This article, written by Exelon’s Kathleen Barrón, senior vice president of federal regulatory affairs and wholesale market policy, will be published in the fall issue of the Environmental Law Institute’s magazine.
Since at least the 1970s, federal and state policymakers have looked for ways to bring cleaner sources of electricity to customers. From the Public Utility Regulatory Policies Act to the federal tax code, from regional carbon cap-and-trade programs to state renewable portfolio standards, we have seen numerous attempts over the last 40 years to either encourage cleaner and more efficient sources or discourage pollution-emitting sources.
Across the board, however, federal and state policies have ignored the largest and most reliable source of clean energy: nuclear generation. Despite providing more than 60 percent of the nation’s zero-emissions energy, nuclear operators across our industry have largely stayed out of the debate, instead keeping the lights on, our capacity factors up, and our heads down.
Utilities kept doing what they were doing: operating the nation’s 99 nuclear reactors safely and affordably, providing 20 percent of all the electricity consumed in the United States, and serving as the backbone of the power grid that policymakers were seeking to improve. All along, it was assumed that nuclear energy would continue to be there while policies led to new sources of clean power. That is no longer a viable strategy.
Here’s why: In the previous era of increasing electricity demand, nuclear energy could survive and even thrive despite being left outside of clean energy incentive programs and policies. However, in the current era of flat or falling demand, subsidized competition, cheaper (but emitting) alternatives, and increased operating expenses, many nuclear facilities are not recovering their costs.
This is occurring across all electricity market structures, as evidenced by the nuclear plant retirement announcements this spring in California, Nebraska, and Illinois. In fact, in just the last year, operators have elected to prematurely retire 10 units, or one-tenth of the fleet nationwide, representing 69 million megawatt-hours of zero-emission generation — three times the energy generated by all solar panels built in the United States over the last 15 years.
This does not include the lost carbon-free energy generated by the nuclear plants that have already ceased operation in California, Wisconsin, and Vermont, nor the additional plants that financial analysts currently deem at risk of following them to premature retirement. These shutdowns have real costs and irreversible consequences for plant communities, the electricity grid, and the environment — when the plants that have announced retirement stop generating electricity, CO2 emissions will go up dramatically. We will go backwards in our effort to bring customers cleaner electricity.
In recognition of this increasingly dire reality, states are exploring ways to value the carbon-free power provided by nuclear plants until a more comprehensive approach to national clean energy policy emerges. In New York, Governor Andrew Cuomo and the state public service commission have provided the leadership necessary to create a new type of environmental regulation that will support the Empire State’s reactors as a bridge to a low-carbon future.
Under the new regulation, the commission has established a Zero Emission Credit program to enable the state to achieve its goal of reducing CO2 emissions 40 percent below 1990 levels. The ZEC program will function similarly to the familiar renewable energy credits that facilitate RPS programs, but with an important and innovative new feature. The state will buy ZECs from nuclear plants and the credits will be priced at the value of avoided CO2 emissions, also known as the “social cost of carbon,” minus any market compensation.
This ensures that the state pays nuclear plants no more than needed to achieve the necessary carbon reductions. In contrast, indirect measures, such as RPSs or tax credits, tend to have wildly varying embedded prices of CO2. A diverse group of climate scientists and environmental groups have praised the innovative regulation, arguing that it will make New York a global leader in energy policy.
If properly valued and granted license extensions, today’s nuclear fleet could continue operating until the middle of this century, serving as a carbon-free bridge to the clean energy future we all want. However, losing nuclear plants prematurely will make that bridge longer and far more expensive. The question is this: should we build on our existing clean energy foundation, or should we tear it down and start from scratch?
