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  • The Economics of Nuclear Energy

    A few weeks back Heritage hosted a briefing on Capitol Hill to discuss the economics of building new nuclear power plants in the United States. The briefing featured Michael Metzner, senior vice president and treasurer for Exelon Corp., and Caren Byrd, executive director of Morgan Stanley’s investment banking division.

    Metzner asserted that the economics “have never been stronger” for nuclear power, but also commented that it would cost between $6 billion and $8 billion to build a new plant, quite a large investment for a firm to make. Byrd noted that, given the shaky history of nuclear in the U.S. (due in large part to the inflexibility that resulted from the nuclear industry becoming too dependent on government and the effective obstructionist tactics employed by anti-nuclear activists), investors are approaching nuclear with caution.

    There is much speculation that the nuclear industry will fail unless it is packaged with a substantial amount of government handouts, but more government funding is not the solution to kicking off a nuclear renaissance. Heritage’s nuclear expert, Jack Spencer, emphasizes a number of policy approaches that would allow the nuclear industry to become sustainable in the long run. Among these is limiting government support to that provided by EPACT 2005. Spencer says:

    EPACT 2005 provides loan guarantees, production tax credits, and risk insurance to the first few nuclear reactors built. Given that the greatest risk to the nuclear industry is government itself, the burden of proof remains with the federal government to demonstrate that it will allow the nuclear industry to mature. Its support through EPACT 2005 should be adequate to achieve this goal so long as it is combined with commitments by Congress and future Administrations to assure political and regulatory stability for the nuclear industry.

    Posted in Energy [slideshow_deploy]

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