US Department of Energy to Provide $1 Billion Loan for Three Mile Island Nuclear Plant Restart

US Department of Energy to Provide $1 Billion Loan for Three Mile Island Nuclear Plant Restart

The U.S. Department of Energy's Loan Programs Office has offered a conditional commitment for a $1 billion loan to Constellation Energy. The financing is intended to fund the restart of the Three Mile Island Unit 1 nuclear reactor in Pennsylvania, which was shut down in 2019 due to economic unviability. This move represents a significant federal intervention to support existing nuclear power for grid reliability and carbon-free energy generation.

Context & What Changed

The conditional commitment of a $1 billion loan from the U.S. Department of Energy’s (DOE) Loan Programs Office (LPO) to Constellation Energy for the restart of Three Mile Island Unit 1 (TMI-1) is a landmark event in U.S. energy policy. TMI-1, an 852-megawatt pressurized water reactor, was commissioned in 1974 and ceased operations in September 2019 (source: U.S. NRC). Its closure was a direct result of adverse market conditions, primarily driven by low wholesale electricity prices from abundant, cheap natural gas and the increasing penetration of subsidized renewable energy sources. The plant was no longer economically competitive within the PJM Interconnection, the regional transmission organization (RTO) that coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia (source: pjm.com).

What has changed is a fundamental realignment of federal energy policy, recognizing the intrinsic value of existing nuclear power plants for both grid reliability and decarbonization. This shift is codified in recent legislation, notably the Bipartisan Infrastructure Law (BIL) of 2021 and the Inflation Reduction Act (IRA) of 2022. The BIL established a $6 billion Civil Nuclear Credit (CNC) program to support financially distressed nuclear reactors (source: energy.gov), while the IRA introduced a production tax credit (PTC) for existing nuclear plants, providing a crucial revenue floor. The LPO's action for TMI-1 represents the next evolutionary step: direct federal financing not just to prevent closures, but to reverse them. This intervention signals that the federal government is now willing to assume significant financial risk to preserve and restore zero-carbon, firm power generation capacity. The decision is further bolstered by growing concerns over grid stability, highlighted by reliability warnings from grid operators like PJM and the North American Electric Reliability Corporation (NERC), who have pointed to the risks of premature retirements of dispatchable generation (source: nerc.com).

Stakeholders

Constellation Energy: As the owner and operator, Constellation is the primary beneficiary and risk-bearer. The loan de-risks the significant capital expenditure required for refurbishment and relicensing. The company's motivation is to transform a decommissioned asset into a profitable, long-term source of carbon-free electricity, capitalizing on the new federal incentives and potentially higher future power prices driven by electrification and data center growth.

U.S. Department of Energy (LPO): The LPO's objective is to execute its mandate to finance innovative energy projects that support national policy goals. For the TMI-1 project, this includes ensuring grid reliability, preserving high-quality energy jobs, and meeting climate targets. A successful restart would serve as a powerful proof-of-concept for the LPO's expanded role in energy infrastructure finance. Conversely, a failure would expose the office to significant political and financial criticism.

Federal Government (Biden Administration): The project is a tangible outcome of the administration's industrial and climate policy. It demonstrates a commitment to an “all-of-the-above” clean energy strategy, where nuclear power plays a critical role alongside renewables. It also carries national security implications, as a robust domestic energy grid is vital for economic and military preparedness.

Pennsylvania State Government: The state stands to regain a significant source of high-paying jobs (typically 500-700 permanent positions at a nuclear plant) and a substantial local tax base. The restart also enhances the state's energy security and reduces its reliance on volatile natural gas markets.

PJM Interconnection: As the grid operator, PJM benefits from the addition of a large, dispatchable, and weather-independent generation source. The 852 MW from TMI-1 would improve resource adequacy, potentially lowering capacity market clearing prices and reducing the risk of reliability events, particularly during extreme weather.

Nuclear Regulatory Commission (NRC): The NRC is the independent safety regulator. It faces the unprecedented task of evaluating a license renewal and restart application for a plant that has been dormant for several years. Its process will be under intense scrutiny from all stakeholders to ensure safety standards are rigorously applied without undue delay.

Industrial & Commercial Energy Consumers: Large power users, particularly data centers and heavy manufacturing, benefit from the enhanced grid reliability and potentially more stable long-term electricity prices. Many are actively seeking 24/7 carbon-free energy, which TMI-1 could provide through Power Purchase Agreements (PPAs).

