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for the advocates of SC-CO2, Section 5 also lists a number of Obama-era “Technical Support Documents” “which shall be withdrawn as no longer representative of government policy.”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
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