Obama Goes Nuclear

Loan guarantees in the 2011 federal budget could help revive the nuclear power industry.

President Obama's proposed 2011 budget could provide a significant boost to the U.S. nuclear power industry, which has been stalled for decades. If approved by Congress, the budget would provide $36 billion in loan guarantees for nuclear power plants, opening the way for around seven new nuclear power plants, depending on the final cost of each. The new guarantees are in addition to $18.5 billion in guarantees provided for in a 2005 energy bill.

Aging power: The Watts Bar nuclear plant, shown here, is one of the newest in the United States. It started operations in 1996 (construction began in 1973). Credit: TVA

The increased support for nuclear power marks a change for the Obama administration, which has opposed similar increases in the past. Some policy experts say it is part of a strategy to win Republican votes for a comprehensive climate and energy bill.

The loan guarantees are needed because investors are reluctant to put up money for nuclear power plants, which raises the cost of financing. Investors are worried about uncertainties in the cost of the plants, especially since it's been so long since any new ones have been built. They're also concerned that, historically, political support for nuclear power plants has been unstable, with regulatory backing disappearing in less time than it would take to build a new plant.

By guaranteeing loans, the government can bring down financing costs. The fact that the support for nuclear is now bipartisan--coming from both the president and from Republicans in Congress--also suggests that it will remain stable beyond the current administration, says Charles Forsberg, the executive director of the MIT Nuclear Fuel Cycle Project. As a result, he says, more utilities could be willing to undertake the construction of nuclear power plants.

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According to one recent analysis, the cost of building nuclear power plants has approximately doubled in the last seven years (due to things such as increasing materials costs). As it stands, this means that the cost of electricity from new plants would be around 8.4 cents per kilowatt hour, compared to about 6 cents per kilowatt hour for conventional fossil fuel plants. But cutting the cost of financing could make nuclear competitive with fossil fuels, says Andrew Kadak, a professor of nuclear engineering at MIT.