Insider's Game

Sen. Lamar Alexander, R-Tenn., has a “Low-cost Clean Energy Plan” being marketed to people with substandard reading skills. His press release claims his plan to build 100 nuclear power plants will “lower utility bills,” though it “should not add to the federal budget since ratepayers will pay for building the plants.” In other words, the people in Missouri, Ohio, Michigan and elsewhere who get their electricity from coal-fired power plants should see their utility bills skyrocket. Here’s a reality check on Alexander’s flimflam.

The Republican plan proposes to double the level of U.S. nuclear energy generation in 20 years. How much would that cost? We currently have about 100,000 megawatts of nuclear generating capacity, and the cost of building a nuclear plant is about $7.5 million per megawatt, according to Moody’s. So the cost would be about $750 billion. On a per megawatt basis, a nuclear plant costs five times as much to build and 10 times as much to operate as a natural gas plant. The $750 billion cost excludes the cost of shutting down the CO2 emitting coal-fired plants.

Now bear in mind, outside of a need to reduce carbon emissions, there is no economic basis for building 100,000 megawatts of new baseload generating capacity, especially in the states most reliant on coal power. Almost all the fuel currently used in our power plants, coal and natural gas, is produced domestically. Nuclear power has a lot of issues, but it does not emit CO2, so there is a rational basis for considering nuclear as one of several solutions to climate change.

Alexander proposes that construction costs would be financed with loans from the federal government, since the private sector would not take the credit risk. As Moody’s notes, the “cost and complexity of building a new nuclear power plant could weaken the credit metrics of an electric utility and potentially pressure its credit ratings several years into the project.” Of course, none of that lets the ratepayers off the hook. Most of what we pay in our utility bills covers the cost of capital infrastructure, not fuel or other operating costs.

Moody’s estimates that it takes about 10-15 years to build a nuclear plant. So it would be more than a decade before we would see any real reduction in CO2 emissions from Alexander’s plan. During that decade, the damage from greenhouse emissions will only be more disastrous.

Alexander offers up his plan as an alternative to the current proposed cap and trade legislation, which is designed to begin greenhouse gas reduction right away. He describes the House Bill as a “$100 billion a year national energy tax.” Once again, he panders to people who don’t know how to read, because the $100 billion refers to the gross cost, not the net cost. The net cost is more like $22 billion a year, or about $175 dollars per average household, according to the Congressional Budget Office. (See CBO calculations below.)

Anything that addresses the issue of climate change involves a tradeoff, and nuclear power may very well be one part of the long-term solution. But this Republican scheme offers nothing to reduce greenhouse emissions in the short run. Alexander’s claim that it imposes less of a financial burden on utility ratepayers than the current House Bill is close to fraudulent.

Addendum, July 15, 2009: Salon’s Andrew Leonard reports on, “The ridiculously high cost of nuclear power.”