Carbon Taxes, Nuclear Energy & Renewables, and How to Finance Alternative Energy.
Of course really what I mean is to de-carbonize the physical economy of the U.S. and, be extension, the world.
The issue around carbon taxes is generally framed correctly: we need to get rid of carbon. I've discussed, as has NNadir, the very real world, right now, immediate problems of burning Dangerous Fossil Fuels (DFF). There are of course carbon-neutral fuels that address climate change but even they have particulate issues that are NOT resolved (at least in the 'bio-mass' category. But getting rid of DFF completely should be a planetary goal for the next few decades and that is what I want to address here.
I am NOT an export on these plans to "disincentive" DFF. I'm quite the layman on this but that being the case, I'm educated enough to know that this will have an effect on things, where we go with energy, and my wallet.
I don't like either the carbon tax or the cap and trade stuff I hear about. I say this because in one way or another, either the public/rate payer has to pay for this and DFF users still get to use DFF.
The Object: "Deadly Fossil Fuels"
First, carbon taxes will spur the development of non-DFF electrical generation. No doubt about this. But, it means, in effect, that utilities will have to pay for continued, long term use of DFF, which are inevitably passed on to the rate payer, that is, you, me and my mother (who, BTW, is on a fixed income). So I don't like it.
Secondly, carbon "cap and trade" allows operators to accumulate the right to pollute to certain localities and continue to use them. If the market for cap & trade really flourishes it not only allows the continued use of carbon spewing DFF but operators can actually make money on it's continued usage. So, I don't like it.
Finances
This brings us to finances. The dove-tailed debate here is over how to finance all the non-DFF generation sources, most talked about and up for debate, of course, are, in order of importance: nuclear, wind and solar (all varities). Pro-wind & solar lobbyists do everything they can to stop funding for nuclear. Generally, as a rule, few in the pro-nuclear lobby care about funding for wind & solar. So it's generally a one directional lobby effort: yes or no on nuclear.
As many know, if you cut all subsidies to wind and solar, most of this industry would die off rather quickly, both operationally and those projects under construction. There is some solar CSP (centralized solar power stations with some storage) that, I'm told is not subsidized.
If you cut off all actual paid subsidies (one where the money actually changes hand) to nuclear, every plant in the U.S. would continue to operate as is since any subsidies that did go into building them in the first place, 80% of which was paid between 1942 and 1974 and the majority of which went to nuclear weapons it would have zero effect on currently deployed nuclear as they have paid back any subsidy way over the value of that original subsidy in spades. We get 70% of our non-carbon spewing generation from nuclear. Wind and solar, right now, provide about 1.1% or slightly more of actual power delivered.
So what to do?
Many people are up in arms over the supposed 'subsidy' a US loan guarantee provides. There are, currently, about 118 billion USD requested in for such guarantees. Of course technically this is not really a tax-payer out-of-my-pocket-into-a-lenders subsidy like the Production Tax Credit. Money only gets paid if the project fails. And even most of this itself is paid for by the utilities not the tax payer. Of course it's paid for 'by the utilities' means the rate payer through the investment scheme set up by the legislation.
The advantage of the price guarantees is that nuclear gets built, investments are made, the economy expands, people are employed in high paying and union jobs, power is delivered to over 90% capacity and huge amounts of CO2 and deadly particulate are no longer generated with all those spin off effects helping everyone.
But neither the loan guarantees nor the very small Production Tax Credit targeted for nuclear energy (about $8 billion USD) is going to spur very much new nuclear and I have some issues with it in any event. All this, BTW, can be applied to non-nuclear carbon free energy generation as will. But since I see atomic power as the best anti-DFF around, I'm stick'n to this.
How to fiance new nuclear: my solution
My friend and co-author of the Left Manifesto for Nuclear Energy, Rod Holt, and I have often agreed: the government "should just build 'em!". It's that important that I think the Federal gov't should build 'em at least at the level of the TVA's semi-public power scheme.
But how? Easy to say, harder to implement. Well, this is true. So, lets examine some facets of this. The way nuclear utilities (such as the biggest wind builder in the U.S., FPL) is to charge the rate payer a small advanced increase in rates. The political problems with this are enormous. Of course, what opponents don't understand that having the rate payer pay later, when power starts flowing, means easily increasing the final price by at least 50% because of interest rates accruing during the 4 to 6 years it will take to build a nuclear plant. So it's pay less upfront or pay a helluva a lot more later. But there are better ways...
First, the objective is to end DFF burning. And by this I mean primarily coal, secondarily, natural gas. To do this means having a specific goal to increase nuclear energy (and other forms of non-carbon energy generation) to the:
- specific phasing out of largest DFF plants (starting with all coal plants in order of dirtiest). This require a national plan and cannot be left up to regional utilities.
- implementation of nuclear phase in/coal phase out on a specific agreed upon mandate for specific MWs to MWs substitution (nuclear in, coal out). This can be worked out regionally but the mandate comes from the DofE.
- A specific tax on the burning of DFF from share holder value not refundable by either Required Must Run contracts or rate-payer increases. The tax is essentially mandated to be on profits for merchant plants and on guaranteed rate-of-return on regulated utilities. YES, this is a sort of/kind of carbon tax, but specifically targeted toward the owners/operators of DFF plants and not the rate payer.
Fission Fuel & Construction Bank
- A national "Fission Fuel & Construction Bank" be set up. The funding of $150 billion USD to start it, additional funding from point 3 above. The monies collected, seen as a 'fine' on burning DFF, will be used to finance ongoing operations of this FF&CB institution. This bank will be run in conjunction between the NRC, DofE and the Treasury Dept.
- The mandate of the FF&CB is to provide zero interest, guaranteed loans to all new construction of nuclear power plants. Up to 10% of these loans will be mandated to research and development for:
a. Generation IV MSR/LFTR development (the rational choice) and thorium usage.
b. reprocessing of spent nuclear fuel from light water reactors.
[The above points a. & b. will provide a huge incentive at every level of the nuclear infrastructure to invest in these solutions. All national labs (ORNL, Idaho, Livermore, etc) will be mandated to direct resources into this direction. Also, investments can be made into R&D for UHVDC and AC transmission and all associated projects relating to new nuclear generation]
Since the FF&CB will provide both financing and guarantees, private investment will be discouraged and dissincentativized. Any default by private companies on these loans puts the property and projects associated with theses failures into a toxic-asset management group which will become the owners of the project including the C&OL license and associated projects.
The FF&CB will only start collecting a return on the loan from when the power plant goes 'critical' or about 6 months before the plant goes COD (commercial on-time delivery) which ever is shortest. This means that rate payers will not receive any rate increases until the plant actually goes on line. Increases in rates will be subject to special FF&CB review before the operators submit such requests to their ISO/Energy Commission state regulators.
Along these lines, 8% of all net profits from future sales of electricity from these financed projects will be returned to the FF&CB for as long as the plants produce salable electricity.
I believe such a bank is a model on how to finance new nuclear builds along with payback for the original investments for a self-supporting carbon-free fission future.
David Walters