Nuclear Power: Still Not Viable Without Subsidies

Attributed Authors: Doug Koplow, Earth Track, Inc. Published: Feb 2011

Conspicuously absent from industry press releases and briefing memos touting nuclear power’s potential as a solution to global warming is any mention of the industry’s long and expensive history of taxpayer subsidies and excessive charges to utility ratepayers. These subsidies not only enabled the nation’s existing reactors to be built in the first place, but have also supported their operation for decades.

This report (Full Report or Executive Summary) catalogues in one place and for the first time the full range of subsidies that benefit the nuclear power sector. The findings are striking: since its inception more than 50 years ago, the nuclear power industry has benefited—and continues to benefit—from a vast array of preferential government subsidies. Indeed, as the report shows, subsidies to the nuclear fuel cycle have often exceeded the value of the power produced. This means that buying power on the open market and giving it away for free would have been less costly than subsidizing the  construction and operation of nuclear power plants. Subsidies to new reactors are on a similar path.

The most important subsidies to the industry do not involve cash payments. Rather, they shift construction-cost and operating risks from investors to taxpayers and ratepayers, burdening taxpayers with an array of risks ranging from cost overruns and defaults to accidents and nuclear waste management. This approach, which has remained remarkably consistent throughout the industry’s history, distorts market choices that would otherwise favor less risky investments. Although it may not involve direct cash payments, such favored treatment is nevertheless a subsidy, with a profound effect on the bottom line for the industry and taxpayers alike.

Future choices about U.S. energy policy should be made with a full understanding of the hidden taxpayer costs now embedded in nuclear power. To accomplish this goal, we offer the following recommendations:

  • Reduce, not expand, subsidies to the nuclear power industry. Federal involvement in energy markets should instead focus on encouraging firms involved in nuclear power—some of the largest corporations in the world—to create new models for internal risk pooling and to develop advanced power contracts that enable high-risk projects to move forward without additional taxpayer risk.
  • Award subsidies to low-carbon energy sources on the basis of a competitive bidding process across all competing technologies. Subsidies should be awarded to those approaches able to achieve emissions reductions at the lowest possible cost per unit of abatement—not on the basis of congressional earmarks for specific types of energy.
  • Modernize liability systems for nuclear power. Liability systems should reflect current options in risk syndication, more robust requirements for the private sector, and more extensive testing of the current rules for excess risk concentration and counterparty risks. These steps are necessary to ensure coverage will actually be available when needed, and to send more accurate risk-related price signals to investors and power consumers.
  • Establish proper regulation and fee structures for uranium mining. Policy reforms are needed to eliminate outdated tax subsidies, adopt market-level royalties for uranium mines on public lands, and establish more appropriate bonding regimes for land reclamation.
  • Adopt a more market-oriented approach to financing the Nuclear Waste Repository. The government should require sizeable waste management deposits by the industry, a repository fee structure that earns a return on investment at least comparable to other large utility projects,and more equitable sharing of financial risks if additional delays occur.
  • Incorporate water pricing to allocate limited resources among competing demands, and integrate associated damages from large withdrawals. The government should establish appropriate benchmarks for setting water prices that will be paid by utilities and other consumers, using a strategy that incorporates ecosystem damage as well as consumption-based charges.
  • Repeal decommissioning tax breaks and ensure greater transparency of nuclear decommissioning trusts (NDTs). Eliminating existing tax breaks for NDTs would put nuclear power on a similar footing with other energy sources. More detailed and timely information on NDT funding and performance should be collected and publicized by the NRC.
  • Ensure that publicly owned utilities adopt appropriate risk assessment and asset management procedures. POUs and relevant state regulatory agencies should review their internal procedures to be sure the financial and delivery risks of nuclear investments are appropriately compared with other options.
  • Roll back state constructionwork-in-progress allowances and protect ratepayers against cost overruns by establishing clear limits on customer exposure. States should also establish a refund mechanismfor instances in which plant construction is cancelled after it has already begun.
  • Nuclear power should not be eligible for inclusion in a renewable portfolio standard. Nuclear power is an established, mature technology with a long history of government support. Furthermore, nuclear plants are unique in their potential to cause catastrophic damage (due to accidents, sabotage, or terrorism); to produce very long-lived radioactive wastes; and to exacerbate nuclear proliferation.
  • Evaluate proliferation and terrorism as an externality of nuclear power. The costs of preventing nuclear proliferation and terrorism should be recognized as negative externalities of civilian nuclear power, thoroughly evaluated, and integrated into economic assessments—just as global warming emissions are increasingly identified as a cost in the economics of coal-fired electricity.
  • Credit support for the nuclear fuel cycle via export credit agencies should explicitly integrate proliferation risks and require project-based credit screening. Such support should require higher interest rates than those extended to other, less risky power projects, and include conditions on fuel-cycle investments to ensure the lending does not contribute to proliferation risks in the recipient country.


Tags: export credit agencies loan guarantees nuclear subsidies Price-Anderson tax subsidies title 17