EPA rule not such a boon for nuclear after all -- utilities

U.S. EPA's greenhouse gas proposal for existing power plants doesn't do enough to boost nuclear energy, advocates for the industry say.

Two months after EPA unveiled the proposal -- and just over two months before the end of the public comment period -- companies that have invested billions of dollars in the United States' primary source of zero-carbon baseload energy say they are still reviewing the draft.

But while the industry has yet to reach a consensus position, some utilities say they are discouraged by the way the June 2 proposal treats new nuclear projects that are coming online or attempts to help existing facilities overcome the economic factors that threaten them with retirement. The agency has proposed tougher state carbon intensity targets for states that host nuclear in the hopes of encouraging them to provide incentives for the industry, but some advocates say it hasn't rewarded states for past nuclear investment.

Analysts say EPA officials intended to write a proposal that rewards nuclear for its zero-carbon baseload power. The draft was released amid administration fears that nuclear retirements driven by competition from cheap natural gas and waning energy demand could jeopardize President Obama's near- and midrange greenhouse gas reduction commitments (Greenwire, Feb. 5).

And in the wake of EPA's rollout, many assumed the agency had thrown a lifeline to an industry that high-profile administration allies, including former White House climate and energy czar Carol Browner, had come to regard as part of the solution to climate change (Greenwire, June 2).


The Energy Department is reviewing scenarios that put the nuclear retirement rate as high as one-third in the years to come. The U.S. Energy Information Administration predicts that a much more modest 6 percent of the nation's nuclear fleet is at risk, but even that could increase atmospheric carbon dioxide emissions by 200 million to 300 million metric tons over the next decade in the likely event that natural gas generation is ramped up to offset it. EPA's draft rule seeks to manage this risk by assigning nuclear energy states slightly more stringent targets in an effort to encourage them to promote nuclear relicensing.

"We therefore propose that the emission reductions supported by retaining in operation six percent of each state's historical nuclear capacity should be factored into the state goals for the respective states," EPA states in the rule's preamble. If states do not retain their nuclear fleets, they must make up that 6 percent zero-carbon energy through other measures, like new demand-side efficiency or renewable energy.

But utilities that have invested or are investing in nuclear facilities say that's not enough.

"While EPA appropriately recognized the critical role of existing nuclear plants in enabling the U.S. to meet carbon reduction goals, the nuclear crediting mechanism needs to be improved to achieve EPA's intended objective," said Paul Adams, a spokesman for Exelon Corp., which operates the largest nuclear fleet in the nation. He called on EPA to finalize a rule that will "treat zero-carbon resources the same and ensure states do not double-count these resources."

EPA only builds 6 percent of nuclear generation into a state's target -- and only gives it that much credit for preserving its existing nuclear capacity. But 100 percent of a state's renewable resources count toward the rule's target -- which creates an imbalance between the two sectors, nuclear advocates say.

But despite arguing that EPA's draft sells existing nuclear short, Exelon is expecting it to spur Illinois to help the company save three at-risk nuclear plants in that state. On a July 31 call with investors, Exelon Senior Vice President of Government and Regulatory Affairs Joseph Dominguez noted that Illinois will soon need to respond to the rule by crafting a state implementation strategy to meet its targets -- which include the 6 percent add-on for nuclear. Exelon's three at-risk nuclear units should receive incentives, he said.

"The plants produce a tremendous amount of zero-carbon energy, and so if you lose those, you're going to see a big uptick in carbon emissions," he said. "And we've seen that in states where plants have actually retired."

While the draft rule makes an effort to preserve at-risk nuclear, it merely assumes that new projects that are currently under way will go forward -- baking those reductions in to state targets for Tennessee, Georgia and South Carolina. Those states all have new nuclear facilities under construction and face tougher standards than are assigned to other states in their region -- 39 percent, 44 percent and 51 percent, respectively, by 2030.

At a conference last week in Washington, D.C., hosted by the Environmental Council of the States (ECOS), Larry Monroe, Southern Co.'s senior vice president of research and environmental affairs, said his company thought it was positioning itself for easier compliance with eventual EPA greenhouse gas standards eight years ago when subsidiary Georgia Power partnered with other Georgia-based utilities on the nation's first new nuclear construction in three decades.

Instead, EPA simply assigned Georgia a tougher standard that assumed those megawatt-hours were already available -- effectively not giving the state credit for bringing them online. But the state would still have to attain that target if the units were scuttled.

"It did not help us, it actually penalized the state of Georgia," he said.

Georgia Power serves about half the state's electric customers, and its fossil fuels facilities may bear the brunt of the higher state target, which could require fuel switching, efficiency upgrades or both to bring the state into compliance.

EPA's rule has led states and utilities that have made early strides in a host of areas -- from combined-cycle natural gas to renewables to demand-side efficiency -- to complain that they have not been credited for their early actions but have instead been assessed tougher obligations because of them. Some, like California, face very tough targets for the future despite past progress to reduce emissions -- but may still support the rule because state policymakers back its goals (Greenwire, July 17).

But analysts say EPA faced a tough task when it came to deciding how the rule should treat nuclear energy. In contrast to wind and solar facilities, nuclear plants are so large, they say, that giving full credit for facilities that are already slated to come online could mean giving states like South Carolina a way to meet their targets without making any reductions elsewhere.

And if nuclear were treated exactly like renewable energy and states were held accountable for every megawatt-hour of power currently derived from nuclear plants, then the retirement of a single unit could hobble a state's ability to meet the standard at all, said Kyle Aarons, an analyst for the Center for Climate and Energy Solutions.

"A state would just be in dire straits if a 2 gigawatts plant goes offline," he said. "States would have an extremely difficult time making up for that through other means."

Rethinking its approach?

EPA could treat nuclear the same way that it does large hydropower, leaving it out of the rule completely. But that would do nothing to protect at-risk units.

"While there are very valid concerns, it is difficult to come up with a way that EPA could have done it better, because there are problems any way you want to slice it," Aarons said.

But industry advocates say they hope EPA will find a better way to encourage the retention of existing units. One industry source said the agency appeared to be rethinking its proposed 6 percent carve-out for at-risk nuclear in response to repeated comments by utility-sector stakeholders.

EPA staff had come to realize that the rule would not dissuade utilities from closing their nuclear units and replacing the power with new natural gas units, which would not be subject to the existing source rule, the source said. That would encourage fuel switching away from a zero-carbon technology and toward fossil fuels, the source said -- hardly the result EPA is hoping for.

"If there's one place that EPA knows they've done a bad job, it's on that," said the source. "And I presume that if anything changes between the proposal and the finalization, the treatment of those at-risk nuclear units will change."

Browner said on the sidelines of the ECOS event last week that although she was still assessing the draft, its intent was to preserve a role for today's nuclear facilities.

"Existing nuclear energy plants should be recognized for their valuable role in producing carbon-free energy," she said. "State and national carbon reduction goals will be difficult or impossible to meet without our existing nuclear energy plants, reinforcing the need to preserve them."

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