- Massive tax subsidies to nuclear in Kerry-Lieberman legislation
Massive tax subsidies to nuclear in Kerry-Lieberman legislation
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Three Tax Breaks for Nuclear Power in Kerry-Lieberman Will Cost Up to $57.3 Billion for 22 Reactors
Read the new analysis exposing these tax breaks here (pdf).
On May 12th, 2010 Senators John Kerry (D-MA) and Joseph Lieberman (I-CT) introduced their long awaited climate and energy bill, the American Power Act (APA). The APA contains a number of fatal flaws, including creation of a massive unregulatable carbon market, billions of tons of unverifiable offsets, and billions of dollars in free allocations to polluting industries. Perhaps no one makes out as well under the proposed legislation as nuclear reactors.
In the APA, the nuclear industry receives an additional $35.5 billion in loan guarantee authority under the Department of Energy’s Title XVII Loan Guarantee Program, bringing the total volume of loan guarantees for nuclear power to over $58 billion. The bill also contains several massive tax subsidies. Accelerated depreciation, an investment tax credit and an expansion of the existing production tax credit are three proposed tax credits that are likely to be significant for the industry. For the 22 reactors, the number going through Nuclear Regulatory Commission licensing as of March 2010, these three tax credits would cost between $35.7 and $57.3 billion.
APA bill would shorten the period for depreciation from 15 years to five. It would also allow companies to use the more favorable 200% declining balance depreciation method instead of the 150% declining balance method which is currently being used. This change is worth $450 million to $1.6 billion per reactor. This is a subsidy of .3 to 1.5 cents per kilowatt-hour (c/KWh).
Investment Tax Credit
APA would make nuclear reactors eligible for an investment tax credit of 10% of the facility’s costs. This subsidy would be worth $860 million to $1.5 billion per reactor. This is a subsidy of 0.59 to 1.6 c/kWh.
Expanded Production Tax Credit
The existing nuclear power production tax credit (PTC) was first enacted in the Energy Policy Act of 2005. APA would expand that provision by increasing the amount of new capacity eligible for the credit from 6,000 MW to 8,000 MW. New provisions also make it easier to use and transfer the credit. The nominal value of the credit will increase by $2 billion, from $6 to $8 billion. However, a company cannot use both the ITC and the PTC, so the industry likely to choose ITC over PTC for more certain and higher payouts.
APA also includes provisions for nuclear power that were not discussed in the Earth Track’s analysis. Subsidies not assessed here include eligibility of nuclear investments for the advanced energy tax credit, access to tax-exempt private activity bonds for nuclear projects and provision of more federal insurance against regulatory delays. These provisions have the potential to be massive, but it is difficult to estimate their full impact.
As Congress contemplates climate and energy legislation that it is time to break with the past. That means not subsidizing the same dirty technologies that have failed. Nuclear power is expensive, unsafe and we still have not found out a way to deal with the waste. We should not be giving this failed technology billions of dollars in tax subsidies in any bill.
For More Information Contact: Ben Schreiber, Climate and Energy Tax Analyst, Friends of the Earth (202) 222-0752, [email protected]