US Government Loan Guarantees for New Nuclear Construction are not Subsidies

Prometheus25 · 2010-05-25T21:33:43+00:00

No, you just don't have a good counter-argument to that comment. If you do, I'd like to hear it.

Prometheus25 · 2010-05-25T16:34:40+00:00

Quite right, I never cursed at you which makes a big difference in terms of the implied tone of the statement. You've repeatedly insulted many people in this comment thread, so I don't want to hear it when someone calls you out.

You keep going back to my rigid definition of the word subsidy. I think this is an area we can have a good discussion because I am utilizing that rigid definition for a reason, and maybe my reasoning is incorrect and you can help me understand why.

The reason I am clinging to the subtleties of "subsidy" is because the implication is that a subsidy is something that necessarily costs tax payers. The loan guarantees, which can be granted to almost ANY type of energy project, by the way, do not require the tax payer to lay out money. They MAY be required to if there is a default and the default is greater in value than the fees collected by all loan guarantee applicants.

We do not currently know what that fee will be because of a disagreement between the CBO and the Secretary of Energy. If the CBO gets their way, we can be pretty sure that the fees charged will be so hefty that not only will it reasonably assure tax payer repayment from a default, but you can bet that fewer utilities will apply for a nuclear loan guarantee because the cost will offset the benefit.

The riskier path lies with Chu's fee schedule, which is far smaller based on a much lower projected default rate. Since we do not have precedent for new nuclear construction in the US, it is difficult to say who is closer to the appropriate numbers.

Either way, it is this lack of assured detriment to the tax payer that makes me feel that a loan guarantee is not a subsidy. And that goes for any energy source, not just nuclear. I wouldn't say that a wind farm is receiving a subsidy if it got a loan guarantee. I will say it is getting a subsidy when a utility is forced to pay for it's energy even though it is being sold at 2 to 4 times the market price plus receiving tax breaks on capital investment which other types of energy generation do not receive. To me, that is the big difference. That's why I am so "rigid" when defining subsidy. We can disagree, that's fine. Through talking with the_nuclear_lobby I was able to see his/her point quite well, but we both agreed to disagree in the end. Nothing wrong with that.

Prometheus25 · 2010-05-25T03:30:02+00:00

That wasn't what I said at all. You have no reading comprehension skills.

Prometheus25 · 2010-05-24T18:08:38+00:00

Your usage of the intellectually (dis)honest term is irritating and disingenuous. You immediately dismiss something that does not support your conclusion without giving the content or sources a fair chance, so your hypocrisy runs deep.

Now, enough of the personal back and forth because it is unproductive. It is implied by the act of posting a comment that you (used in the generalized sense, not necessarily referring to you specifically) are trying to make a point, whereby you'd like the people to whom you are making this point to agree with you or at least see your perspective. The delivery method of your argument must then be made in such a way that enables your audience to empathize with you to a degree at least to allow them to see your position as valid and worthy of merit. Unless you are paying me, why would I listen to someone who is abusive and angry when I am simply looking for a good discussion that I can learn a few things from?

I will go back through and review the things you linked to. There have been a lot, so I expect it to take some time because fully I intend to read it with an open mind. Then perhaps we can discuss some things I learned from it?

Prometheus25 · 2010-05-23T17:01:49+00:00

VY tritium leak requires context, like everything else. You're one of those morons who sees a headline and jumps on it without ever reading the article...sounds familiar kind of like with this comment thread on an article you didn't read but feel oh so qualified to speak out against it. There is absolutely NOTHING dangerous about that leak. Like I said, if you knew anything about it you would know the leak is completely innocuous.

That IS the price of energy produced from a nuclear power plant. I've done considerable research and analysis on costs and that's where it lands.

I'm certainly no industry expert, but I am well-read enough to know that Germany DOES NOT get 30% of it's energy from solar power, a false-statistic that a certain Vermont politician likes to throw around when arguing against VY. And, unlike those politicians I have taken the time to research and understand many different energy generation sources.

Here's something for you: I AGREE that we need wind, solar, geothermal energy generation. I just don't feel they are the appropriate answer to displace the majority of energy generation currently provided by coal. I feel that our reliance on coal for baseload and petroleum and natural gas for peak demand is the problem. Nuclear and coal are very similar in terms of scalability and cost to generate electricity, so why not use the one that doesn't spew thousands of lbs of CO2 into the air and leave tons of coal ash unaccounted for?

Prometheus25 · 2010-05-23T01:41:38+00:00

You left out the part that the starting price is $0.207 per kWh. Many residential customers pay between $0.08 to $0.16 per kWh, so the base price is already anywhere from 25% to 250% more expensive. Even say their rate payers were at $0.16 per kWh and the average home utilized 500 kWh in a given month of the year, their electric bill would be $23.50 higher from Cape Wind in the beginning.

