Skip to main content

Thoughts on the DOE Loan Guarantee Program

The Department of Energy is moving forward with its clean energy Loan Guarantee program. In a press release last week, DOE announced that it had received applications from 17 companies to build 14 nuclear power plants totaling 21 new units and almost 29,000 megawatts of new electrical capacity. In total, the applications seek $122 billion in loan guarantees, while the program is authorized to commit only $18.5 billion to new nuclear plants. Following the DOE announcement, NEI's Richard Myers, Vice President, Policy Development, noted in an interview with Bloomberg that the oversubscription is a sign that $18.5 billion is not adequate to provide the financing support necessary. In a piece on the loan guarantee program and another on the debt ceiling of the Tenessee Valley Authority, Dan Yurman explains why.

In essence, there are some jobs so big they are beyond what the private sector alone can do. Federal support, such as loan guarantees, enables the private sector to attract more capital to the enormous projects needed than would occur otherwise. Without that public-private partnership, the entire cost of these massive projects would be borne entirely by the federal government (i.e., the taxpayers). With federal encouragement, the private sector is willing to bear a fair share of the risk and put its money on the line to contribute to dealing with the nation's energy and environmental needs. That's what we take from the oversubscription in loan guarantee applications last week.


Martin Burkle said…
Looks like these plants average 7.1 billion each. Would the total cost of the plant be guaranteed or is there more cost than this?
David Bradish said…
Martin, in order to receive a loan guarantee, as much but not more than 80% of the project costs can be financed by debt. The loan guarantee backs all of the debt. The other 20% has to come from equity.

So if the plant costs $7.1B, then the government can guarantee at most up to 80% of the total cost (depending on how the utility wants to finance the project) or $5.7B.
Arvid said…
Of course, one idea is that the government does carry 100 % of the cost, and ownership, like in France...

By the way, does the industry pay anything for these loan guarantees? One could argue that they won't cost the US government a single cent as long as nothing goes wrong, but the government is taking on quite a bit of risk which could end up as real debts. And the guarantees are obviously very valuable to the industry, one could probable even put a dollar value on them.

I propose a bold and (imho) fair plan: give loan guarantees to all serious power projects in the US! That would be fair but would tilt the competitive board so capital intensive technologies (wind and nuclear) become more competitive than they are today.

Of course, you could argue that it wouldn't tilt anything, and that the current system instead is tilted in the interest of low capital plants, that is, gas.

As a matter of fact, that is exactly what I claim: in the power business there is no such thing as a level playing field, just a number of diifferently sloping ones, and it's up to the government to choose the one which is most in the national interest.
David Bradish said…
By the way, does the industry pay anything for these loan guarantees?

Definitely. Here's what Exelon will pay for the loan guarantee on the two proposed reactors in Texas:

"Exelon will pay DOE a program fee of more than $400 million for the application, Nesbit said. There will also be an annual loan maintenance fee of $200,000 to $400,000, a one-time facility fee of about $55 million and a one-time application fee of about $800,000."

One could argue that they won't cost the US government a single cent as long as nothing goes wrong

We try to make that argument, but it doesn't always get heard. Oh well, gotta keep at it.

Popular posts from this blog

Sneak Peek

There's an invisible force powering and propelling our way of life.
It's all around us. You can't feel it. Smell it. Or taste it.
But it's there all the same. And if you look close enough, you can see all the amazing and wondrous things it does.
It not only powers our cities and towns.
And all the high-tech things we love.
It gives us the power to invent.
To explore.
To discover.
To create advanced technologies.
This invisible force creates jobs out of thin air.
It adds billions to our economy.
It's on even when we're not.
And stays on no matter what Mother Nature throws at it.
This invisible force takes us to the outer reaches of outer space.
And to the very depths of our oceans.
It brings us together. And it makes us better.
And most importantly, it has the power to do all this in our lifetime while barely leaving a trace.
Some people might say it's kind of unbelievable.
They wonder, what is this new power that does all these extraordinary things?

A Design Team Pictures the Future of Nuclear Energy

For more than 100 years, the shape and location of human settlements has been defined in large part by energy and water. Cities grew up near natural resources like hydropower, and near water for agricultural, industrial and household use.

So what would the world look like with a new generation of small nuclear reactors that could provide abundant, clean energy for electricity, water pumping and desalination and industrial processes?

Hard to say with precision, but Third Way, the non-partisan think tank, asked the design team at the Washington, D.C. office of Gensler & Associates, an architecture and interior design firm that specializes in sustainable projects like a complex that houses the NFL’s Dallas Cowboys. The talented designers saw a blooming desert and a cozy arctic village, an old urban mill re-purposed as an energy producer, a data center that integrates solar panels on its sprawling flat roofs, a naval base and a humming transit hub.

In the converted mill, high temperat…

Seeing the Light on Nuclear Energy

If you think that there is plenty of electricity, that the air is clean enough and that nuclear power is a just one among many options for meeting human needs, then you are probably over-focused on the United States or Western Europe. Even then, you’d be wrong.

That’s the idea at the heart of a new book, “Seeing the Light: The Case for Nuclear Power in the 21st Century,” by Scott L. Montgomery, a geoscientist and energy expert, and Thomas Graham Jr., a retired ambassador and arms control expert.

Billions of people live in energy poverty, they write, and even those who don’t, those who live in places where there is always an electric outlet or a light switch handy, we need to unmake the last 200 years of energy history, and move to non-carbon sources. Energy is integral to our lives but the authors cite a World Health Organization estimate that more than 6.5 million people die each year from air pollution.  In addition, they say, the global climate is heading for ruinous instability. E…