President Trump has a different view of climate change than the previous administration. His decision to disassociate the U.S. from the Paris Climate Accords has received the lion's share of recent publicity in this regard. Now the President's March 28th Executive Order (EO) could harm the U.S. nuclear power industry (although we doubt that was his intent).
The EO directs the EPA, among other things, to review the previous administration's "Clean Power Plan". There are two main parts to the CPP with respect to electric power generators: 1) carbon pollution emissions guidelines for both new and existing generation and 2) federal efforts to measure the social costs of carbon (SC-CO2) as well as nitrous oxide and methane. It is the latter that concerns us here.
Two states, New York and Illinois, have recently taken steps to subsidize aging nuclear generating stations. Both states used a variant of the SC-CO2 concept to justify above market payments to these base load power stations. The states' rationale was simple. This subsidy was not related to either capacity or energy production. Rather it was an indirect payment for power produced with certain environmental attributes, in this case, low carbon emissions.
Regulatory personnel in NY have argued that nuclear subsidies, called Zero (carbon) Energy Credits were no different than the state program supporting renewable energy via Renewable Energy Credits. In addition, these so-called RECs fall within the state's jurisdiction. However, the administrative price setting mechanism for nuclear ZECs was based on benefits ascribed to the social cost of carbon.
Section 5 of the March 28 EO is intended to "Review Estimates of the Social Cost of Carbon, Nitrous Oxide, and Methane for Regulatory Impact Analysis" and shift federal policy. The intent of this EO, plainly stated in its first section, is to "promote clean and safe development of our nation's vast energy resources" and perhaps equally important, "avoiding regulatory burdens that unnecessarily encumber energy production…."
Unfortunately for the advocates of SC-CO2, Section 5 also lists a number of Obama-era "Technical Support Documents" "which shall be withdrawn as no longer representative of government policy." These documents, the product of a federal interagency working group, also disbanded, provided the underpinnings and rationale for the SC-CO2 methodology. In effect, the federal government has renounced the previous administration's SC-CO2 methodology. Related: Is Big Oil Betting On The Wrong Horse?
Nuclear subsidies based on environmental criteria will probably remain in place in New York and Illinois. However, other states like Ohio and Pennsylvania are facing a similar dilemma of aging, uneconomic merchant nuclear base load generation in often economically depressed regions. The pressure to keep these plants open will be considerable. But they won't be able to claim any benefit from the non-carbon emitting nature of nuclear power. That policy is being rewritten literally as we write.
We don't blame the nuclear power industry for attempting to rebrand itself as providing energy and environmental improvement. However, the federal government has taken the latter rationale away from the industry. If carbon's no longer a problem, who cares if relatively high cost nuclear power plants provide a solution?
By Leonard Hyman and Bill Tilles
More Top Reads From Oilprice.com:
Leonard S. Hyman is an economist and financial analyst specializing in the energy sector. He headed utility equity research at a major brokerage house and… More
Comments
He's all over the map and this Congress, valuing party over country, does nothing to restrain him.
I fear this will not end well for him or the USA.
The only real question is why they are not taking a more aggressive stance against renewable energy mandates and heavy subsidies. Could it be that the main impact of forcing intermittent renewables onto the grid is to cause coal and nuclear (baseload) plants to be retired and replaced with "flexible" natural gas plants (to the benefit of the powerful oil/gas industry)? If so, that would be a sign that it is the oil/gas industry (as opposed to coal) that they are truly in bed with, and their talk of saving coal is just lip service.
Another inaccurate characterization is that federal actions and policies will necessarily affect state policies. Just because Trump doesn't believe that there is a social cost of carbon doesn't mean that the states cannot pass policies based on that premise. Again, look at the state mandates for renewable energy, for a large fraction of overall power. Those all had environmental justifications, including global warming, and were passed with no consideration of the attitude of the federal govt. Many were passed during the Bush administration.
Thanks you for your comments.
First, you characterize federal policy towards energy as being pro fossil vs pro renewables with nuclear power suffering at best benign neglect. However, Energy Secretay Perry stated quite clearly, at least to us, in a June 27th White House briefing that his department's goal was to "make nuclear energy cool again". Perhaps we misinterpret but this does not sound like neglect at the federal level.
Second, the pro fossil vs pro nuclear dichotomy also misses another point we've been making for awhile. Nuclear's (economic) problem is that it supplies continuous, relatively expensive base load power. Renewables provide power that is relatively cheap, distributed and intermittent. Our point here is that renewables represent an alternative technology. New technologies almost by definition have the potential to annihilate old ones. For example, commercial sailing vessels were replaced by steam powered ships, horse and wagons were completely replaced by the automobile and telephone destroyed the telegraph. It is not unreasonable to assume that in perhaps say fifty years renewable energy plus storage will completely replace central station, base load electric power plants.
Lastly you refer to our "inaccurate characterization" that federal policy will affect state's actions. Three states, Ohio, Pennsylvania and Connecticut all face the same issues of aging, relatively uneconomic merchant nuclear facilities often in economically disadvantaged locales. The pressure to keep these facilities open will be considerable. The point of our article is that recent federal efforts will make these efforts more challenging.
Second,
Problem is, the stupid liberals here have been programmed through their fake universities and trash passing as entertainment. You grandparents were all genius compared to you. Treasonous, seditious communists fill every school, ruled by Jesuits and other subversives directed by Rothschilds and Rockerfellers.
As for you fools who discount our president, keep swilling the lies of nazi-Soros' media machine. If you live long enough, you'll realize the American people chose him to defend the Western Civilization you're so busy shitting on. I can already see your face when your first born or grandchild pops out missing half their arm or later you discover they're retarded because of the attending quack sticking them with an inoculation.