NUCLEAR:

White House throws ailing reactors a potential lifeline

The Obama administration today threw a potential -- and limited -- lifeline to the country's ailing nuclear industry, highlighting the ability of existing reactors to help states curb emissions.

U.S. EPA unveiled a proposal for curbing emissions from existing power plants that pointed to the United States' fleet of about 100 reactors as playing a critical role -- alongside ramping up efficiency and shifting to natural gas and other low-carbon alternatives -- in cutting the utility sector's greenhouse gas emissions by 30 percent compared with 2005 levels by 2030.

At issue is EPA's finding in the proposal that preventing the closure of "at-risk" existing reactors could avoid up to 300 million metric tons of carbon dioxide during the initial compliance phase of 10 years.

"Policies that encourage development of renewable energy capacity and discourage premature retirement of nuclear capacity could be useful elements of CO2 reduction strategies and are consistent with current industry behavior," the agency said. "Costs of CO2 reductions achievable through these policies have been estimated in a range from $10 to $40 per metric ton."

The U.S. nuclear industry is facing a host of challenges, including stiff competition from cheap natural gas, low wholesale energy prices, increasing fixed operation and maintenance costs, and high upfront capital costs for building new units.

EPA noted that units have recently closed in California, Florida and Wisconsin, and additional closures have been announced in Vermont and New Jersey. EPA also noted that the U.S. Energy Information Administration in its most recent annual energy outlook projected that an additional 5.7 gigawatts of capacity -- about 6 percent of the country's current capacity -- is at risk of retiring.

EPA pointed to a February 2013 Credit Suisse report that found nuclear plant operators may be experiencing a $6-per-megawatt-hour shortfall in covering operating costs with electricity sales.

"Assuming that such a revenue shortfall is representative of the incentive to retire at-risk nuclear capacity, one can estimate the value of offsetting the revenue loss at these at-risk nuclear units to be approximately $12 to $17 per metric ton of CO2," the agency wrote. "EPA views this cost as reasonable."

The agency went on to propose that emission reductions from retaining 6 percent of each state's historical nuclear capacity should be factored into each state's goals. EPA also asked for comments on whether the cost of completing new reactors in Georgia, South Carolina and Tennessee should be considered in the states' compliance plans.

Steve Clemmer, the Union of Concerned Scientists' director of energy research and analysis, said it's reasonable for EPA to include existing nuclear generation in the baseline and to credit states for new reactors, adding that the agency's modeling of the rule doesn't project the construction of new reactors beyond the five currently being built. But Clemmer questioned EPA's methodology and finding that 6 percent of the nation's existing fleet is at-risk economically and applying that percentage equally across the states, noting that factors playing into each plant's closure varies.

"In states where existing plants aren't economically vulnerable, they could get a windfall profit by getting extra credit," he said, noting that the industry already receives generous subsidies.

The EPA proposal is already emboldening the industry's focus on state compliance plans.

Marv Fertel, the Nuclear Energy Institute's president and CEO, said in an interview that the U.S. nuclear industry in coming months and years will be pushing states with merchant nuclear plants to value those units for avoiding emissions. States must submit compliance plans by June 30, 2016, or ask for an extension by April 1, 2016. The rule is slated to be finalized next June.

"We have a bunch of states that have renewable portfolio standards; we think you ought to be basically looking at in the state maybe a clean energy standard ... and you should be including nuclear as a part of that," Fertel said.

Fertel said state policies could bolster nuclear units -- just as they currently boost wind and solar.

"It would work the same way it's working for renewables right now. You have to meet the renewable standard, so you're driving renewables into certain portfolios in the state; this would say that you ought to be looking not only to drive nuclear by either updates or whatever, but value the existing nuclear for the attribute of no emissions, as well as all it does for reliability," Fertel said.

The current fleet of reactors avoids 600 million metric tons of carbon dioxide each year, equivalent to removing 113 million cars from the road, Fertel added.

The Obama administration in recent months has highlighted the link between climate mitigation and nuclear power. Pete Lyons, the Energy Department's assistant secretary for nuclear energy, said earlier this year that a rash of premature U.S. reactor closures could threaten the country's climate goals.

EPA Administrator Gina McCarthy in prepared remarks for an event in Washington, D.C., today placed nuclear power on par with solar and wind, saying states have the opportunity to "shift to 'no' carbon sources like nuclear, wind, and solar." McCarthy went on to say that the nation's nuclear reactors continue to "supply zero carbon baseload power. Homegrown clean energy is posting record revenues and creating jobs that can't be shipped overseas."

The administration earlier this year finalized $6.5 billion worth of loan guarantees for the country's first U.S. reactors in decades without requiring developers to pay a "credit subsidy fee" -- money that protects taxpayers should the developers default (Greenwire, April 21).

The nuclear industry has stepped up its campaign efforts in recent months, with Exelon Corp. taking the lead, partially funding a new front group called Nuclear Matters. The group's members include former White House climate adviser and former EPA Administrator Carol Browner, former Sens. Evan Bayh (D-Ind.) and Judd Gregg (R-N.H.), former Energy Secretary Spencer Abraham, and former Commerce Secretary and Obama Chief of Staff Bill Daley.

Doug Vine, a senior fellow at the Center for Climate and Energy Solutions (C2ES), said EPA is setting base lines over the country's total generation mix, and a state's job becomes more difficult if a reactor retires. Vine said C2ES has seen two approaches that could benefit nuclear plants, including the clean energy standard that Fertel mentioned and carbon pricing.

Kyle Aarons, a senior fellow at C2ES, said the rule could act to incentivize states to keep current reactors running.

"It's certainly going to change states' thinking," Vine said. "It's going to put a more long-term focus on nuclear."

Twitter: @HMNorthey | Email: hnorthey@eenews.net

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