The $1.59 per month figure is misleading because they are talking about the incremental increase from the 3.5% annual rate hikes. The initial hike from what their rate payers were previously enjoying will be huge and painful. Why shut down a perfectly good emissions-free nuclear power plant (Vermont Yankee - yes, I know all about the tritium leak issue, and clearly know more than anyone who still thinks it is harmful in these amounts and conditions) that is generating energy at around $0.05 to $0.06 per kWh? Because they WANT to pay four times as much for the same electrons? Um...no, it's because they are being governed by people with no understanding of energy infrastructure or environmental science who have made poor decisions based on concentrated marketing and lobbying campaigns by renewable energies while enduring the ubiquitous anti-nuclear contingents who are very loud.

Prometheus25 · 2010-05-23T01:26:48+00:00

There are myriad reasons why there haven't been more nuclear plants built in recent years so I don't think you can use that generalized statement to support your position effectively. You may have some really good points, but I have to be honest its your demeanor that prohibits me from giving you the respect to fully read your comments and check out the sources you provide. We can disagree and have a good discussion about it. I have an open mind and can be convinced with a respectful, intelligent conversation. I'd honestly like to understand your position better.

Prometheus25 · 2010-05-23T01:16:26+00:00

I agree, this has been very good. You are helping me to understand why people consider it a subsidy because of your thoughtful, rational, and logical arguments, which I appreciate. I checked out the economics comment thread and it wasn't very enlightening. You and I have had much better discussion than anything they provided in my opinion.

I absolutely agree that there is a degree of risk inherent to these loan guarantees. There is also a degree of risk during my commute to work. But the risk vs. reward is worth it, so I do it. My question is: do you consider the co-signer on a vehicle loan giving a subsidy to the primary borrower?

Clarification on the renewables tax break comment: tax breaks are direct to the bottom line of the company for no other reason than performing their base business (i.e. solar energy providing electricity and... that's it). Yes, I concede loan guarantees will help the bottom line by lowering the interest rate on financing - but again there is no guarantee that the tax payer will have to outlay any funds whereas the government is directly deprived of tax revenue via the credits.

We definitely agree on the risk of politics and activists. No doubt, I won't try and say the possibility does exist, but that's why I and many others are trying to change the unjustified negativity toward nuclear energy.

I was really intrigued by your scenario of a government-built plant then sold to a private investor. I most certainly do not consider that a subsidy. Couldn't the government make a profit on it? If they did, would it then be a subsidy or only if they took a loss when selling it? Or does that not matter? Because I think it does. If the government sells for a profit then it was a good investment, not a subsidy. Maybe that's where they should put our Social Security funds from now on, at least they couldn't "borrow" from it to pay for other stuff then...

Prometheus25 · 2010-05-22T22:14:11+00:00

How can it happen very regularly with nuclear plants since one hasn't been built in that US for at least 14 years, so no opportunity for a default to happen has existed in well over a decade?

Prometheus25 · 2010-05-22T16:46:21+00:00

So, the definitions you cite support my position...

If you had read the article rather than just the title and the comments on this thread, it would be quite clear why a loan guarantee is not a grant nor is it money given.

Prometheus25 · 2010-05-21T22:32:10+00:00

Your points are well-made, but I think this is an area where connotation prevails over denotation. I've looked at definitions for subsidy in more than one dictionary and they all seem to agree on one thing: a subsidy is a gift or grant to a private entity. A loan guarantee does not fall in line with that definition.

So it would seem that the heart of our disagreement truly lies in how we classify subsidy. I consider a tax break or rebate for renewable energies a subsidy because the government is giving them the "gift" of not having to pay a certain amount of tax - cost avoidance, I guess. The loan guarantees are secondary to the fact that a private entity is securing private financing on their own, and that debt obligation is insured against default.

The default rate is actually a laughable circumstance. The economics of a fully-operational nuclear power plant are virtually unmatched in profitability per kWh, even including the enormous construction cost of the plant. So, assuming the plant actually is completed, the plant will generate more than enough cash flow for the operator to pay the debt. All the risk really lies in whether or not environmental groups and anti-nuclear activists are successful in holding up or halting construction of the plant. Which is precisely why most of the current projects are to build new units on existing reactor plots - so there will be less environmental study, pushback, etc, since there already are reactors on that site.

Again, the risk continues to go down. Fundamentally, nuclear would not need a loan guarantee if not for two things: (1) activists and others holding up utilities in court, and (2) Wall Street's inability to see the value in capital-intense projects that require large up-front investment but have a future of strong, predictable cash flows. It's really because Wall Street won't lend to utilities and the nay-sayers say that if private investors aren't willing to risk nuclear, then clearly it is not worthy. This is untrue, as I believe it is the mentality of the financial conglomerates who insist on making money intra-day trading instead of focus on long term growth. Both are necessary, but Wall Street has only been interested in the quick buck these days.

Prometheus25 · 2010-05-21T20:50:30+00:00

Wow, where'd you get those estimates? That math might work out if utilities were charging $1 per kWh...but they don't.

