Five Free Market Priorities for a Nuclear Energy Renaissance

Energy policy, especially targets for lower carbon dioxide emissions, has
emerged as a priority for Congress and the Obama Administration.
Unfortunately, nuclear energy seems to have been forgotten by leadership in
both the legislative and executive branches of government.

First, the President's budget had almost nothing related to advancing
nuclear energy. Then Henry Waxman (D-CA) and Edward Markey (D-MA) released
their American Clean Energy and Security Act of 2009, which would enact
numerous misguided environmental provisions, including a costly carbon
dioxide cap-and-trade program, but offers virtually nothing regarding
nuclear energy.[1] This is extremely problematic given the fact that
emissions-free nuclear energy could help meet both congressional and
Administration energy policy objectives for clean, affordable, domestic
energy.

This could be a blessing in disguise, given the heavy-handed approach that
the President's budget and Waxman-Markey take in promoting politically
correct energy sources like wind and solar. When it comes to nuclear energy,
policymakers should reject the subsidies-first mentality that permeates most
current thinking and instead focus on the following five free market
priorities.

1. Return to the Original Intent of Energy Policy Act (EPACT) of 2005

EPACT 2005 provided loan guarantees, standby support, and production tax
credits to mitigate the effect of decades of regulatory risk for
approximately the first six nuclear reactors built in the U.S.[2]

Congress and the nuclear industry believed these provisions would provide
predictability after years of erratic regulatory hurdles through targeted
and limited temporary assistance. More importantly, EPACT 2005 displayed
broad, bipartisan support for clean, affordable nuclear energy.

This has devolved, however, into nuclear subsidy creep, with expansion of
tax credits, standby support, and unlimited loan guarantees under
consideration. While many were willing to accept some limited subsidies for
nuclear energy, this call for more taxpayer support is splitting what was
largely a consensus that accepted nuclear energy's place in America's energy
mix.

Even more concerning, however, is that subsidies will prevent the nuclear
industry from ever realizing its full potential. Government interference
will result in inefficiencies and politically-driven business decisions that
will stifle technological development and drive up costs.

To restore broad support and to ensure a market-competitive nuclear
industry, direct and indirect taxpayer support established by EPACT 2005
should not be extended beyond what is currently authorized.

2. Avoid Creating a Government-Dependent Nuclear Industry

Expanded and unlimited subsidies will not create a sustainable nuclear
industry; in fact, it will do just the opposite. Relying on continual
handouts from Washington will create a dependent, vulnerable industry that
is not likely to be viable in the long term.

Not only should loan guarantees be limited, but congressional attempts to
reinvigorate the nuclear industry through taxpayer-subsidized workforce and
manufacturing-expansion programs are not needed.

Confidence among private investors in the nuclear industry is being
demonstrated today. Private companies are expanding their workforce,
enrichment and manufacturing facilities are expanding capacity, universities
are increasing the size of their nuclear engineering programs, and the
private sector is implementing craft-labor workforce programs. This is all
being done without additional taxpayer largesse and before ground has even
broken on a new nuclear plant in the U.S. Creating dependence where a
sustainable industry is emerging is simply bad policy.

3. Remain Committed to Scientific Conclusion on Yucca Mountain

Under any realistic waste management scenario, there will be a need for
long-term geologic storage. President Obama has publicly supported nuclear
power with the caveat that waste storage and management be based on sound
science.

The Nuclear Regulatory Commission (NRC) is currently reviewing the
Department of Energy's application for a permit to construct the repository
at Yucca Mountain. President Obama should fully support this process.

To ensure that its conclusions are legitimate, the NRC must have the freedom
to pursue a transparent, fact-based process in a non-adversarial
environment. While inputs from local stakeholders must be accommodated, the
NRC must be allowed to make decisions based on good science and engineering
in a timely manner. This requires a process that allows valid concerns to be
heard and resolved without being hijacked by outside, agenda-driven
interests.[3]

4. Introduce Market Principles into Nuclear Waste Management Reform

While the private sector efficiently manages front-end (fuel-related)
activities and plant operations, the government remains in control of
America's dysfunctional regime for waste management. The time has come to
reform America's approach to nuclear waste management.

The federal government's inability to fulfill its legal obligations under
the 1982 Nuclear Waste Policy Act has often been cited as a significant
obstacle to building additional nuclear power plants. Given nuclear power's
potential to help solve many of the nation's energy problems, now is the
time to break the impasse over managing the nation's used nuclear fuel.

The current system is driven by government programs and politics. There is
little connection between used-fuel management programs, economics, and the
needs of the nuclear industry. Any successful plan must grow out of the
private sector, be driven by sound economics, and provide access to the
funds that have been set aside for nuclear waste management activities.[4]

5. Focus the Government on Key Responsibilities

The federal government has several extremely important roles to play when it
comes to nuclear energy. Rather than micromanaging the industry, government
should limit itself to:

Allowing the industry to operate under free market principles,
Establishing predictable and effective regulation that will ensure safety
and security,
Supporting critical basic research and development, and
Opening Yucca Mountain.
A Different Approach on Energy

Despite early promise, the nuclear industry proved unsustainable largely due
to government intervention. Now the U.S. has the opportunity to restart its
nuclear industry.

However, the industry's future should be in the hands of the private
sector--not government bureaucrats. This not only ensures that decisions are
made based more on a project's value than its politics, but it also frees
government resources to focus on the critical role of providing efficient
regulations that allow business to flourish while protecting public health
and safety. Government might be able to give the United States a handful of
reactors, but only the private sector can provide a true nuclear
renaissance.

Jack Spencer is Research Fellow in Nuclear Energy and Nicolas D. Loris is a
Research Assistant in the Thomas A. Roe Institute for Economic Policy
Studies, at The Heritage Foundation.

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[1]William W. Beach, David Kreutzer, Ph.D., Karen Campbell, Ph.D., and Ben
Lieberman, "Son of Waxman-Markey: More Politics Makes for a More Costly
Bill," Heritage Foundation WebMemo No. 2450, May 18, 2009, athttp://www.
heritage.org/Research/EnergyandEnvironment/wm2450.cfm; Ben Lieberman,
"Waxman-Markey Global Warming Proposal's Other Problematic Provisions,"
Heritage Foundation WebMemo No. 2436, May 12, 2009, at
http://www.heritage.org/Research/EnergyandEnvironment/wm2436.cfm.

[2]Jack Spencer, "Competitive Nuclear Energy Investment: Avoiding Past
Policy Mistakes," Heritage Foundation Backgrounder No. 2086, November 15,
2007, at http://www.heritage.org/Research/EnergyandEnvironment/bg2086.cfm.

[3]Jack Spencer, "Secretary Chu's Blue Ribbon Commission on Nuclear Waste,"
Heritage Foundation WebMemo No. 2382, April 6, 2009, at
http://www.heritage.org/Research/EnergyandEnvironment/wm2382.cfm.

[4]Jack Spencer, "A Free-Market Approach to Managing Used Nuclear Fuel,"
Heritage Foundation Backgrounder No. 2149, June 23, 2008, at
http://www.heritage.org/Research/EnergyandEnvironment/bg2149.cfm.
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