President Obama supports two new reactors in Georgia 

He approves $8.3 billion in first federal loan guarantees for nuclear energy

President Barack Obama (right) finally came out in support of nuclear energy after a year of apparent indifference. This past week he approved $8.3 billion in federal loan guarantees for two new Westinghouse AP1000 1,150 MW nuclear reactors at Southern's Vogtle site. In doing so he also extended a hand across the partisan aisle to Republicans in the Senate in an effort to gain support for pending climate change legislation.

During the presidential election campaign, Sen. John McCain (R-AZ.) called for construction of new nuclear plants and reached out to building trade unions on this issue. While he succeeded in getting then candidate Obama to admit that nuclear energy "has to be part of the mix," Obama never enthusiastically embraced the industry during the campaign even though as a U.S. Senator he comes from Illinois which has more nuclear reactors than any other state in the union.  The primary reason was to keep the green wing of the Democratic party firmly in his camp.

There was no question about the enthusiastic response in the nuclear industry to the announcement this past week. The political response in the Senate was mixed with some senators praising the action and others saying they would remain opposed to the climate bill regardless of what Obama did about nuclear energy. Environmental groups which have opposed any re-start of the nuclear energy industry continued along these lines. The only signal of change was a more muted than expected comment from the Sierra Club.  Greenpeace continued its hostile reception to anything related to the nuclear energy industry.

Obama reaches out to green groups

The media sensation that comes with a presidential announcement was justified by some of Obama's unambiguous remarks in support of nuclear energy. Early in his remarks, the President reached out to green groups. He said,

"Even when we have differences, we cannot allow these differences to prevent us from making progress. On an issue that affects our economy, our security, and the future of our planet, we can't keep on being mired in the same old stale debates between the left and the right, between environmentalists and entrepreneurs."

The president made it clear he understands the benefits of nuclear and communicated them in terms that reach out to environmental groups. He said "…nuclear energy remains our largest source of fuel that produces no carbon emissions."

He went on to point out that a single nuclear reactor, like one of the units to be built by Southern in Georgia, will cut carbon dioxide emissions by 16 million tons a year compared to a coal fired plant with similar electricity output. Put another way, the President said, building one of the new reactors will have the equivalent impact of taking 3.5 million cars off the road.

Republicans have mixed responses

The President did not get a clear signal from republicans they are ready to sign up for his climate bill now that he has signed on for nuclear loan guarantees. Republican Senate Leader Mitch McConnell (R-KY) told the New York Times Feb 17 Obama's support for nuclear energy will not result in republican support for a cap on carbon emissions. He called it an "energy tax" and said republicans in the senate won't vote for it.

On the other hand, Sen. Lamar Alexander (R-TN), (right) who heads the Republican Senate Conference, issued a statement Feb 16 saying President Obama "deserves credit" for moving ahead with the loan guarantees.

Alexander added he supports the three appointments that are pending as commissioners for the U.S. Nuclear Regulatory Commission. The ability of the NRC to complete reviews in a timely manner of more than a dozen license applications for new nuclear reactors is a critical issue with the industry.

Alexander has introduced a bipartisan Clean Energy Act with Sen. Jim Webb (D-VA) to promote development of nuclear energy. However, like other republicans, Alexander hews to the line that carbon taxes are in the end just more taxes and he's unlikely to vote for them.

The president succeeded in warming up the chilly atmosphere in the Senate over climate change legislation, but he's not home yet. In the meantime, the door to the nuclear renaissance has opened wider with the approval of the first loan guarantees.

The President has also noted he plans to ask Congress for the authority to issue another $36 billion in loan guarantees on top of the $18 billion that is already in place. This is not spending money. It is basically insurance and the industry pays for the cost of the program.

Cost of loan guarantees not settled

Almost buried in the general excitement of the announcement is the news that the Department of Energy and Southern have not agreed on the fee the utility will pay the government for the loan guarantee. If the fee is too high, say 10% of the amount covered, the utility will walk away.

According to some nuclear energy experts, the issue of the cost of the fee must be resolved before Southern gets its licenses for the two new reactors which are expected in about two years. Southern CEO David Ratcliffe (right) told Climate Wire/NYT Feb 17 a payment in the range of 1-2% would be manageable. He added that the utility and DOE have a "ballpark understanding" of the cost of the fee.

According to a press release from Southern issues Feb 16, the loan guarantees approved by the federal government are for $8.3 billion. The two reactors have a combined total cost of approximately $14 billion including balance of plant and transmission and distribution infrastructure. A 2% fee on $8.3 billion would be $166 million which is a lot of money in anyone's wallet.

Units 3 & 4 at Southern's Vogtle site are expected to enter revenue service in 2016 and 2017 respectively. They are based on the Westinghouse AP1000 design. The firm is building four units in China. By the time Southern breaks ground in 2011, Westinghouse will be bringing back lessons learned from Asia to help control costs and get the plants built on time.

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