought to be taken seriously by the US boosters of adapting the approach here.

The most extensive body of work I've seen on the topic has been assembled by Mycle Schneider, an independent consultant and founder of WISE-Paris.  His recent reports include a number of interesting findings.  First, the French decision to complete reactors when other countries stopped construction due to poor economics led to overcapacity of baseload power in France.  To boost usage, the French then subsidized electric heating -- a strategy that boosted aggregate demand, though exacerbated demand swings with heightened demand peaks.  Because nuclear power plants must run fill tilt, following a variable demand curve was not something this fleet of reactors did well.  As a result, France has had to export nuclear baseload cheaply, while importing peak energy at a much higher cost.  The country has also brought back online a number of very old and polluting oil-fired generation stations to provide peak energy.

A second important finding from Schneider's work is that the impact of the nuclear power program on final energy demand has been quite modest, and that the bulk of final demand continues to be met by fossil fuels.  He questions the idea that nuclear power was a useful strategy to deal with the issue of oil security, pointing out that only 12 percent of oil consumption in the country in 1973 was used in the electricity sector. 

Schneider's "Beyond the Myth" paper also provides a useful review of the institutional framework for the French program, and highlights a number of circumstances where institutional structures have served to restrict rather than enhance program transparency.  This history of opaqueness may be one reason why the recent relevations of potential safety problems have caused such a stir.

A second interesting paper, written by Arnulf Grubler of the International Institute for Applied Systems Analysis (October 2009), looks at the costs of the French nuclear program using previously unanalyzed cost data.   Grubler finds that France reactor construction times lengthened considerably from an average of 63 months for the 1971-79 period (PWR Westinghouse license reactors) to 126 months for the 1984-1999 period (PWR new French design).  He notes that the construction time for the Flamanville-3 EPR reactor submitted by French authorities to the IAEA (p. 16) was "entirely implausible," as it was a shorter time frame (and for a new design) than what had been achieved by nearly all prior reactors built in the country.  He also finds that despite standardization, learning, and other factors that in theory can bring down unit construction costs, the French program instead showed real cost escalation over time (p. 25).  Between 1974 and 1984, the real cost escalation was 5% per year.  This increased to 6% per year from 1984-1990.  The latest reactors in the period analyzed were roughly 3.5 times as expensive as the reactors built at the outset of the French program.  

An important caveat is that these numbers pick up the cost of fuel chain facilities only through the price of fuel.  In fact, however, the French government is itself a major player in those facilities, and these less visible portions of the fuel chain are believed to be heavily subsidized.  This would further weaken cost trends from the French nuclear program.

A key justification of massive subsidies to reactor construction in the US is that they are merely transitional supports to help the industry through "first of a kind costs," but will no longer be needed once learning brings reactor costs down.  The fact that not even the French saw declining real costs over time is indeed sobering.

A final critique of the French program worthy of mention was put forth by Yves Marignac, the current Executive Director of WISE-Paris, and another long-time analyst of the French program.  In recent presentation in New York, Marignac points out that, similar to their US counter-parts, the French have not figured out a long-term solution for managing their nuclear waste; and that very substantial portions of the real costs of nuclear power remain hidden due to state involvement in the sector.

Will a less airbrushed view of the French program make Alexander, Graham, or McCain rethink the most appropriate policies for US energy strategy?  Probably not.  But it should.

All Risk, No Reward for Taxpayers and Ratepayers: The Economics of Subsidizing the 'Nuclear Renaissance' with LGs and CWIP

As the projected costs of nuclear reactor construction have escalated, demand forelectricity has declined as result of the recession, and the cost of alternatives has plummeted, the nuclear industry has recognized that new nuclear reactors are simply uneconomic and impossible to fund in the capital markets. Seeking to override the verdict of the marketplace, the industry’s lobbying arm has demanded massive increases in subsidies from taxpayers and ratepayers to underwrite the industry. It demands: