These days, clean energy ranks right up there with Mom, apple pie and ice cream as an All-American attribute. You can barely sit through a TV show, listen to the radio, or even read a blog without coming across an ad from someone extolling the virtues of some "clean" energy form or another. Never mind that some of them—from nuclear power to "clean" coal—bear no resemblance to genuinely clean energy sources. Some industries have more money to spend on ads than others...
So what could be more virtuous than a federal Clean Energy Bank? The idea sounds perfect: the federal government would set up a bank to support the development and implementation of clean energy technologies, especially those that private investors can’t or won’t fund. In fact, it’s so perfect the Senate Energy Committee has already approved the concept as part of its upcoming energy bill, as has the House Energy Committee in its Waxman-Markey cap and trade climate bill.
So why has much of the environmental community been lining up to oppose the Clean Energy Bank?
Well, there are a couple of teeny-tiny little problems with the concept, especially in the Senate version. Kind of like there were teeny-tiny little problems with unregulated derivatives trading, or lack of federal oversight and regulation, or corporate greed, that brought the U.S. economy to its knees last October.
It is not far-fetched—indeed, it’s completely foreseeable—that, as the Senate Clean Energy Bank legislation is currently written, we could see trillion dollar or more taxpayer bailouts of "clean energy" technologies within the next decade. You didn’t like TARP? Wait until taxpayers have to bail out the likes of Duke Power, UniStar Nuclear, and Southern Company at levels that might make even Citigroup or General Motors blush.
The Senate' s Proposal
Let’s face it: it’s pretty tough for environmentalists to oppose something called a Clean Energy Bank.
But here’s the reality: Sen. Bingaman’s Clean Energy Bank, which is incorporated in S. 949, the Senate Energy bill still being considered by the Senate Energy Committee, would provide more concrete government backing for dirty energy technologies than anything any lobbyist for the nuclear power or coal industries could have dreamed of even a year ago.
Indeed, Sen. Bingaman’s bank would place NO limit to the amount of money that can be federally guaranteed for "clean energy" technologies by this proposed bank. US$10 billion? No problem. US$100 Billion? No problem. US$1 Trillion? No Problem!
The Bingaman bank would authorize this new entity—the Clean Energy Development Administration, which would have an administrator and a nine-member Board of Directors, and virtually no other oversight—to issue as much money in taxpayer-backed loan guarantees as it wants for any projects that fall under an exceedingly broad "clean energy" definition.
In this case, “clean energy” would include—and this is clearly part of the intent --new nuclear reactors, as many as the industry might consider building. That alone has the environmental community up in arms, since no matter what industry propaganda may say, the U.S. environmental movement remains adamant that nuclear power is not a solution to the climate crisis.
"Clean coal" could also be funded under this definition, including such environmentally dubious concepts as coal-to-liquids and unproven carbon sequestration technologies.
But even if this Bank were only oriented toward renewable energy and energy efficiency, it would still be problematic. With all respect and love toward those designing and building new solar PV, solar thermal, wind, geothermal and other 21st century technologies, even they don’t deserve unlimited taxpayer backing for their projects.The Congressional Budget Office and Government Accountability Office both have projected a 50% or greater failure rate for loan guarantees for new nuclear reactors. And there is no denying that the failure rate for renewable energy projects is going to be above zero. While it’s fine for taxpayers to take some risk for new energy technologies, it’s not so fine to bet potentially hundreds of billions of dollars on risks of 50% or more, especially on such capital intensive projects as new reactors, which are now projected to cost US$10 billion or more each.
And the nuclear power industry is the one most in need of this money. Why? Because there is no private capital available to support construction of new nuclear reactors, private investors simply won’t take that risk. If Bank of America or Citigroup have been thinking for the past few years that nuclear reactors are too risky but subprime mortgages aren’t, then a 50% projected failure rate might be too low.
The reality is that the nuclear industry already has asked for US$122 billion in taxpayer-backed loan guarantees (most of which would actually be taxpayer-funded as well, through the Federal Financing Bank). And that would cover only about 20 reactors. Getting to the Republicans’ dream of 100 new reactors by mid-century (outlined by Sen. Lamar Alexander (R-Tenn) in the GOP Saturday radio address early May and repeated late May as a goal for both Senate and House legislation), would cost at least five times that amount—and that’s before the cost overruns start rolling in. For comparison, a Department of Energy study of 75 existing reactors found an average cost overrun of 207%. If that level holds true for a new generation of reactors, we’d be looking at trillions of taxpayer dollars at risk.
The House Clean Energy Bank
The House Energy Committee approved as part of the climate bill a different version of the Clean Energy Development Administration. Reflecting discomfort with some of the more outlandish provisions of the Senate version, the House rejected unlimited loan guarantees, and instead would subject the bank to the normal annual Congressional authorization and appropriations process—a major improvement.
And the House version, which came as an amendment offered by Reps. John Dingell (D-MI), Jay Inslee (D-WA) and Bart Gordon (D-TN), places some priority on those technologies that can reduce carbon emissions the fastest and at the lowest cost per emissions reduced—neither of which would necessarily benefit either nuclear or coal.It also would prohibit any single technology from receiving more than 30% of bank funds. Still, theoretically nuclear and coal together could receive 60% of this “clean energy” money. So while better than the Senate version, it still reflects a misguided vision of what constitutes clean energy.
There is a long way to go for both of these versions: there are likely to be amendments offered when each reaches its respective floor and differing House-Senate versions would have to be reconciled if they get that far. But leave it to the U.S. Congress to take a concept as simple and potentially beneficial as a clean energy bank, and turn it into a bureaucratic nightmare that could provide most of its funding for decidedly dirty technologies.
Source and contact: Michael Mariotte at NIRS Washington