Perry just made taxpayers invest in a $25-billion nuclear ‘financial quagmire’

Nuclear plants are money losers, but Perry is loaning billions more to the last new one being built.

Construction on the long-delayed Vogtle nuclear reactor in Georgia, June 2014. CREDIT: AP/John Bazemore
Construction on the long-delayed Vogtle nuclear reactor in Georgia, June 2014. CREDIT: AP/John Bazemore

On Friday, Secretary of Energy Rick Perry authorized up to $3.7 billion in taxpayer-backed loan guarantees to finish building the last remaining new nuclear plant under construction in this country.

This loan, to the Southern Company’s Vogtle plant in Georgia, is on top of $8.3 billion in previous federal loan guarantees for the troubled $25-billion nuclear plant. That means if — or, rather, when — the project goes belly up, U.S. taxpayers will have to bail out Southern Company and its partners with a record-breaking $12 billion.

“When” might be more likely. Nuclear power has become so uneconomic that half of all existing power plants are “bleeding cash” — and even the profitable ones have the narrowest of positive operating margins, according to a recent Bloomberg New Energy Finance (BNEF) analysis.

Since so many existing plants are money losers, it’s no shock that new nuclear plants have priced themselves out of the market for new power generation entirely.

New nukes make so little economic sense that the Vogtle project is both “the first new nuclear power plant to be licensed and begin construction in the United States in more than three decades,” as the Department of Energy (DOE) news release explains, and the last nuclear plant under construction in the U.S.” as Bloomberg reported.

Back in March, the Atlanta Journal-Constitution called the project “a financial quagmire.” The Westinghouse plants, originally priced at $14 billion, were already $3.6 billion over budget and almost four years behind schedule. Recently, Southern Company released new estimates that put the total project cost at $25 billion.

No wonder that Westinghouse itself filed for bankruptcy back in March.

Globally, the nuclear industry is struggling. As the New York Times reported, another well-known nuclear developer, General Electric “has scaled back its nuclear operations, expressing doubt about their economic viability,” whereas the French builder Areva “is mired in losses.” In August, the Financial Times wrote, “It sometimes seems like U.S. and European nuclear companies are in competition to see which can heap greater embarrassment on their industry.”

Yet in the DOE press release Friday, Perry said, “I believe the future of nuclear energy in the United States is bright.” Seriously.

As the leaked final draft of a grid study Perry ordered this summer pointed out, most of the recent nuclear plant closures were because “the marginal cost of generation for many nuclear plants is higher than the cost of most other generators in the market.” That’s why Perry proposed on Friday a new rule that would make Americans pay more for nuclear-generated electricity than the power market says it’s worth.

The reality is that, in the increasingly likely event the financial quagmire known as the Vogtle project goes belly up, U.S.  taxpayers are on the hook for a $12 billion bailout. That is more than 20 times what the $528 million loan to solar tech company Solyndra cost taxpayers after the company collapsed. Of course, Solyndra failed because other U.S. investments in solar panels helped make them so cheap that Solyndra couldn’t compete. It wasn’t clear which solar technology would triumph when the DOE made its initial loans in Solyndra. (Overall, the clean energ loan guarantee program was wildly successful). Solar was a rapidly advancing industry that out-priced some of its own companies.

Nuclear, on the other hand, is failing because it can’t compete against fracked gas and renewables like solar and wind. And Perry is making this loan after we already know new nuclear power plants are uneconomic.