Fallout from Solyndra Hurts Nuclear Startups

Politicians are drawing parallels between the $535 million federal loan guarantee issued to bankrupt solar manufacturer Solyndra and loan guarantees that the U.S. Department of Energy is offering to utilities building new nuclear power plants. But while those nuclear startups could also go bust, experts say U.S. taxpayers are unlikely to take a loss on them. That's because the only reactor projects moving forward are those in a handful of southern states, where laws allow utilities to offload the risk onto state ratepayers.

A case study is the two-reactor expansion by Southern Company at the Vogtle nuclear power station in Georgia—the only project in construction to be offered a federal loan guarantee. Southern Company is unlikely to default on its $8 billion loan guarantee because, under Georgia law, it is prebilling its customers for much of the cost.

This all but assures Southern Company of recouping the total expenditure, according to Peter Bradford, a former U.S. Nuclear Regulatory Commission member and a nuclear policy expert at Vermont Law School's Institute for Energy and the Environment. "The risks in Georgia are fairly low because state utility commissioners have said customers will cover the full cost no matter what, whether the plant is canceled or experiences substantial cost overruns," says Bradford.

Utility-friendly laws in states such as Georgia and South Carolina are, however, an exception. The risk of default on nuclear loan guarantees would be higher in most U.S. states, because most states have competitive, rather than regulated, power markets. New nuclear plants are expected to generate power at 12 to 20 cents per kilowatt-hour, which is two to three times more than average U.S. power prices. "The economic setback of 2008 and the decline of natural gas prices—a decline that's now projected ... to last out into the 2030s—have pushed any semblance of economic justification for these plants way off over the horizon," says Bradford.