Even in a Carbon-Constrained World, FirstEnergy’s Nuclear Bailout Proposal in Ohio Must Be Rejected

November 8, 2018 | 12:01 am
Nuclear Regulatory Commission
Jeff Deyette
Director of State Policy and Analysis

A new report, The Nuclear Power Dilemma, released today by my UCS colleagues, finds that more than one-third of the nation’s nuclear power fleet – that provides more than 20 percent of the country’s nuclear power – are uneconomic or slated to retire over the next decade primarily due to economic, safety, and performance reasons. Two of the uneconomic plants—Davis-Besse and Perry—are in Ohio and owned by Akron-based FirstEnergy Corp. Like the analysis’s other unprofitable nuclear plants, Davis-Besse and Perry can’t compete in today’s power markets with the cheap natural gas and renewable energy that is transforming our nation’s electricity sector. That’s why FirstEnergy is now seeking a bailout from the Ohio legislature to keep these facilities open.

In a world where the threat of climate change is increasingly dire and the need to dramatically cut carbon emissions is even more urgent, every source of zero-carbon energy is important. But make no mistake: FirstEnergy’s bailout proposals for its struggling nuclear plants are poorly conceived and must be rejected. Here’s why.

FirstEnergy isn’t interested in advancing clean energy or reducing carbon emissions

After doubling down on coal and nuclear despite the rise of cheap natural gas and renewables, FirstEnergy has spent years trying to get support for a bailout of all of its uneconomic power plants, including its fleet of old, inefficient, and dirty coal-fired plants.  First, it appealed to the Ohio utility commission for a bailout of its coal plants, then it went to President Trump and the Federal Energy Regulatory Commission predicated on debunked claims that coal plant retirements would impact the reliability of the electricity sector. Both plans have fortunately failed thus far. But that hasn’t stopped FirstEnergy, and if they get their way, ratepayers will be subsidizing uneconomic, carbon-intensive coal plants to the detriment of our public health, environment, and climate.

Furthermore, FirstEnergy is actively trying to stall Ohio’s clean energy momentum. They have spent years at the Ohio legislature trying to gut the state’s energy efficiency and renewable energy standards that have helped spur Ohio’s nascent clean energy industries. Wanting to subsidize uneconomic coal on one hand and trying to kill clean energy progress on the other leaves no room for negotiation in supporting its nuclear facilities.

Of the 30 states with nuclear power plants, 17 states–including Ohio–have nuclear capacity that is unprofitable or scheduled to close.
Source: UCS

FirstEnergy’s newest proposal fails our conditions for support on all accounts

FirstEnergy’s latest attempt to bail out its Ohio nuclear plants is a “zero-emissions nuclear” (ZEN) proposal (HB 381 in the Ohio Legislature) that would generate ZEN credits for every megawatt-hour (MWh) of power produced from their nuclear plants and then require Ohio’s electric utilities to buy the credits for $17 dollars each (adjusted annually for inflation) through 2030. The legislature’s fiscal analysis reveals the proposal would cost Ohio ratepayers $180 million or more per year.

UCS’ new report argues that we must consider the impacts of potential abrupt nuclear plant retirements in achieving the carbon reductions necessary to avoid the worst impacts of climate change. While the potential retirement of Davis-Besse and Perry poses no threat to the reliability of the region’s power supply, the analysis does show that in the absence of strong policies such as a price on carbon or robust low-carbon electricity standards, coal and natural gas would largely replace their lost generation, thereby raising near-term carbon emissions at exactly the time when those emissions need to be going down. As a result, exploring some means to ensure that these and other unprofitable plants continue operating warrants discussion.

Importantly, the UCS report lays out five conditions that must be met before any consideration should be given by policymakers to providing economic support exclusively to struggling nuclear plants. FirstEnergy’s nuclear bailout proposal fails all of them:

  • Safety: any plant qualifying for economic support must meet or exceed the Nuclear Regulatory Commission’s highest safety standards. The Davis-Besse plant fails this test with one of the worst safety records in the nation’s nuclear fleet.
  • Transparency: nuclear plant owners should open their financial books for regulators and the public to protect ratepayers by demonstrating the need for economic support. FirstEnergy’s proposal far exceeds our estimate of what these plants would need to survive, and they’ve offered no proof that this level of support is necessary.
  • Flexibility: To further protect consumers, financial support should be temporary and adjustable to account for changing economic or policy conditions. FirstEnergy’s proposal appears to lock in significant ratepayer expense through 2030 with no meaningful review or provisions for adjustment.
  • Strengthened renewable energy and energy efficiency standards: FirstEnergy’s proposal does nothing to stimulate the rapid growth in clean energy resources needed to meet our deep carbon reduction goals. As discussed above, FirstEnergy has spent considerable effort to stop Ohio’s momentum in advancing renewables and efficiency. In contrast, Illinois, New York, and New Jersey significantly or strengthened their renewable electricity and energy efficiency standards as part of legislation that provided financial support for distressed nuclear plants.
  • A commitment to impacted communities: Transition plans for affected workers and communities – to attract new investment, replace lost jobs, and rebuild the tax base once nuclear plants eventually do retire – must be included in any economic support proposal. FirstEnergy’s proposed legislation does not put forth anything meaningful in this respect.

So, there you have it: zero out of five conditions met. Because FirstEnergy has shown no commitment to seriously addressing the threat of climate change and because its proposal for bailing out its unprofitable nuclear power plants meets none of the above criteria, it’s clear that Ohio legislators should say no to FirstEnergy’s bailout proposal and instead move forward with a clean energy plan that builds on Ohio’s abundant potential for renewable energy and energy efficiency.

Let’s be clear: UCS does not prefer a piecemeal approach to achieving necessary carbon reductions in our electricity sector. We strongly recommend state and federal policies such as a price on carbon emissions or a low-carbon electricity standard that provides a level playing field for all low-carbon technologies. Our analysis shows these policies would cost-effectively achieve much greater carbon reductions. Unfortunately, there’s currently a leadership void in Washington, DC. Given the urgency of climate change, we must therefore explore alternatives. But we must also ensure that the alternatives stand up to scrutiny and ultimately move us toward a truly clean economy fueled primarily by renewable energy resources. FirstEnergy’s current proposal simply doesn’t pass muster.

NOTE: UCS Sr. Analyst Sam Gomberg contributed in the drafting of this blog.