Bush administration: all nuclear hat, no cattle
When it comes to new nuclear generating reactors – as is the case with so much in the Bush White House – the administration fits that old derisive Texas curse, “All hat and no cattle.”
As March draws to an end, the administration has yet to issue a solicitation for federal loan guarantees for the new generation of nuclear reactors. It looks to me that the White House and the DOE won’t get the solicitation out in time for the nuclear generating companies to lock in “full faith and credit” guarantees before the November presidential election. That’s a major blow to a timely return of new nuclear generation to real power markets.
Complicating the issue is the current meltdown in credit markets. If Wall Street was skittish about providing debt support to new nukes at the beginning of the year, when the nukes began clamoring for the loan guarantee solicitation, then it’s probably quivering with fear today when it contemplates the market for new debt.
To be fair, it’s not entirely the administration’s fault that the solicitations for $18.5 billion in federal loan guarantees haven’t yet hit the street. As Dennis Spurgeon, DOE’s official and mild-mannered Duke Nukem, told a Platts conference in early February, the administration has to get approval from Congress before it can issue the solicitation. When the loan guarantees were established in the 2005 Energy Policy Act, Republicans still controlled Congress. The blinkered nuclear power industry, seeing a never-ending Republican majority, viewed the congressional review as merely a courtesy. Today, the Democrats control both the House and Senate. Spurgeon has no ability, unlike the video game hero, to blast his way through the political labyrinth to get the solicitation issued.
So the administration and the nukes are losing their “beat the clock” game. Constellation Energy’s Michael Wallace outlined the timing issue for the Platts February conference. He estimated that it will take Constellation about three months to put together an application once DOE issues the solicitation. Then another four months or so would lapse before DOE could vet and approve the guarantee.
If DOE were to issue the solicitation next week – probably not in the cards – we’re looking to about July before Constellation could get its loan guarantee application in order. Then we’re into November on review, and a new administration will be drooling over what’s to come in January in terms of its priorities and policies. It won’t be focused on loan guarantees. If the issue even comes to the new administration’s attention, the best response for the nukes will be a political punt.
Riiing! The alarm clock has run out. To mix metaphors and clichés, is the glass half full? I think it is damn near empty, regardless of who gets elected president in November.
Add another couple of years, at least, to the schedule for new U.S. nuclear power plants. Already, nuclear utilities are looking at 2018 for the first of the new generation of generators. Could we be realistically looking at 2020 or 2021? That’s my guess.
The only positive development for the nukes is the move by the Federal Reserve Bank to keep interest rates low. That means the nukes might not have to pay ruinous (whatever happened to usury laws?) interest rates for the money to build their plants. Companies that can dedicate large amounts of equity to the plants will have a head start. But why would a company pour that much of its own capital into a nuke, regardless of the cost of debt? That strikes me as business insanity, unless there is a guaranteed market for the output.
If I were a betting man (and I’m not), I’d be putting my chips on the roulette wheel marker that says “natural gas,” at least for the short term. And in the long term, I guess it was Keynes who said, “We’ll all be dead.”