Why New Nuclear Depends on Loan Guarantees

Constellation Energy and Electricite de France boasted this week that they are closer to winning federal loan guarantees for a new reactor they propose to build at Constellation's Calvert Cliffs power station in Maryland. The $18.5 billion pool of funding they're vying for will be critical to jump-starting the stalled U.S. nuclear industry. Construction problems in Finland and France with the reactor design slated for Calvert Cliffs -- the EPR from Paris-based nuclear technology and services giant Areva -- show why.

Bad news flows in constantly from Olkiluoto, the site on Finland's coast where Areva is three years behind schedule on an EPR it is building for a Finnish utility -- the first of the 1,600-megawatt reactors. Earlier this month the bad news came with the leak by Greenpeace of a letter from Finnish nuclear regulators complaining of a lack of professionalism at Areva. The regulator said this was complicating resolution of questions regarding EPR safety system designs and welding quality on key reactor parts. One week later Areva was ordered to stop work on some welds.

 

London's Independent called the Finnish safety concerns a potential threat to four EPRs proposed for construction in the U.K. Areva responded with a press release saying all was well in Finland. It says that the "slight imperfections" identified on the surface of the reactors cooling lines will "have no impact on their strength properties or safety features."

 

But any way you slice it, the Finnish reactor that was supposed to start up this year is now hoped for 2012 -- a delay that has put the project at least 2 billion euros over its original 3-billion euro budget. Delays and cost overruns were what scuppered the U.S. nuclear construction industry in the 1980s, and they are no doubt driving up the cost of financing today. Federal loan guarantees are the only way to bring them back down.

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