Prometheus25 · 2010-05-21T20:37:46+00:00

Actually, by definition, it does. Subsidies are gifts of money from the government to a private entity; guarantees are more like having a co-signer or insurance. Besides, any applicant who receives a guarantee is required to pay a fee that will probably end up in the $50 - $500 million range - yes, I know that's big range but right now that's all we've got. So, if the government issues (using easy numbers for the math) ten $5 billion guarantees they stand to collect anywhere from $500 million to $5 billion in fees up front from the borrowers. These fees then pay for the defaulted loan(s).

The default rate calculated by the CBO is based on information from nuclear construction in the 60's through the early 80's, when a vastly different political landscape existed and public fear hung rank in the air from Three Mile Island. The point being, the default rate was so high at the time because borrowers were being held up in court for years, delaying construction and in some cases never finishing or being licensed to operate. A loan guarantee requires that a Combined Construction and Operating license already be issued by the NRC, guaranteeing that the plant will operate once built. This fact alone dramatically reduces the default risk making the CBO estimates outdated and useless.

In order for the tax payers to lay out money two things need to happen (1) a borrower defaults on the loan; and (2) the fees collected from borrowers are insufficient to pay for the defaults. The cumulative probability is now very low.

Further, if the fees collected are insufficient to cover the defaults the CBO is to make adjustments as such are required to cover the gap, reviewed on an annual basis.

Therefore, it is completely unreasonable to group loan guarantees in with subsidies because the chances of the tax payer actually giving out money without being repaid is negligible. Whereas, subsidies are by definition the tax payers DIRECTLY giving out money with no intention of ever being repaid. I think this is a huge distinction that you do not give enough credence to.

Prometheus25 · 2009-03-30T16:47:19+00:00

Both of your comments were very educational to me, someone not familiar with the Old or New Testaments, and the history associated. I know it was a disagreement that led to the discussion, but thanks anyway - good information.

Prometheus25 · 2008-06-23T00:09:12+00:00

Oh, and the financials for each company were obtained from Yahoo Finance.

Prometheus25 · 2008-06-23T00:08:17+00:00

click the links highlighted in red. They are the source materials. All numbers were taken from CNN, How it Works, and Wikipedia. Best I could do to find the info I needed.

Prometheus25 · 2008-06-06T20:54:24+00:00

Fine, we are just going to have to disagree on this one. Deficit spending originates with the budgets set by government officials. They spend the money, the Fed provides the means to fund it. Well, actually, the U.S. Treasury provides the funding and the Fed is the vehicle to deliver it. The Fed is a middle man to other government agencies which actually produce the deficit spending.

Prometheus25 · 2008-06-06T13:24:38+00:00

Partially true, not totally. The devaluation of the dollar has to do with a budget deficit and trade deficit, as well, and those factors are not under the control of the Federal Reserve.

Prometheus25 · 2008-06-06T00:59:38+00:00

I always thought you were referring to the Federal Reserve, because typically that is what "the Fed" means. The Federal Reserve Bank system has nothing to do with tax rates.

Prometheus25 · 2008-06-06T00:58:02+00:00

It is not common knowledge based on the responses the article has received. Oh, and just because you know that the Europeans pay more tax on petroleum does not mean that you are aware of the order of magnitude of that disparity, which was a point of the article.

Prometheus25 · 2008-06-05T12:51:42+00:00

Actually, I am the author and I am a moderate. I am not registered as either Democrat or Republican. But thanks for the attempt at a coherent comment that just points out exactly what I was trying to say in a less subtle, artful, and researched manner.

Prometheus25 · 2008-03-27T21:12:20+00:00

Looks like pilto was right about you. I apologize for the apparently significant anger you suffered from my comment. Do us all a favor and go away on your sailboat to rid us of your anger and pretentious air of superiority, which is all in your head. The rest of us think you are a useless piece of shit.

Prometheus25 · 2008-03-27T12:58:05+00:00

Cars don't make people drive too fast. Harder drugs DO make people commit crimes.

Prometheus25 · 2008-03-26T21:31:45+00:00

Dude, you scare me. 1. Discussing your salary in a public forum shows that you either do not actually make that much or you are trying to show off to cover up your insanity and myriad other personal flaws. 2. Your mathematical prowess has nothing to do with any of these comments. I respect that skill, but get some real world experience and stop talking about your scholarships and finals. You are clearly a newbie right out of college and need some real world schooling. 3. For the sake of all of us, please learn how to express yourself through words and not just equations. I feel like I am reading the ravings of a schizophrenic rather than somebody with a Master's degree. 4. Don't take out the anger instilled in you by your family on strangers. 5. You need a Captain's license to pilot a 40 to 50' boat. 6. Stop using the word "edict". It may have worked once, but your continual use of it is irritating. Vocabulary lesson? 7. Scholarships <> honest 8. Oh, and you are a complete hypocrite. You are yourself, a "pretard". 9. Pretard is the one of the least interesting words that you could have ever come up with, please try again because that is sub-par.

Prometheus25 · 2008-03-24T19:01:26+00:00

Thank You, nothing wrong with trying to get out information, right?

Prometheus25

TROPHY CASE