Environmental & Public Interest Groups: The stakeholder landscape is divided. Pro-nuclear climate groups view this as a pragmatic and essential step for decarbonization. However, anti-nuclear organizations will raise concerns related to the legacy of the 1979 TMI-2 accident, long-term nuclear waste storage, and the financial risks to taxpayers.

Evidence & Data

Nuclear power currently provides about 19% of total U.S. electricity and nearly 50% of its carbon-free electricity (source: eia.gov). The premature closure of plants like TMI-1 has often resulted in an immediate increase in fossil fuel generation to fill the gap. For example, after the Indian Point Energy Center in New York closed in 2021, natural gas generation in the state increased significantly (source: U.S. Energy Information Administration).

The LPO has a portfolio of over $30 billion in loans and loan guarantees and has historically enabled landmark projects, including the first new U.S. nuclear reactors in decades at Plant Vogtle in Georgia (source: energy.gov/lpo). The loan for TMI-1 falls under the Title 17 Innovative Energy Projects authority, which allows the LPO to finance projects that re-power, re-tool, or re-purpose energy infrastructure.

The economics of the restart are underpinned by the IRA's nuclear PTC, which provides a credit of up to $15/MWh (inflation-adjusted) for electricity produced by existing reactors. This federal support effectively creates a price floor, making the plant viable even in low wholesale price environments. The total cost to restart the plant is estimated to be between $1.5 and $2.0 billion (author's assumption based on similar refurbishment projects), with the $1 billion DOE loan covering a substantial portion of the capital required for inspections, component replacement, fuel loading, and regulatory compliance.

Scenarios (3) with probabilities

Scenario 1: Successful & Timely Restart (Probability: 60%)

In this scenario, Constellation finalizes the loan agreement, completes the refurbishment and safety upgrades within the projected budget and timeline (approximately 3-4 years), and successfully navigates the NRC’s relicensing process. The plant resumes commercial operation by late 2028 or early 2029. It operates with high reliability, benefits from the IRA production tax credits, and secures long-term PPAs with data centers or other large offtakers. This outcome validates the DOE’s policy, establishes a precedent for other retired plants (e.g., Palisades in Michigan), and strengthens the role of nuclear power in the U.S. energy mix.

Scenario 2: Delayed & Over-Budget Project (Probability: 30%)

The project proceeds but encounters significant hurdles. Inspections reveal more extensive material degradation than anticipated, leading to cost overruns and schedule delays. The NRC licensing process is prolonged by legal challenges from anti-nuclear groups or complex technical questions. The final cost exceeds initial estimates, straining Constellation’s finances and reducing the project’s expected return on investment. The plant eventually restarts, but its troubled execution serves as a cautionary tale, making it harder for similar projects to gain financial and political support in the future.

Scenario 3: Project Abandonment (Probability: 10%)

A “showstopper” issue is discovered during the refurbishment process—a critical, non-replaceable component like the reactor pressure vessel is found to have unforeseen degradation, or costs escalate to a point where the project is no longer economically viable even with federal support. Alternatively, a shift in the political landscape leads to the withdrawal of federal support. Constellation abandons the restart, resulting in a financial write-off and a significant political embarrassment for the DOE and the administration. This would have a chilling effect on investment in the existing nuclear fleet and deal a major blow to the narrative of a U.S. “nuclear renaissance.”

Timelines

Q1-Q2 2026: Finalization of loan terms and financial close between DOE and Constellation.

H2 2026: Commencement of on-site refurbishment, component procurement, and workforce mobilization.

2026-2028: Parallel track of physical plant refurbishment and the NRC's safety and environmental review for license renewal and restart authorization.

Mid-2028: Anticipated receipt of renewed operating license from the NRC.

Late 2028 / Early 2029: Fuel loading, system testing, and resumption of commercial operation.

2029-2059 (approx.): Projected 30-year operational lifespan under a renewed license, with loan repayment occurring over this period.

Quantified Ranges

Total Project Cost: Estimated at $1.6 billion to $2.1 billion. The $1 billion federal loan would cover approximately 50-65% of the total capital required.

Levelized Cost of Electricity (LCOE): Post-restart, the LCOE for TMI-1 is projected to be in the range of $40-$60/MWh. This is competitive with new-build combined-cycle natural gas plants (especially with carbon pricing) and significantly lower than the LCOE for new-build nuclear, which often exceeds $100/MWh (source: Lazard LCOE analysis).

