Will the U.S. Bailout Nuclear Power at the Expense of Renewable Energy

nuclear power plant
Image courtesy of U.S. DOE.

started out in the United States with the promise it would be “too cheap to meter,” but may end up being “too big to bail out.”  A new report by the nonprofit Nuclear Information and Resource Service (NIRS) finds that a national bailout of nuclear energy patterned on the model advanced this year in New York State would cost ratepayers and taxpayers more than $280 billion by 2030.  Based on an independent analysis that over half of existing nuclear power in the U.S. will be unprofitable by 2020, a narrower bailout would still cost the U.S. $160 billion by 2030.  In addition to enormous expense, NIRS found that one major side-effect of bailing out nuclear power on a large-scale basis would be the starving of renewable energy of needed capital.

The “Too Big to Bail Out: The Economic Costs of a National Nuclear Power Subsidy” report notes that since 2014 nuclear power companies have lobbied aggressively for new subsidies to benefit existing nuclear power stations in the U.S. So far, such proposals have only been adopted in one state (New York), and legal and regulatory challenges have resulted today in only one nuclear reactor receiving temporary financial support to date: the R.E. Ginna Nuclear Power Plant in New York. A long-term, statewide subsidy policy recently adopted in New York, to be implemented beginning in April 2017, is now being touted as a model for other states and for national implementation. The total cost of the 12-year subsidy New York is offering to four reactors is substantial: an estimated $7.6 billion — more than three times as much as the subsidies for new renewable energy sources ($2.44 billion by 2030) under the state’s new standard.

How good a yardstick is New York in terms of what the industry wants for a broader bailout?

A recent draft report by the U.S. Department of Energy (DOE) recommends providing new and increased subsidies and incentives to promote the longevity of existing reactors and also the deployment of new reactors; the DOE report recommends subsidies amounting to $27/MWh, very close to those under the New York model.  Relying upon the close symmetry between the New York State first-in-the-nation bailout scheme and the comparable DOE national subsidy recommendations, the NIRS report looks at both the cost of bailing out all reactors ($280 billion by 2030) and, more narrowly, the 56 percent of U.S. nuclear energy production that is expected to be uneconomical by 2020 ($160 billion by 2030).  For comparison purposes, the smaller of the two bailout totals projected by NIRS is significantly more than the $128 billion invested in all new wind generation in the U.S. over the last 10 years.

Report author Tim Judson, executive director, NIRS, said: “Investing in aging nuclear plants diverts scarce consumer energy dollars from investments in new, zero-carbon energy resources. It puts utilities and regulators in the posture of investing in legacy infrastructure, rather than modernizing the grid. Analysis of the bailout scheme in New York State looking at social cost factors such as climate change shows that conventional renewable energy subsidies are at least four times as effective at mitigating CO2 emissions in the medium-term as nuclear subsidies and twice as cost-effective in the short-term. The bottom line is that renewable energy could be developed to replace or phase-out nuclear generation at far lower cost than nuclear could be subsidized.”

Former Nuclear Regulatory Commission (NRC) Commissioner Peter Bradford, currently adjunct professor on Nuclear Power and Public Policy, Vermont Law School, and former chair of the New York and Maine state utility regulatory commissions, said: “This report illustrates that the subsidies now being sought for nuclear units that are already massively subsidized may pay far too much for relatively little climate benefit.  Worse still, they may slow the evolution of the electric industry to a less concentrated and more customer friendly form.”

Other key findings in the NIRS report include the following:

  • The U.S. would be bailing out a decidedly geriatric nuclear industry. Proposals to subsidize existing nuclear power plants are being driven by the declining economic viability of the nation’s aging nuclear fleet. From 2002-2012, average operating costs for nuclear power plants rose by 50 percent, or about 4.5 percent per year, on average.  The U.S. now has the oldest reactor fleet in the world, now averaging 35.6 years, with 37 percent older than their original licensed lifespan of 40 years; another 37 percent are between 31 and 40 years old.
  • High industry operating costs are a key factor in nuclear’s inability to compete. Since 2014, six more closures have been announced, and several more reactors have been named as potential closure candidates. The blame for nuclear’s economic problems has been misplaced on lower electricity prices resulting from declining demand and the growth of lower-cost energy sources. If nuclear operating costs had not increased so dramatically over the last 15 years, reactors would neither be unprofitable nor would their owners require such large subsidies to ensure their continued operation.
  • Nuclear is already heavily subsidized. The NIRS report points out that it is untrue for the industry to maintain that existing nuclear power stations are unsubsidized or even “under subsidized.” Nearly all reactors were heavily subsidized by state and federal policies, from research and development, to favorable cost-recovery treatment by state utility commissions, to the $130 billion bailout (in 2016 dollars) for bad debts in the 1990s. The new proposed subsidies are for these same reactors, nearly half of which were sold or transferred effectively debt-free to merchant power generators between 1998 and 2004.  The industry also benefits from federal and state policies that reduce or eliminate reactor owners’ liability for environmental impacts, including nuclear accident insurance, nuclear waste management and disposal, reactor decommissioning and site cleanup, uranium mine and processing waste, and water consumption. A comprehensive study of nuclear power subsidies in 2011 concluded that the cost of financial supports to the nuclear industry has frequently exceeded the value of the electricity nuclear power plants produce.
  • A nuclear bailout is not a good climate strategy. Nuclear subsidy costs would be incurred without, on their own, reducing carbon emissions. Maintaining existing reactors’ operations does not, in and of itself, cut greenhouse gas emissions, as the Environmental Protection Agency (EPA) determined in framing the Clean Power Plan. It would only hedge against possible increases in emissions, if fossil fuel generation were to increase due to reactor closures. This is consistent with the EPA’s determination in issuing the Clean Power Plan regulation, which concluded that incentives for existing reactors were unwarranted to meet carbon dioxide (CO2) reduction goals.
  • Nuclear plant retirements can … and should … be handled like non-nuclear generator retirements. The NIRS report recommends, among other things, creating “proactive plans to replace or phase out nuclear, in concert with emissions reduction and renewable energy goals, and grid modernization initiatives. In this way, reactor closures may be treated similarly to reliability impacts of generator retirements, which involve a similar process:  (1) independent evaluation of the likelihood and scale of grid impacts resulting from the plant closure; (2) evaluation of the availability, cost-effectiveness, and timeframe for alternatives, through resource planning, market-based processes, or procurement through open, competitive bidding; and (3) time-limited economic support for the incumbent generator only until more cost-effective alternatives can be identified and implemented.”

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This post was prepared by Solar Thermal Magazine staff.

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