The electric power industry in the United States will face a number of great challenges in the next two decades, including increasing electricity demand and the aging of the current fleet of power plants. These challenges present a major test for the industry, which must invest between $1.5 trillion and $2 trillion by 2030 to meet the increased demand. In addition to these challenges, the potential for climate legislation, controversy over hydraulic fracturing, and post-Fukushima safety concerns have all resulted in significant uncertainty regarding the economics of all major sources of base-load electricity.

Currently nuclear power produces 22% of the nation’s electricity, and over 70% of the nation’s low-carbon electricity, even though unfavorable economic conditions have stalled construction of new reactors for over 30 years. The economics are changing, however, as evidenced by the recent construction and operating licenses (COLs) awarded by the Nuclear Regulatory Commission to Southern Company and SCANA Corporation to build two new units each. The successful construction of these units could lead to more favorable financing for future plants. This improved financing, especially if combined with appropriate additional government support, could provide serious momentum for the resurgence of nuclear power in the United States.

The most important way in which government support could benefit nuclear power is by increasing the amount of loan guarantees provided to the first wave of new nuclear power plants. This will help encourage additional new builds, which will help reduce the financing risk premium for new nuclear and improve interest rates for future plants. Instead of simply increasing loan guarantees for nuclear energy, a permanent federal financing structure should be established to provide loan guarantees for “clean energy” technologies in general, a category in which nuclear energy should be included. Most importantly, any changes should be made as part of a coherent, long-term energy policy, which would provide utilities with the correct tools to make the necessary investments, and the confidence that will allow them to undertake large-scale projects.

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