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Global Warming Reports
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Executive Summary
In February 2010, the Obama
administration announced that it would help finance two new nuclear
reactors at the Vogtle nuclear power station in Georgia, offering an
$8.33 billion loan guarantee to Georgia Power (a subsidiary of
Southern Company) and two other companies invested in the project.
President Obama claimed that the investment was necessary to create
clean energy jobs, stimulate our economy to export homegrown
technology instead of importing foreign oil, and secure the future of
our planet and our civilization by fighting the growing threat of
global warming.
However, this loan is an expensive
gamble on a technology with a long history of bankrupting utilities
and soaking ratepayers. New nuclear reactors are not cheap, not
clean, and will set America back in the race against global warming.
Most importantly, they are not necessary. Clean energy technologies
can begin cutting global warming pollution right away, do so at lower
cost and with less risk, and will create more jobs in the process.
There is an extremely high risk that
taxpayers will be on the hook if the Vogtle loan guarantee proceeds.
The loan guarantee is an up-front bailout that will enable Southern
Company to make an uneconomic investment.
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Private lenders decline to finance
new reactors because of the substantial risk that the investment
will fail. In 2003, the Congressional Budget Office estimated that
the chance of a loan for new nuclear reactor construction resulting
in default would be “very high – well over 50 percent.” In
2008, the Government Accountability Office estimated a default rate
of just over 50 percent for all loan guarantees (including other
eligible projects in addition to nuclear power plants). The Obama
administration’s proposed loan guarantee would transfer this risk
onto American taxpayers, who would pay up to $8.33 billion in the
event that Southern Company and its partners run into trouble.
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Vogtle perfectly illustrates the
risk. The original two reactors at the plant took almost 15 years to
build and came in 1,200 percent over budget. Southern Company
shareholders had to swallow $1 billion in losses, and Georgia Power
electricity customers saw their electricity rates climb 40 percent
over several years.
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The design of the new reactor has
not been finalized, and is still undergoing review at the U.S.
Nuclear Regulatory Commission (NRC). As a result, Southern Company’s
cost estimates for the two new reactors are speculative. If delays
and cost escalation drive up the price tag before or during
construction – as was the case with nearly every previous reactor
– the company could default on the loan and even fail to complete
the reactor, wasting taxpayer dollars.
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Moreover, the electricity demand
Southern Company anticipates the reactor to serve may not
materialize. And since nuclear power plants are large and
inflexible, this possibility poses a serious financial risk.
Construction of a nuclear reactor cannot be halted halfway to get
half of the power output – it’s all or nothing.
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Moreover, in May 2010, a Georgia
state judge found that the state Public Service Commission (PSC)
failed to adequately explain why building new reactors at Vogtle
would be a prudent investment, and remanded the state certification
for the reactor back to the PSC.
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Southern Company’s decision on
whether to accept the offer of the loan guarantee or not is expected
in mid-June 2010, after the company requested a 30 day extension.
The Vogtle nuclear loan could cost
electricity customers and taxpayers billions of dollars.
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Georgia Power customers will be
paying $1.6 billion through higher electricity rates over the next
six years to help finance the reactor construction. By 2017, the
average Georgia Power customer will be paying an additional $10 per
month to support the project.
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If Southern Company defaults
before the reactor becomes operational and the government fails to
charge an appropriate subsidy cost for the loan guarantee, the
taxpayer cost could reach as high as $11 billion (including the loan
guarantee amount of $8.3 billion and a possible subsidy cost of $3
billion) – or $95 per American household.
Building new nuclear reactors – at
Vogtle or elsewhere – is an expensive way to produce electricity.
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The estimated cost to build a new
reactor has more than tripled since 2005. Analysts at Moody’s
Investor Services call it a “bet the farm” risk.
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Illustrating the risk, the French
government-owned nuclear giant Areva is building a new reactor in
Finland, and the project is three and a half years behind schedule
and 75 percent over budget after a series of construction problems.
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Southern Company and its partners
estimate that the new Vogtle reactors and transmission upgrades will
cost $14 billion. Over the lifetime of the reactors, that translates
to an estimated rate of 13.5¢ to 16.5¢ per kWh for nuclear
electricity (including transmission and distribution costs). The
benefit of the loan guarantee would only lower the estimated cost of
electricity by about 3 cents per kWh. This would still compare
unfavorably to the 8.8¢ per kWh average retail price that Georgia
households and businesses currently pay.
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Moreover, Southern Company may be
underestimating the actual cost of the reactors. For example, in
2009, Florida Power & Light estimated that a similar project to
add new reactors of the same design to Turkey Point in Miami would
cost $12 to $18 billion. And in May 2010, Progress Energy increased
the estimated cost of building a new 2-reactor nuclear facility in
Levy County by $5 billion, for a total of $17 to $22.5 billion.
