Refurbished Three Mile Island Payment Structure Is Not Quite What It Seems

the  New York Times  it plans to spend $1.6 billion to refurbish Reactor 1
and restart it by 2028, pending regulatory approval. “The symbolism is
enormous,” said Joseph Dominguez, chief executive of Constellation. “This
was the site of the industry’s greatest failure, and now it can be a place of
rebirth.”

Economic Benefits Of Three Mile Island

Local residents and politicians welcome the return of Three Mile Island,
which will employ about 600 people when it restarts. “This will transform
the local economy and presents a rare opportunity to power our economy
with reliable clean energy that we can count on,” said Tom Mehaffie, a
Republican state representative whose district includes the plant. “This is a
rare and valuable opportunity to invest in clean, carbon-free and
affordable power — on the heels of the hottest year in Earth’s history.” A
recent poll found that 57% of Pennsylvania residents supported reopening
Three Mile Island “as long as it does not include new taxes or increased
electricity rates.”
Dominguez was especially proud to announce that Constellation would
pay to refurbish the Three Mile Island facility entirely out of its own
pocket, and Microsoft would be on the hook for buying electricity from the
plant for 20 years. “We’re not asking for a penny from the state or from
utility customers,” he said.
There is a lot to unpack here. The demand for electricity is exploding,
thanks to cryptomining and AI.  Data centers  are sucking up vast amounts
of electricity, much of it from renewables. That means there is precious
little electricity left over to cool our homes and business, power our
electric cars, or meet the needs of industries trying to decarbonize their
activities. Supplying the crypto and AI sectors with renewable energy
threatens to slow or reverse the transition to clean energy for the rest of
society. At some point, we may need to ask ourselves just how much
crypto and AI we really need.

A $1.6 Billion Federal Loan Guarantee

What Joseph Dominguez failed to mention when he proclaimed that
Constellation was not asking for a penny from the state or from utility
customers to restart Three Mile Island was that in May it applied for a $1.6
billion federal loan guarantee — which coincidentally is precisely the
amount of money it plans to invest to restart the shuttered reactor.
According to the  Washington Post , the taxpayer-backed loan could give
Microsoft and Constellation Energy a major boost in their unprecedented
bid to steer all the power from a US nuclear plant to a single company.
Microsoft is one of many large tech companies scouring the nation for
zero emissions power for its data centers and one of the leaders in the
field of artificial intelligence.
The plan to restart the shuttered reactor on Three Mile Island has already
generated controversy as energy experts debate the merits of providing
separate federal subsidies for the project in the form of tax credits.
Constellation’s pursuit of the $1.6 billion federal loan guarantee, which
has not been previously disclosed, is likely to intensify that debate. The
loan guarantee request has cleared an initial review. It has now reached
the stage where the specific terms of a deal would ordinarily start to be
negotiated, according to the Washington Post. A loan guarantee would
allow Constellation to shift much of the risk of reopening Three Mile Island
to taxpayers. The federal government, in this case, would pledge to cover
up to $1.6 billion if there is a default. The guarantees are typically used by
developers to lower the cost of project financing, as lenders are willing to
offer more favorable terms when there is federal backing.
Borrowing Costs For Three Mile Island

In this case, the loan guarantee could save Constellation up to $122
million in borrowing costs for restarting Three Mile Island, John Parsons,
an energy economist at the Massachusetts Institute of Technology, told
the Post. It would come on top of the federal tax credits on the sale of the
power — passed in the Inflation Reduction Act of 2022 — which could be
worth nearly $200 million annually for Constellation and Microsoft. Over
20 years, that comes to a tidy sum — $4 billion to be exact. Technology
companies already benefit from similar tax credits when they purchase
energy from a solar or wind farm, but nuclear power plants generate

