Gov. Martin O'Malley should reject Electricité de France's (EDF) proposal to force Maryland residents to underwrite construction of a third nuclear reactor at Calvert Cliffs in Southern Maryland. Why? Because it makes no economic sense.
Little more than a year ago, the Maryland Public Service Commission approved EDF's acquisition of Constellation Energy's nuclear assets. But the commission wisely conditioned its approval on a series of protections that would ensure that Baltimore Gas & Electric's customers would not only be held harmless from any future bad business decisions by Constellation (BGE's parent company) but would actually benefit from the merger. This agreement should not be undone by EDF's promises that building a new reactor, while uneconomic now, will somehow become viable at some undisclosed time in the future.
It's been more than 30 years since anyone has built a new reactor in the United States, and the first generation of reactors was built with generous government subsidies. In part due to the industry's history of cost overruns and defaults, as well as the high costs and risks of new reactors, Wall Street will not bankroll them, so the industry is asking for more government handouts to launch a nuclear "renaissance." The public, however, is not enthused. A new NBC News/Wall Street Journal public opinion poll found that, out of 14 programs presented for potential budget cutting — including Social Security, college loans, Head Start and national defense — the most acceptable budget cut is for subsidies for new reactors. Fifty-seven percent of respondents said cutting these subsidies is either totally or mostly acceptable.
If the public knew just how dependent the nuclear industry has been on government handouts over its lifetime, even more poll respondents would have called for cuts.
Despite more than half a century of government subsidies at every stage of its development, nuclear power is still not economically viable. A new report commissioned by my organization found that over the past five decades, the total value of subsidies to the entire nuclear fuel cycle has often exceeded the market price of the electricity produced by nuclear plants. New subsidies would shift even more risks from the industry to the public for a technology that is no more economically viable today than it was in the 1950s.
Thanks to the Energy Policy Act of 2005, the industry will enjoy generous new subsidies worth billions that are supposed to help it show it can build a few plants on time, on budget, and operate them safely. With costs approaching $10 billion per reactor, we're still waiting to see if it can.
The nuclear industry has a long history of skyrocketing costs and construction delays that resulted in two costly bailouts. The first bailout occurred in the 1970s and 1980s, when utilities cancelled or abandoned more than 100 plants and charged the costs to their ratepayers even though the plants never produced any electricity. The second happened in the 1990s, when electricity markets were made more competitive and state regulators allowed utilities to charge their customers for a portion of their so-called "stranded costs," which compensated utilities for their uncompetitive plant investments. Utility investors also took big losses when they wrote off the costs of overpriced plants that could not be passed on to ratepayers.
EDF is not about to make the same mistake. It wants Maryland taxpayers and ratepayers to shoulder Calvert Cliff 3's uncertain costs and risks and is trying to persuade them by promising new jobs and economic development. Calvert County already has taken the bait. The Calvert County Board of Commissioners has approved a 50 percent property tax reduction for a new reactor at Calvert Cliffs, which will save EDF about $20 million a year that would have otherwise gone to pay for essential county services. But before state officials start counting jobs for this project, they should calculate what these jobs will cost Maryland and evaluate other alternatives that are less risky and more beneficial.
All low-carbon technologies, including nuclear power, must be on the table to confront our looming climate crisis. However, keeping the government's thumb overwhelmingly on the scale of nuclear power will only further mask its considerable drawbacks. It also will disadvantage cheaper, less risky carbon-reduction measures that can be implemented much more quickly, such as energy efficiency and many renewable energy technologies whose costs, unlike nuclear's, have declined over time. Numerous studies have shown that an aggressive energy-efficiency and renewable-energy portfolio — combined with new natural gas plants — could reduce our nation's carbon emissions faster and more cheaply than trying to build a new fleet of reactors.
In the 1990s, the financial industry, aided by government policies that loosened lending rules and kept interest rates low, sold millions of people mortgages for overpriced houses they couldn't afford. Those policies led to a massive financial crisis and taxpayer bailout, one of the largest in U.S. history. Now EDF wants Maryland to underwrite its risky, expansionist plans so that it can gain a foothold in the U.S. nuclear market. That may be good for French-owned EDF, but it's not good for Maryland. Governor O'Malley should just say non.
Ellen Vancko is the manager of the Nuclear Energy and Climate Change Project at the Union of Concerned Scientists in Washington, D.C.