Independent estimates of possible reactor costs go even higher.
New nuclear reactors are not safe or
clean – nor are they a solution to global warming.
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The new reactors at Vogtle would
set America back in the race to reduce global warming pollution. The
new reactors would take a decade or more to build and tie up
investment dollars, delaying action to reduce emissions. If that
money were instead directed to clean energy solutions, such as
energy efficiency measures, it could begin reducing emissions
immediately.
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The NRC has raised safety concerns
about the proposed design of the new reactors at Vogtle, which it
has not yet certified. Specifically, the NRC has identified issues
that could prevent the reactor’s shield building from performing
adequately during an earthquake, tornado or hurricane.
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The new reactors at Vogtle would
produce 2,500 metric tons of highly radioactive spent fuel over
their lifetimes. This waste would remain dangerous for thousands of
years, and no nation has developed a permanent solution for safely
disposing of it.
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The two reactors at Vogtle already
consume as much as 66 million gallons a day from the Savannah River
– more water than 500,000 Georgians use daily at their homes.
Adding two more reactors would increase water withdrawals to as much
as 132 million gallons a day, or 2 percent of the river’s normal
flow – competing with other downstream water needs. Drought and
high temperatures, such as the severe water shortage the state
experienced for three years ending in June 2009, could force the
reactor to reduce output or shut down even as demand for electricity
is highest – a vulnerability that will only be aggravated by
global warming.
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Moreover, two additional reactors
would double the volume of heated water the reactors discharge back
into the river, which kills fish and damages the fragile river
ecosystem. Construction of the reactors would likely require
dredging up to 100 miles of the river channel as well, disrupting
fish spawning.
Guaranteed loans for nuclear reactor
construction are not a good way to create jobs.
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After a brief spike in employment
during the construction of the plant, the Vogtle reactors will
actually become a drag on Georgia’s economy. The high cost of
power from the Vogtle reactor (estimated at 10 to 13 cents per kWh
including the benefit of the loan guarantee) will raise citizens’
energy bills, leading to the loss of 5,000 to 9,000 jobs (full time
equivalent).
Clean energy and energy efficiency
are more effective tools to stimulate America’s economy, create
clean energy jobs, increase energy security and fight global warming
than new nuclear reactors.
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Clean energy is more
cost-effective than new nuclear reactors. Per dollar spent over the
lifetime of the technology, energy efficiency and biomass co-firing
produce as much as 500 percent more electricity than nuclear power
and are five times more effective at preventing carbon dioxide
pollution. Combined heat and power (in which a power plant generates
both electricity and heat for a building or industrial application)
is greater than three times more cost-effective.
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If the $14 billion capital
investment required to build two new reactors at Vogtle were instead
directed into energy efficiency, Georgia Power could reduce
electricity consumption in its service territory by 2 percent
annually over 15 years. This investment in energy efficiency would
save Georgians close to $13 billion on their energy bills at
current electricity prices – since energy efficiency measures are
cheaper than running an existing power plant. The savings on energy
bills would create on the order of 2,800 jobs statewide – an
increase in employment on the order of 8,000 to 12,000 jobs when
compared to the job losses that would be caused by higher
electricity rates from building two reactors at Vogtle.
The United States should focus on
improving energy efficiency and generating electricity from clean
sources that never run out – such as wind, solar, biomass and
geothermal power – rather than wasting taxpayer dollars to offer
upfront bailouts to builders of expensive and risky nuclear reactors.
State and federal leaders should:
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Oppose additional subsidies for
nuclear power. Nuclear power has already benefited from more
than $140 billion in federal subsidies over the last half-century,
from limited liability to loan guarantees. The federal government
should not further subsidize new nuclear reactors. Any subsidies for
low-carbon energy alternatives must be judged based on their
relative short-term and long-term costs and environmental
advantages.
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Shift the nation’s strategy
for dealing with global warming away from propping up risky
technologies like nuclear power, and instead establish a cap on
emissions, guided by the latest scientific understanding. Instead
of issuing loans to the nuclear industry, the United States should
establish a policy to cap economy-wide emissions of global warming
pollution at a level sufficient to prevent the worst impacts of
global warming.
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Focus on energy supply
technologies that are cleaner, cheaper and deliver results faster
than nuclear power. The United States should reduce overall
electricity use by 15 percent by 2020, strengthen energy efficiency
standards and codes for appliances and buildings, and obtain at
least 25 percent of its electricity from clean, renewable sources of
energy that never run out, such as wind and solar power, by 2025.
States should also enact similar policies or expand existing
targets.
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