Recently, President Obama announced an $8.33 billion loan guarantee to build a brand new nuclear power plant in Georgia. This could be the first new nuclear power plant in nearly 30 years, which is a big deal. Now before everyone gets all giddy about this announcement there are several things that need to be understood.
What is a Loan Guarantee?
A loan guarantee is a promise by a government to assume a private debt obligation if the borrower defaults. Most loan guarantee programs are established to correct perceived market failures by which small borrowers, regardless of creditworthiness, lack access to the credit resources available to large borrowers.
Basically, what this means is that the government is “cosigning” the loan and is responsible for the loan if anything goes wrong. This can be used to help finance projects that are risky, new or are having a hard time getting the amount of credit needed to finance the project.
What About the Radioactive Nuclear Waste?
Nuclear waste can be a scary thing when you consider the harmful potential of this substance. Typically nuclear waste is stored in pools of water or cement caskets on-site of the nuclear power plant. This system has proved to be relatively successful thus far, but a more permanent solution is needed. With the Obama administration’s cancellation of the Yucca Mountain project, which was supposed to be the nations repository for radioactive waste, many are left wondering what will happen to existing and future nuclear waste. With no clear long-term plan for radioactive waste, many are left wondering why the President would be in favor of building a new nuclear power plant.
Personally, I feel relatively safe with the cement caskets being used to store this waste. The cement caskets that store this radioactive waste are rated to be good for 90 years, so we still have some time to get a game plan.
So the questions that immediately come to my mind are:
- How long will these cement caskets actually last?
- What do we do when these caskets start needing to be replaced, do we just move the waste to newer caskets?
- Why don’t we start reprocessing nuclear waste to generate electricity?
Unfortunately the answers to these questions are topics of much debate. Clear answers to these questions do not appear to be in the immediate future.
Should the Government Be Guaranteeing Loans for Nuclear Plants?
With the pathetic financial state that our government is in, are they really in a position to even offer a loan guarantee? How can a government that is constantly raising its debt ceiling even consider having to pay 8 billion dollars for a power plant. If the government continues offering loan guarantees for nuclear power plants and some of the companies default on their loans, where is the money going come from to pay these loans?
Regardless of your political beliefs, the fact that the United States government is continuing to promise more expenditure should be a red flag. How much longer can we continue promising, borrowing and ‘printing’ money?
But Nuclear Energy is a Good Clean Source of Energy, right?
As many of you know, I am in favor of building new nuclear power plants, see my previous blog post here. Nuclear power offers many benefits and we are in need of diversifying our energy portfolio. There is no doubt in my mind that nuclear energy will play an important role in our energy future because of the increased energy demands and reduced availability of cheap/clean energy. Nuclear energy has been picking up steam for several years and it appears that it may finally be getting some much-needed attention. As nuclear energy continues to garner attention and becomes more cost beneficial, I am confident private investors will start investing in the construction of these plants.
USA Today, The Oval – Obama urges new round of nuclear power plants
The Washington Post – Obama offers loan to help fund two nuclear reactors