Nuclear Opponents Invoke Solyndra
While no nuclear loan guarantees have been granted, one has nonetheless been promised to the companies now building the Vogtle 3 and 4 reactors, near Augusta, Ga. It is not clear whether those builders, led by the Southern Company, will actually accept a federal guarantee; Southern says it has been shopping in the private market.
Nonetheless, two groups that oppose the construction of the Vogtle reactors are arguing that the proposed loan guarantee for the project is “Solyndra-like,” a reference to the scandal over a solar panel manufacturer in California that went bankrupt in 2011 after receiving a $535 million federal guarantee.
On Wednesday, the opponents, Synapse Energy Economics and Earth Track, released a report based on the Department of Energy’s responses to four Freedom of Information Act requests over three years. The report argues that Vogtle might not go forward without the loan guarantees and that the department is poorly set up to evaluate the risk of default and set an appropriate upfront fee.
Furthermore, they argue, with new setbacks for nuclear power, including the persistence of very low prices for natural gas and the accident at Japan’s Fukushima Daiichi plant, the loan package should be revised. By some measures, the Vogtle project is more than a year behind schedule, they noted. And the owners and the contractor are enmeshed in a $900 million dispute on costs.
At the Southern Company, Tim Leljedal, a spokesman, said that loan guarantee negotiations with the Department of Energy were continuing. “We are committed to financing options that will serve the best interests of our customers, and – as long as the terms and conditions of D.O.E. loan guarantees serve those interests – we will continue pursue that option,’’ he said.
Last year, he noted, Southern borrowed $4.3 billion from commercial sources at an average rate of 2.8 percent.
One of the report’s authors, Doug Koplow of Earth Track, argued that this comparison was irrelevant. That was senior secured debt to be used for other purposes, he said, and “it didn’t have any of stigma or risk like a large nuclear project.’’
But proponents of Vogtle argue that its prospects are sound. For one thing, its builders note, it is fundamentally different from a project like Calvert Cliffs 3.
Calvert Cliffs, about 50 miles south of Washington, would have been a “merchant” plant, meaning that it would pay back its loans by selling energy at whatever the prevailing rate was, and that rate is subject to market risks like shifts in overall demand and a decline in the price of competing sources like natural gas.
Vogtle is being built with the approval of the utility regulators, with its costs paid by ratepayers as long as the regulators consider the money to be spent appropriately. In other words, it could be a poor choice or a great choice, depending on future trends like the price of natural gas and the overall demand for electricity, but the builders will have the revenue to repay the loans.
The Department of Energy has extended the deadline for Southern and its partners to decide on the loan guarantee offer until this June.
Meanwhile,the new reactors are taking shape.