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SOTU Update: Cost Estimate for Nuclear Energy Loan Guarantees

by Demian Brady / /

In a surprising move, President Obama made a pitch for nuclear energy in his State of the Union address:

"[T]o create more of these clean energy jobs, we need more production, more efficiency, more incentives. That means building a new generation of safe, clean nuclear power plants in this country.”

In NTU Foundation's line-by-line analysis of the spending proposals in the SOTU, this issue was listed with an unknown cost. More information is available today from Bloomberg News:

For the 2011 budget, the department will add $36 billion to the $18.5 billion already approved for nuclear-power plant loan guarantees, according to the people, who asked not to be identified because the budget hasn't been released.

The cost to taxpayers won't be the full $36 billion for the guarantees, but for the percentage of loans that default. In 2003, S. 14 (108th Congress) contained a provision to furnish federal loan guarantees for the construction of the next generation of nuclear power plants. CBO estimated "that the net present value of amounts recovered by the government on its loan guarantee from continued plant operations following a default and the project's technical and regulatory risk would result in a subsidy cost of 30 percent ... ." Applying that subsidy rate, the President's proposal could cost $10.8 billion, $2.16 billion annually over a five year period.

This new data brings the tab for the new spending proposed by the President to $72.6 billion annually