The Road to Hell is Paved with Tax Credits

Nuclear power in the USA has been in a high cost purgatory for a long time. ALARA based regulation made new nuclear prohibitively expensive in the mid 1970's, by pushing newbuilding costs to four or more times what nuclear should-cost. Over the next three decades, ALARA pushed operating costs for existing plants to three or four times what they should be. Plants that could easily operate with 200 workers are staffed with 600 or 800 people, including small armies of ex-special ops security forces.

No problem. Already depreciated nuclear could afford it, when it was competing with coal. Along came fracking, and nuclear --- a low marginal cost source of power --- could not compete with gas, a high marginal cost source, on marginal cost. US nuclear survived only in a few regulated markets or with the help of taxpayer handouts. The two attempts to build new plants turned into financial fiascos.

Now all this is about to change. The Inflation Reduction Act gives nuclear power a first class seat on the gravy train. Happy days are here again.

1) Existing plants get a Production Tax Credit (PTC) of $15/MWh. Most of these plants are fully depreciated. In a rational world, a nuclear power plant's fuel and O&M cost would be about $10/MWh. The existing plant PTC will be more than double that. This will run 8 years before it has to be renewed.

2) New plants get a PTC of $25/MWh for the first ten years. And you tack on an extra 10% if your site is a brownfield, such as an old coal plant. And another 10% if you buy domestic. And $0.60 for every kilogram of hydrogen you make. It's sobering to realize that the PTC is larger than the fully built up should-cost of nuclear electricity.

3) This is all on top of 6 billion USD in the Civil Nuclear Credit Program. Not to mention, $700 million for 20% enriched fuel.

4) If you have a close, working relationship with the right bureaucrats, you might get access to loan guarantees that are supposed to support some 100 billion dollars in loans. 11.7 billion dollars has been appropriated for this purpose.

Nuclear joins wind and solar at the public trough.

But let's think this through. One of two things will happen:

1) The subsidy is sufficient to make the subsidized cost competitive. My guess is this will be the case for the existing plant PTC. But nuclear now violates ALARA. The plants can afford to spend more money reducing the danger of radiation exposure. The NRC needs to pile on more regulation, to bring that danger down to what is now Reasonably Achievable. Nuclear's operating costs must go up.

2) The subsidy is insufficient to make the subsidized cost competitive, in which case nothing happens, and the taxpayer saves some money. I suspect this will be the case for the newbuilding subsidies. With gas back down to around 2 cents/MMBTU, NuScale's subsidized price of $89/MWh is DOA. So far NuScale has signed up less than a third of the customers needed for its first plant.

But if I'm wrong, that will just give the NRC room to push costs up. Larger subsidies will only accelerate the cost increases. Subsidies combined with ALARA based regulation create an upward spiral in costs, and a downward spiral in nuclear's prospects, along with it any hope of solving the Gordian Knot.

Subsidies combined with a margin gobbling regulatory philosophy are not the route to salvation. They are the route to perdition. US nuclear is sliding from purgatory to hell. And it is doing it on the backs of the working poor. Is there a more blatant, in-your-face transfer of wealth from the poor to the rich than tax credits?

Nuclear's only hope is metanoia, a completely different mind set.

1) Abandon ALARA.

a) No engineer can design to ALARA.

b) No rational investor can allow himself to be exposed to ALARA.

c) ALARA shouts to one an all that near background dose rates are perilous.

2) Renounce the Two Lies and all their works, including LNT.

3) Shun subsidies.

4) Enforce competition.

5) Use the market to find the right balance between economy and safety. We use the market to regulate far more dangerous sources of electricity.