Thursday, March 10, 2011

To Be or Not To Be a Nuclear Subsidy

yorick-olivier Let’s talk subsides: after all, the nuclear energy industry can barely survive without them, right? And the industry has snuffled its nose in the federal trough for so long that it is virtually addicted to the sweet, sweet lucre that it finds amongst the slop.


Well, let’s say up front that all energy sources receive subsidies of one kind or another – that’s a consequence of the government wanting to ensure that privately run concerns direct their attention in useful ways. Various kinds of tax credits can ensure that certain actions are taken or energy types encouraged.

Having said that, nuclear energy has received one of the smallest amounts of federal subsidies over time for any energy source. I’m not going to propose reasons why this might be so, but over the past decades, the nuclear industry has received less federal support than renewables and far less than coal and oil.

A recent study analyzed all federal energy expenditures from 1959 to 2006 and found that of the $725 billion that was distributed, 73 percent ($530 billion) went to oil, natural gas and coal; 18 percent ($130 billion) to hydro and renewables; and 9 percent ($65 billion) to nuclear.

Not peanuts, of course, but the report takes in a lot of ground that one might not think of as subsidies: R&D, tax policy, disbursements, regulation, market activity and government services. Some of the money is seen by companies, often as tax credits, but the Department of Energy and the national labs do a fair amount of research on nuclear energy topics, not all of which will find commercial application. In any event, the report’s approach seems to me judicious.

I have seen studies – usually ones unfriendly to nuclear energy generally – that try to lump in loan guarantees among the subsidies. Loan guarantees are emphatically not subsidies – just the reverse, really, as the government collects credit subsidy fees to cover any risks associated with the loans.

Loan guarantees imply no cost to the taxpayer; In fact, they have the potential to lower electricity prices for consumers – because the guarantee encourages private lenders to finance a new plant at a lower interest rate - and the industry pays the cost of using the guarantee.

It’s easiest to see them as a trade: a credit subsidy fee for a much lower interest rate, an exceptionally beneficial quid pro quo. Everybody wins: consumers get lower cost clean energy and thousands of workers get jobs to help build the reactors.

Why look at subsidies right at this moment? Well, there has recently been a report purporting to show nuclear energy as soaked in subsidies and even requiring them to survive. Leaving aside motivations for the report, it makes some fairly elementary errors about what is and isn’t a subsidy to make nuclear energy look just as bad as it possibly – even impossibly - can.

Reporters covering its unveiling seemed to recognize this and the report hasn’t gotten much traction, so it’s not really worth a direct response. But the subject of subsidies is poorly understood, so now seems a good time to demystify them a little.

The World Nuclear Association has an interesting take on subsidies in the international nuclear sphere. See here for that. Money quote:

Today, apart from Japan and France, there is about twice as much R&D investment in renewables than nuclear, but with rather less to show for it and with less potential for electricity supply.

A boy and his skull. Because Laurence Olivier is so associated with Hamlet, one tends to forget he (Hamlet, that is) is supposed to be quite young. The gravedigger in the play says Hamlet is 30, but other lines in the play make him even younger. Hamletophiles will puzzle over this one forever.


GRLCowan said...

The net result of a specific industry's subsidies and the special taxes levied on it, or on its customers, is what counts, of course.

I recently read a headline -- and didn't feel I had to read further -- on four billion in supposed subsidies for the oil industry. Had I read further, do you suppose I might have found the $4B figure referred not to one year but to five years or ten years?

So that for honest backgrounding's sake they might have summed it with the five-year subsidy of government, by users of petroleum-derived motor fuels, which is on the order of $400 billion?

How would that summing look? Something like this:


seth said...

There are no current subsidies on nuclear power none zilch.

In fact the US DOE owes the industry $23B in fees for decommissioning nuke plants that will always be nuke plants with only core replacements and $35B for nuclear waste storage that the plants are doing themselves waiting for fuel reprocessing. DOE research on way in the future never never land nukes has no tie to today's nuke power.

WInd/Solar receives $tens of billions in feedin tariff subsidies getting 4 and 5 times the going rate for their power output. They receive enormous unaccounted subsidy in their 4 times normal transmission requirements and the natural gas required to load balance them. All solar/wind loan guarantees will default when state and federal legislators cut feed in tariff subsidies.

Anonymous said...

I think your link to the 'recent study' is broken. At lease it doesn't work for me. I dug around and found this

Is that it? It's from Sept 2008, not exactly 'recent' in the context of bloggo land.

David Bradish said...

The link should be working now, thanks.

perdajz said...

GRLCowan is absolutely right: you can't look at half the balance sheet. To end this line of thought, the NEI needs to compute the state, local and federal taxes paid by the nuclear power industry over the time corresponding to the supposed subsidies. I know the NEI maintains economic benefit datasheets for many plants that touch on these numbers for a given plant in a particular year, but we need a grand total.

Nuclear power is a 50 billion dollar a year business, would be my guess. How much does a 50 billion dollar a year business pay in taxes annually? I'm not exactly sure. 10 billion? I am sure, however, that if you tally this up for the entire industry over a length of time, it will dwarf any supposed subsidies during that time.

Anonymous said...

Link broken again.

David Bradish said...

Hmm, it works for me. Perhaps just paste the link into the url: