Will the banks save us ?

Kurt Vonnegut said “We could have saved the world but we were too cheap”

So it is with energy.  While real renewable prices have been coming down for a long time (see the exciting NY Times piece on solar PV being cheaper than new reactors) nuclear has some incredible financial advantages over other forms of energy.

First, they dont have to pay for insurance for the full cost of their accidents.  At a national level, the first $12.5 billion of claims for an single nuclear accident are  shared across all the reactor operators and above $12.5 billion, the costs are picked up by the government (see the Price Anderson act).

In Japan the situation is similar, except the amounts are lower.  The first $1.2 billion is covered by the nuclear operator after that the government picks up the tab.

The second financial advantage is that generally speaking the nuclear industry does not have to pay for the full cost of their waste.  In the US, billions of taxpayer dollars were spent on the Obama abandoned Yucca Mountain nuclear waste dump site.  So now, like almost every country in the world, the long term location of this radio-active poison is unknown and the waste is sitting in pools (like the ones now releasing radiation into the atmosphere at Fukushima) or casks near reactors waiting for a permanent dump site.

Because these advantages were not enough, the Bush administration passed $18 billion in loan guarantees for new reactors with a bunch of other highly advantageous features including:

  • A production tax credit worth billions to nuclear utilities
  • Risk insurance – protecting new reactors builders from costs of delays – including law suits against the reactor.
  • Reduced licensing fees – the govt pays half of the costs of their work for a new plant.
  • Purchase power agreements where the government agrees to buy power from new reactors at a guaranteed price.

No other power producer in the US looks at this type of favorable investment circumstance.  And ever with all these benefits, no utility wanted to buy a new reactor for years after these were passed.

When i fought reactors in eastern Europe, often the most important strategy was to go for the banks.  Nukes are crazy expensive, often running $10 billion or more.  Utilities cant buy them without govt guarantees and significant bank involvement.

But as the nuclear disaster in Japan worsens and remains out of control, the banks are showing their first signs of backing out of these projects.  Greenpeace reports that the second largest German bank has just abandoned the Jaitapur nuclear power plant project in India.  With luck (and a little proper analysis) other banks will soon follow suit.

CitiBank UK even before the Fukushima meltdowns had failed nuclear power on all 5 investment criteria.

In other news, real renewables stocks are rising.

Tokyo has 20 times normal background radiation (this is worrying because the wind has been prevailing out to sea and Fukushima is over 100 miles from Tokyo).

And a power line for at least one of the stricken reactors is being installed in hopes of further cooling the reactor and spent fuel pools.

Sadly, we may not be passed the worst of Fukushima yet.