Job Creation: The project is expected to create 1,500-2,000 temporary construction and refurbishment jobs over 3-4 years and restore approximately 500-700 high-paying, full-time operational jobs with an average salary significantly above the regional median.

Grid Impact: The addition of 852 MW of firm capacity represents approximately 1-2% of PJM's typical summer peak load, providing a meaningful boost to the region's reliability margins.

Risks & Mitigations

Technical Risk: The primary risk is the condition of long-lead-time components after years of dormancy. Mitigation: Constellation will undertake an exhaustive program of non-destructive examination and testing. The project budget must include a significant contingency (e.g., 20-25%) to address unforeseen component replacement or repair needs.

Regulatory Risk: The NRC process for restarting a dormant plant is not well-trodden, creating uncertainty. Mitigation: Early and continuous engagement with NRC staff is critical. Constellation can leverage its extensive experience with NRC licensing at its other operating plants to proactively address potential regulatory concerns.

Market Risk: A long-term collapse in wholesale electricity prices could still render the plant uneconomic, despite federal subsidies. Mitigation: The key mitigation is securing long-term, fixed-price PPAs with creditworthy offtakers (e.g., tech companies, utilities) for a significant portion of the plant's output. The IRA's PTC provides a strong backstop against low market prices.

Supply Chain Risk: Sourcing specialized, nuclear-grade components and qualified labor could be challenging and subject to inflation. Mitigation: Early engagement with the nuclear supply chain to place orders for critical components. Partnering with unions and technical colleges to build a skilled labor pipeline.

Political & Public Opposition Risk: Legal and political challenges could delay or derail the project. Mitigation: A robust public outreach and community engagement program emphasizing the project's economic and environmental benefits. A transparent and comprehensive safety case to build trust with the public and regulators.

Sector/Region Impacts

Energy Sector: This project fundamentally alters the valuation of retired or at-risk nuclear assets. It creates a viable pathway for their return to service, potentially spurring similar initiatives across the country. It reinforces the strategic importance of the existing nuclear fleet as the backbone of the clean energy transition.

Public Finance: This demonstrates a more assertive use of federal financial tools to achieve industrial policy objectives. The performance of this loan will be a key data point for the future of the LPO and similar government credit programs. It shifts the risk calculus for private investors in the nuclear sector.

PJM Region: The restart directly addresses reliability concerns within PJM, one of the nation's most critical electricity markets. It diversifies the generation mix, reducing over-reliance on natural gas and mitigating price volatility.

Large-Cap Industry: For Constellation, this is a major capital allocation decision that could generate substantial long-term value. For other utilities with nuclear assets (e.g., Duke Energy, Vistra Corp.), it provides a template to re-evaluate their own fleets. For the nuclear services and supply chain industry (e.g., Westinghouse, GE), it signals a potential renaissance in the domestic services market.

Recommendations & Outlook

For Government (DOE, NRC): The DOE must implement stringent oversight and reporting requirements to protect taxpayer interests. The NRC should develop a clear and efficient regulatory framework for restarting dormant reactors to provide certainty for future applicants. State governments should consider policies, such as specific clean energy mandates or tax incentives, that complement federal support for these assets.

For Infrastructure Investors: The TMI-1 project signals a paradigm shift. Nuclear assets, previously viewed as liabilities, may now represent value opportunities when backed by federal support. Investors should re-evaluate the risk-return profile of investments in utilities with nuclear portfolios and in the broader nuclear supply chain.

For Corporate Boards (Utilities, Industrials): Boards of utilities with nuclear assets should direct management to conduct a full strategic review of their fleets in light of these new federal programs. Large industrial consumers should proactively engage with generators like Constellation to explore long-term PPAs for 24/7 clean power.

Outlook: The TMI-1 restart is a bellwether project. Its outcome will disproportionately influence the future of dozens of other U.S. nuclear reactors. (Scenario-based assumption) A successful project will likely trigger a wave of investment aimed at life-extending and uprating the existing fleet, and potentially restarting 1-3 other viable shuttered plants. (Scenario-based assumption) This preservation of existing nuclear capacity is the most cost-effective and scalable path for the U.S. to meet its 2035 grid decarbonization targets. Failure, however, would validate market-based arguments against nuclear power and force policymakers to rely on more expensive or less reliable alternatives to achieve climate and reliability goals.