Friday, April 20, 2012

US Gov Says Nukes Too Risky

The CBO does financial analysis on the US budget, and clearly states that all nuke is shaky at best. Shaky doesn't stir up warm feelings http://www.cbo.gov/publication/42211
  • It may not be possible to charge borrowers the full cost of a loan guarantee because of the high degree of uncertainty involved. When adverse selection is severe, attempts to offset expected losses with an increase in fees can backfire because the higher fees drive away creditworthy borrowers, making it impossible to provide a loan guarantee that does not involve a subsidy.
Historical experience suggests that investing in nuclear generating capacity engenders considerable risk. One study found that of the 117 privately owned plants in the United States that were started in the 1960s and 1970s and for which data were available almost all of them experienced significant cost overruns and 48 of them were cancelled. (In its analysis, CBO relied on a credit-ratings-based approach to evaluate the probability of default rather than on the historical experience of the nuclear industry, for which not enough data exist to draw quantitative inferences.)
Most of the utilities that have undertaken nuclear projects suffered ratings downgrades—sometimes several downgrades—during the construction phase. However, bondholders experienced losses from defaults in only a few instances. Losses for the most part were borne by the projects’ equity holders, the regions’ electricity ratepayers, and the government. Some analysts argue that newer plant designs and changes in the regulatory environment make nuclear investments less risky now, but recent experience abroad suggests that cost overruns and delays are still common phenomena, and concerns remain about an uncertain regulatory environment and changes in demand for electricity.
The study was written by Wendy Kiska and Deborah Lucas of CBO’s Financial Analysis Division.

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