Obama Nuclear Energy Plan Could Help Foreign Manufacturers, Hurt U.S. Companies

In February, President Obama put money behind his commitment to a revitalized U.S. nuclear energy program. The administration has argued that nuclear power must be part of the U.S. energy strategy. The federal government provided $8 billion of loan guarantees for two new nuclear power plants in Georgia. The FY 2011 budget would triple loan guarantees available for new nuclear construction to $54.5 billion.

This is a good start. With the expanded loan guarantee programs many power companies will be willing to take on the expense and risks associated with building nuclear power plants. Loan guarantees also help incentivize power companies to undertake the difficult, laborious and costly process of doing all the studies and acquiring all the permits in order to begin actually breaking ground.

But in taking this bold step, the administration forgot one thing. The loan guarantees apply only to the power companies, not to the domestic nuclear hardware industry. Nor are there any restrictions on companies accepting loan guarantees not to use them to buy foreign components. As a result, the loan guarantees are likely to prove highly beneficial to foreign producers of reactor vessels, forgings and other critical components. Some components, such as very heavy forgings, are only available overseas. These foreign companies have been doing very well over the past several decades due to the different attitude towards nuclear power in the rest of the world. It doesn’t seem smart to give them additional advantages when it comes to competing with domestic U.S. manufacturers.

The administration needs to think more strategically in developing its energy policy. It seems as if the White House forgot about the relationship between manufacturing and energy, at least when it comes to nuclear power. Allowing the U.S. manufacturers of nuclear hardware such as Babcock and Wilcox also to have access to the loan guarantee money would be a good first step in stimulating the expansion of the entire nuclear power industry, not just a portion of it. Moreover, with access to loan guarantees domestic producers would be able to expand production and even invest in new capabilities, such as that for heavy forgings, thereby creating more U.S. jobs and a better chance of competing with foreign companies for export sales.

In addition, the administration could take the far-sighted step of helping to support the development and sale of advanced nuclear power generation technologies by U.S. companies.