Historical cost overruns have added difficulty in financing new reactors
Delays and cost overruns have made nuclear reactors difficult to finance, and they typically can't pursue traditional project finance options
Details
Core information and root causes
"Project finance is used widely in the power sector, but mainly for renewable projects and natural gas turbines – assets that are less capital-intensive, more flexible and have shorter construction times. It has not been used in any significant way for nuclear power plants or hydropower projects."1
"Partially because of continual regulatory change, the time required to build a nuclear plant in the U.S. has continuously increased. The minimum time required to build a plant increased from 4 years in the late 60s to 8 years in the mid-1970s, with 75% of reactors taking 10-15 years to build. Vogtle Units 2 and 3 will have taken more than 14 years to complete, assuming work wraps up this year. Some of this increase was the result of the Calvert Cliffs court case, which mandated that an environmental impact review must be performed for every plant built. This extended construction duration adds even more cost. Long project durations increase financing and labor costs, as well as the probability that new regulations, objections, or other blockers will cause further obstacles."2
Efforts
Current initiatives and solutions
U.S. State Governments
From the DOE's Gateway for Accelerated Innovation in Nuclear (GAIN) Report, "State Nuclear Policies" 3
Tax credits
The main source of market incentives that state governments have used to attract advanced nuclear development is through the implementation of tax credits. State-funded tax credits have been critical in the development of first-of-a-kind technologies in the past and will be an important implementation, alongside federal tax credits, for new nuclear generation.
- Illinois SB193 (2024): Establish carbon mitigation credits for carbon-free energy resources, which are defined as a nuclear power plant that is interconnected to the JPM Interconnection market. See also: Pennsylvania SB979
- New Jersey AB4592 (2022): Create the New Jersey Advanced Nuclear Energy Development Program to incentivize construction of advanced nuclear energy facilities and provide tax credit incentives for constructing and producing energy.
- Utah HB124 (2024): Add nuclear to the definition of an "energy delivery project" allowing access to High Cost Infrastructure Development Tax Credits.
Advanced rate recovery
Due to the high upfront costs of nuclear plant development, licensing and construction, some states have begun to allow their electric utilities to recoup costs through rate recovery before the plant is commissioned and supplying electricity to the grid.
- Missouri HB1804 (2024): Allow for construction work-in-progress mechanisms of new nuclear plant construction with a capacity of 300 megawatts or less.
- Virginia SB454 (2024): Allow Dominion Energy to achieve advanced rate recovery for development costs of new nuclear, including evaluation, design, engineering, federal approvals and licensing, environmental analysis and permitting, early site permitting, equipment procurement, and an authorized rate of return. See also: Virginia HB1491, Missouri SB1493
Tax exemptions/deferments
Tax exemptions allow electric utilities planning to build a new nuclear power plant to either defer or exempt property tax payments through the planning and development stages until construction starts or to be exempt from all property taxes in general.
- Kansas HB2768 (2024): Exempt "new electric generation facilities," which is defined as nuclear energy for generation, from all property or ad valorem taxes levied under Kansas law.
- Wyoming HB213 (2023): Exempt energy production equipment for future generating facilities from property taxes before the start of construction.
Related
Connected bottlenecks and relationships