electricity at a higher cost, making the scale of the subsidy larger.
Microsoft and Constellation have not released any details about how
much the electricity from Three Mile Island will cost.
The Energy Department declined to comment on the application, but
Constellation  told the Post it has not decided whether to accept the loan
guarantee if one is offered, but claimed that any financial risk for
taxpayers would be negligible. “Rest assured that to the extent we may
seek a loan, Constellation will guarantee full repayment,” said a statement
from the company. “Any notion that taxpayers are taking on risk here is
fanciful given that any loan will be backstopped by Constellation’s entire
$80-billion-plus value.” If that is so, then why the need for the federal loan
guarantee in the first place?
The biggest risk to taxpayers would be if the project were to fail after a
significant amount of money is spent trying to get Three Mile Island
operational. Such setbacks are common when new nuclear plants are
being built. The last new nuclear reactors to go online near Augusta,
Georgia, were seven years late and  $17 billion over budget . Constellation
says it is confident Three Mile Island won’t face such setbacks because the
company is restarting an existing unit rather than building a new one from
the ground up. Some may view that as wishful thinking, or as my old Irish
grandmother liked to say, “There’s many a slip twixt the cup and the lip.”
Proponents say reopening nuclear power plants is a good option,
especially with increased demand from data centers that are being built
across the country. “We want Microsoft to buy their electricity from zero-
carbon energy sources instead of from coal plants, so it is in the interest
of all of us that this nuclear power plant gets reopened,” John Parsons said
of the Three Mile Island plan. While the loan guarantee does have risks,
the reopening of an existing nuclear plant is far less likely to run into the
massive cost overruns and delays that are common with the construction
of a new nuclear plant, he added.

Another Kink In The Program

To hear Microsoft and Constellation tell it, every electron generated by the
rejuvenated Three Mile Island plant would be used to power Microsoft

data centers. That’s not quite how it will work out in practice, however.
The electricity from the restarted nuclear reactor will not be connected
directly to Microsoft’s data centers. Instead it will flow into the broader
power grid that serves 13 states and D.C. As the purchaser of the clean
energy, Microsoft can use it to erase — on paper — the emissions from
burning gas or coal to produce electricity that does flow into its data
centers. Microsoft is among several large tech firms using such accounting
methods to brand their data centers climate
friendly. CleanTechnica readers are savvy enough to recognize there is
great potential for all of this euphoria over Three Mile island to become
little more than another corporate greenwashing scheme, one paid for in
large part by federal taxpayers.
Some critics question if Constellation is presenting an overly optimistic
assessment of how quickly and cheaply a nuclear plant can be restarted.
The company said last month that $1.6 billion would cover the full cost of
reopening Three Mile Island by 2028. “We have one Big Tech company
trying to do something that is not aligned with how the markets should be
working, and they want to do it on the backs of ratepayers and taxpayers,”
said Evan Caron, co-founder of Montauk Climate, which invests in clean
energy technologies.
If there are any cost overruns or delays, Microsoft would probably have
the option of abandoning the deal and Constellation would need to find
another buyer willing to pay a premium for Three Mile Island power, he
said. “This has real risk. I think the likelihood of that plant coming back
online by 2028 is low to zero,” Caron said. Constellation bristles at the
suggestion. “We know every inch of this plant and what needs to be done,”
the company said in a statement. “To be clear, Constellation will restart
[Three Mile Island] in 2028, and in fact, we will aim to restart it a year
earlier.”

The Takeaway

There is nothing overtly wrong with the plan to restart Three Mile Island,
but when the details are examined, there certainly are some reasons to be

skeptical. First, when the company bragged it was putting its own money
unto the project, it should have been upfront about the federal loan
guarantee. Second, when Microsoft bragged it was increasing the supply
of renewable energy to its data centers, it should have been upfront about
how the process will actually work. In point of fact, none of the electricity
from Three Mile Island may ever be used to power a Microsoft data
center. There are carbon offsets and accounting shenanigans at work
here, which open the door to chicanery or what some might call “creative
accounting.”
At worst, both companies may have committed sins of omissions, little
white lies that take some of the luster off their bold plan to restart Three
Mile Island. Back in the George W. Bush era, this would be known as
“sideways waffling.” Both companies should know better than to tell part
of the story instead of the entire story. Shame on Microsoft and
Constellation for being a little less than completely honest about what
their plan entails. Being coy about such details make people wonder what
else they are hiding.

Three Mile Island Refurbishment Payment Structure Is Not Quite What It Seems.doc

Three Mile Island Refurbishment Payment Structure Is Not Quite What It Seems.doc