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Nuclear 'Renaissance' Held Up by Fight Between DOE
and OMB
By PETER BEHR of
Published: November 16, 2009
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The awards of $18.5 billion in federal loan guarantees for new
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nuclear plant projects remain held up by an ongoing dispute within
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the Obama administration over the financial risk the new reactors MAIL
pose for the government and taxpayers, according to industry and PRINT
government officials.
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The struggle pits the Energy Sign up for David Pogue's exclusive column, sent every
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Big Growing Pains and Potential
for $5B Weatherization Program that have been at odds since the loan
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guarantee program was approved in 2005. DOE will make
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Senate Climate Battle Shifts Onto the final decision on nuclear project loan guarantee
New Turf requests. OMB has a pivotal say in determining the risk of
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loan defaults if the projects suffer cost overruns or cannot
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Enviro Groups Face Some Tough be completed.
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The risk calculation is critical to a launch of the so-called
"nuclear renaissance" because it determines how much
upfront cash the nuclear project developer must pay to get
A blog about the loan guarantee, which can cover up to 80 percent of
energy, the the multibillion-dollar construction costs, for three of four
environment and new reactors.
the bottom line.

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The two factors in dispute are assumptions about the risk
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of default and the losses the government would suffer if it
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has to reimburse lenders. "DOE and OMB have been at loggerheads over what the basic Dot Earth Blog
assumptions ought to be," said one senior industry executive who would not speak for
attribution because of the issue's sensitivity. MOST POPULAR - BUSINESS

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Senior OMB officials reportedly signed off on a loan fee of 1 to 2 percent of the total
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guarantee at the end of the Bush administration, but the agency has reopened the issue
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by seeking a higher fee now, according to sources. DOE and OMB spokespersons would 3. U-2 Spy Plane Evades the Day of Retirement
not answer questions or comment last week about the dispute. 4. In Health Care Overhaul, Boons for Hospitals and
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The issue is not resolved, said Mayo Shattuck III, CEO of Baltimore-based Constellation 5. States Look Beyond Borders to Collect Owed Taxes
Energy, which has applied for a reactor loan guarantee. Shattuck told a Johns Hopkins 6. Corner Office: Just Give Him 5 Sentences, Not ‘War
University audience Wednesday, "if that upfront fee is really big, it's going to discourage and Peace’

people from wanting to take the loan, because there's so much money going out for a 7. Shortcuts: For the Dishwasher’s Sake, Go Easy on the
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plant of that size. It is a process that we're in to get all parties to get their arms around the
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gap analysis."
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Maze
Constellation Executive Vice President James Connaughton said that a 1 percent credit
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subsidy fee would be reasonable and affordable. A 10 percent fee on an $8 billion Times’s Local Audience
guaranteed construction loan would require a nuclear developer to advance $800 million
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in addition to raising 20 percent or more of the project's financing as equity. At that
higher fee level, nuclear projects can't go forward, he said.

http://www.nytimes.com/cwire/2009/11/16/16climatewire-nuclear-renaissance-held-u... 23/03/2010
Nuclear 'Renaissance' Held Up by Fight Between DOE and OMB - NYTimes.com Page 2 of 2

Nuke critics press for 50% subsidy cost

DOE has narrowed the initial group of potential guarantee recipients to four companies,
including Constellation's proposed third reactor at its Calvert Cliffs site in Lusby, Md., on
the Chesapeake Bay's western shore. Energy Secretary Steven Chu has said loan
guarantee decisions will be made soon, but the department has not publicly set a
timetable.

Critics of nuclear power have said the proposed new reactor projects pose large if The Seasons
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unquantifiable risks, so the credit subsidy cost should be correspondingly high to protect Lehman's demise, dissected
taxpayers if a project defaults before completion. The Union of Concerned Scientists and Why we need to dream

other industry critics say the subsidy figure should be 50 percent, citing conclusions in a
2003 Congressional Budget Office report.

Industry officials reply that that figure is far off base. CBO's 2003 analysis did not assume
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that Congress passes a cap-and-trade climate program raising the price of electricity from
coal and natural gas generators. Nor could it take account of reactor project incentives in See the news in the making. Watch
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the 2005 act -- a federal production tax credit and a total of $2 billion in funding to cover
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losses if regulatory delays cause construction budgets to escalate. These further reduce York Times Real Estate
the risk of default, industry officials say.
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Risk calculations go on behind closed doors
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An analysis by Standard & Poor's noted that the credit subsidy cost for Department of
Transportation highway projects is 5 percent, to cover expected loan guarantee losses.
However, unlike nuclear plants, highway projects pose no technological risks, S&P said in
a report to DOE.

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