Student Loans for Nuclear Plants

Fast Fission Podcast #11 – MP3 File

A bi-partisan group of US Senators is pushing for an increase in the nuclear federal loan guarantee program. They argue the USA can not meet air pollution goals without a sizable nuclear expansion, and the loan guarantee program is essential to getting new construction underway. As it stands now the Federal government has approved $18.5 Billion in loan guarantees, but the industry is pushing for $50-100 billion.

Anti-nuclear groups are mounting a full assault, much as they did earlier this year when a small group in the House tried to get a similar provision added to the Waxman-Markey bill. In that case the anti's succeeded and the pro-nuclear provision was struck from the bill.

Anti-nuclear groups like Greenpeace call the proposal a "massive subsidy," but that stretches the truth. Loan guarantees are not subsidies, they are a guarantee by the government to repay investors for a portion of the cost if the borrower defaults. Their purpose is to reduce the risk of the loans so lenders can offer lower interest rates. The borrowers bear the full cost of the program plus administrative fees.

There's a parallel that many of us are familiar with: the federal college student loan program. The government guarantees student loans so that college students with limited resources can borrower money with favorable terms and at low interest rates. The program allows them to invest in an education they might otherwise be unable to afford. Even though the government backs student loan, the borrower is still required to repay the loan. If the borrower suffers some kind of financial catastrophe and is unable to repay, then the government pays off the loan and works with the borrower to recoup their losses. The program helps people invest in their future and the cost to the government is very, very low because the default rate is almost zero.

Think of the loan guarantees as student loans for nuclear plants. The government stands behind the loans, allowing the borrowers to get favorable terms for large investments they otherwise could not afford. The borrowers pay for the program, and they pay back the loans. Just like the student loan program, the nuclear loan guarantees are a wise investment in our future!