First American Nuclear (FANCO) is relocating to Indiana, announcing plans to build what it calls an “energy park” in rural parts of the state featuring small modular nuclear reactors. On its face, the announcement sounds bold and forward-looking. Nuclear power, after all, is carbon-free at the point of generation and capable of producing large amounts of reliable electricity.
What to Know…
Indiana ratepayers bear all the risk – Senate Bill 424 guarantees that utility customers pay 100% of First American Nuclear’s development costs, even if the project is delayed or canceled.
Higher bills long before any power is produced – Residents will begin paying for the nuclear energy park at least three years before it generates electricity, with no assurance of lower rates later.
Nuclear power may be effective, but it’s a weak business case – The need for full public cost recovery and risk elimination highlights how financially unstable nuclear projects are compared to other energy sources.
But beneath the glossy press releases is a deal that shifts virtually all financial risk onto Indiana residents, long before a single watt of power is produced.
FANCO claims Indiana could have nuclear power online within eight years. That promise has fueled public optimism, with some residents assuming nuclear power will translate into cheaper electricity. There’s little reason to believe that will be the case.
The Law That Made It Happen
The key to FANCO’s move is Indiana Senate Bill 424, legislation specifically designed to attract nuclear development to the state. Two provisions in the bill explain why FANCO’s decision was essentially risk-free.
First, SB 424 allows FANCO to recover up to 80% of approved project development costs through the current utility rate schedule. In plain terms, Indiana utility customers begin paying for the project almost immediately, even though construction may take years and power generation is far off.
Second, FANCO is permitted to recover the remaining 20% of costs through future rate schedules, meaning Indiana ratepayers ultimately cover 100% of the company’s expenses.
And those expenses aren’t limited to construction.
Paying for the Past and the Future
Under SB 424, Indiana residents are responsible for all project development costs, including research, planning, and early-stage work that began years before FANCO ever committed to Indiana. Those costs are retroactively passed on to utility customers.
Worse still, customers will start seeing charges on their utility bills at least three years before any electricity is produced. That’s three years of paying for nuclear power that doesn’t yet exist.
If the project is delayed, as nuclear projects often are, that timeline stretches further.
Heads FANCO Wins, Tails Indiana Pays
Perhaps the most troubling provision of SB 424 is what happens if the project never gets built.
The law explicitly allows utilities to recover project development costs for projects that are canceled or never completed, so long as regulators deem the expenses “reasonable.” There is little doubt such costs would be approved.
That means even if FANCO abandons the energy park entirely, Indiana residents are still on the hook for every dollar spent.
From a business standpoint, this is extraordinary. FANCO assumes virtually no financial risk while the public absorbs all of it.
The Cost Curve No One Believes
The initial estimated price tag for the project is $4 billion. History suggests that this estimate is optimistic.
Nuclear projects routinely come in far over budget due to massive upfront capital costs and complex construction, leading to significant cost overruns and long project timelines, often doubling their original estimates. An $8 billion final cost would be a surprise to no one familiar with the industry.
Indiana utility customers will pay every dollar of that overrun before the reactors are even turned on.
By contrast, even renewable energy developers must absorb meaningful risk. Wind and solar projects are not fully underwritten by utility customers, and private investors face real losses if projects fail.
Great Energy, Bad Economics
None of this is an argument against nuclear power as a source of energy. Nuclear is efficient, dense, and carbon-free in operation. From an engineering perspective, it’s impressive.
However, good energy does not make it good business.
If nuclear power were economically viable on its own merits, it wouldn’t require legislation that guarantees full cost recovery, retroactive billing, and payment even in the event of failure. The fact that Indiana must socialize all the risk upfront is a clear signal that the business model doesn’t work without extraordinary public subsidy.
Indiana isn’t just betting on nuclear power; it’s guaranteeing the house wins.
Great energy. Terrible business.