Forget the Trump Bailout—Here’s a Real Solution for Nuclear and the Climate

November 13, 2018
Photo: Greg Dunlap/CC BY (Flickr)
Rob Cowin
Former contributor

The Trump Administration’s proposal to bail out uneconomic coal and nuclear power plants is a bad idea predicated on a made-up problem. The real crisis we face is the climate crisis, as the recent IPCC report highlighted in stark terms last month. We must steeply reduce CO2 emissions over the next decade and beyond or we will lock in warming that will have disastrous consequences for people around the word.

We’ve dwindled away our most precious commodity in the climate fight… time. Now there are no easy options; no easy pathways. We are in a world of trade-offs. We must reconcile the science and the clock with the reality of where we are in our transition to a clean energy economy.

For the electricity sector, that means building a lot (a lot a lot) more renewables and increasing energy efficiency. It means modernizing our grid, ramping up energy storage, and phasing out coal and natural gas without carbon capture and storage (CCS). And it also means scratching and clawing for every metric ton of CO2 we can avoid, including guarding against the risk of existing nuclear power plants retiring abruptly and being replaced by natural gas.

UCS’ new report, “The Nuclear Power Dilemma: Declining Profits, Plant Closures, and the Threat of Rising Carbon Emissions” analyzes the economics of the existing nuclear fleet and concludes that a well-designed carbon price or a low-carbon electricity standard will help keep existing nuclear plants that meet high safety standards online.

The Trump coal and nuclear bailout is not a real solution

Earlier this year, the administration issued a notice of proposed rulemaking to the federal electricity regulatory commission (FERC), which would use executive authority to force consumers to buy more expensive electricity produced from coal and nuclear plants.

This is a bailout. Not only would it cost rate-payers (or taxpayers, depending on how the bailout is paid for), but the additional use of coal would hurt public health and increase the heat-trapping emissions that drive climate change.

The administration said they needed to take this unprecedented action because the prospect of coal and nuclear plant closures would jeopardize electricity reliability—keeping the lights on—and make the grid less resilient. This justification has been widely disproved by grid experts and was unanimously rejected by FERC. The administration’s actions appear to be based more on politics than on substance.

Even if this administration abandoned the current architecture of the proposal, jettisoning the coal bailouts and focusing only on nuclear, it would still be a poor approach. Dumping a bunch of rate-payer or taxpayer money into the coffers of private interests without big public benefits, transparency, and accountability is wrong.

Likewise, temporary bailouts for nuclear don’t address the systemic market failure which is a significant part of why nuclear plants are losing money in the first place: zero-carbon benefits are not rewarded in the marketplace in most states. Nuclear is competing with natural gas on an uneven playing field, and it’s losing. A temporary nuclear bailout would do nothing to address the underlying issue; applying a Band-Aid on a deep, gaping wound is not a real solution. Throwing good money after bad is not a responsible use of the public trust; these plants would be right back in the red the minute that money runs out.

What nuclear and other low-carbon technologies need is durable policy support that corrects this systemic market failure.

Real policy solutions that help existing nuclear and the climate

Our new report found that even a very modest carbon price ($25 per ton in 2020, increasing 5 percent per year) would solidify the economic position of the existing nuclear fleet, helping to avoid an over-reliance on natural gas and significant emissions increases. It would also incentivize the development and deployment of renewables, as well as other low- or zero-carbon energy technologies.

One policy option that hasn’t received as much attention and can also deliver similar benefits as a carbon price is a National Low-Carbon Electricity standard (LCES), or “Clean” Energy Standard.  UCS has supported this approach in the past, but as i will explore in a subsequent blog, the policy design matters.  For example, the last federal iteration of this policy was the Bingaman Clean Energy Standard Act of 2012, which gave partial credit to natural gas generation without CCS, which we would not support today, given the country’s growing over-reliance on natural gas, and the significant associated carbon emissions.

UCS modeled two policy scenarios: a modest carbon price case ($25 per ton) and a modest low-carbon electricity standard (60% by 2030/ 80% by 2050). The figure below compares the modeling results for our nation’s electricity generation mix under the policy scenarios to the 2017 generation mix, a reference case in 2035 (which includes the 5 nuclear plants slated to retire by 2025) and to three ‘early nuclear retirement scenarios’ that assume an additional 13-26 percent of the current nuclear fleet retires by 2026 because of economic reasons (before their current 60-year operating licenses expire). The early nuclear retirement scenarios are based on our analysis of the profitability of the existing fleet.

Both the carbon price and the LCES help maintain existing nuclear generation at reference case levels through 2035. In the case of the LCES, we see additional reductions in natural gas and additional development of wind and solar. How much the generation mix shifts to low-carbon resources is a function of the stringency of the policy; a higher carbon price or a more ambitious LCES target would show even more renewables.

The figure below shows the emissions trajectory of the different scenarios, including a carbon price and an LCES. Note that our early nuclear retirement scenarios show a 6 percent increase in emissions at a time when we need to be on track to achieve a 90 percent reduction by 2040 (shown here as the National Research Council Carbon Budget) to stay on track with our climate goals. The figure also shows that a 60 percent by 2030 LCES provides similar emissions reductions as the $25 per ton electricity sector carbon price, but note that those policies only get us a little more than half way to our emission reductions target by 2035. More stringent policies or additional complementary polices are required.

A national LCES is good for red states

UCS has been a leading advocate of renewable electricity standards (RES) around the country for many years, and supported the last federal iteration back in 2015, the Udall 30 by 2030 bill. We continue to believe that Congress should pass a strong national RES to help incentivize more renewables development, reduce our nation’s growing over-reliance on natural gas, and aggressively bring down carbon emissions. But, a properly designed national LCES can provide similar benefits, while also solidifying the economic position of existing nuclear plants that meet strict safety standards (preventing abrupt closures). And while we did not analyze this in our modeling, an LCES could also provide an incentive for developing new low and zero carbon energy technologies, including potentially new nuclear reactors and carbon capture and sequestration technologies (CCS), giving us more tools for the climate fight.

A national LCES can broaden the tent of support for low-carbon electricity in parts of the country that are not as far along in their transition to a clean energy economy. This policy helps mitigate some of the imbalances to states with less renewable development relative to a national RES. And it gives many red state congressional delegations a clean energy policy that may be a better fit for their state, freeing up badly needed support from conservatives.

For example, a strong national LCES would provide a lot of benefit to states like South Carolina and Tennessee, for which nuclear power makes the biggest contribution to their electricity mix, with very little coming from renewables. These states could be in position to benefit economically from this policy, while an LCES would also incentivize additional renewables and/or low-carbon development in those states as they prepare to eventually replace those nuclear plants when their useful life expires.

A strong national LCES would also benefit states like Iowa and Kansas, which have enormous wind power as well as nuclear, but also have a lot of coal in their electricity mix. A national LCES would help that existing nuclear stay online, as well as retire some of that expensive and harmful coal generation, while also building on the amazing 36-37% wind energy in their mix. Iowa and Kansas could also easily comply with an LCES and will benefit economically.  All of the states below would realize significant public health benefits that come with trading off coal for renewable energy development.

Electricity Generation Share by Sources, 2017 (source: The Nuclear Power Dilemma)

STATE Nuclear Coal Nat. Gas Hydro Wind Solar Biomass Other
SC 58% 19% 17% 3% 0% 0% 3% 0%
TN 40% 35% 13% 10% 0% 0% 1% 0%
IA 9% 45% 6% 2% 37% 0% 0% 1%
KS 21% 38% 5% 0% 36% 0% 0% 0%

We need to create incentives for states to reduce investments in coal and natural gas, maintain the low-carbon generation they already have, and substantially increase investments in new low or zero carbon technologies. Complementary policies to boost energy efficiency will also be needed. With a national LCES, several years from now the table above could show a significant reduction in generation from coal (and natural gas), while holding nuclear generation steady, and substantially increasing the contribution from renewables.

Absent a national LCES or some other policy that incentivizes and protects low carbon generation, the electricity mix in states like South Carolina and Tennessee is likely to go in the wrong direction for the climate.

We need real solutions, not bailouts

Our new analysis of the economics of the existing nuclear fleet clearly show there’s a risk of abrupt retirements, and that the generation would be replaced primarily by fossil fuels. That’s a climate problem, but it’s also a public health problem, it’s a jobs concern, there are tax revenue implications for communities, and much more. States like Illinois, New York and New Jersey avoided abrupt nuclear retirements by working with stakeholders to reach agreements that spawned real policy solutions. Pricing carbon and creating national standards for low emissions electricity are real policy solutions that would protect existing nuclear that can be implemented at the state or the federal level.

These policies don’t cost taxpayer money, and the modeling we’ve done on the electricity price impacts has shown no significant increases.

Juxtapose these real policy solutions with the coal and nuclear bailout proposed by the Trump administration that will cost substantial rate-payer or tax payer money, will NOT protect nuclear in the long-term, and will assuredly exacerbate the climate crisis while increasing threats to public health.

The choice is clear. We need real policy solutions, not bailouts for political supporters.