EPA Releases Final Rule for Clean Power Plan – How Did Nuclear Fare? – Part 2

Possible motivations?

One wonders why the CPP (1500+ pages) has to be so complicated, as opposed to simply consisting of limits on state power sector CO₂ emissions, or CO₂/MW-hr. The biggest practical difference between the CPP and applying such (simple) limits appears to be the inexplicable distinction between new and existing non-emitting sources. With simple limits, the incentive to keep existing non-emitting generation open would be just as strong as the incentive to build new non-emitting generation. The CPP, on the other hand, is tailored so that there is no incentive to keep existing non-emitting generation open (with the CO₂/MW-hr option, at least).

So why did the EPA do that? One cannot help but ask, what is the largest source of existing non-emitting generation? (It's nuclear, by far.) I cannot help but wonder if part of the reason for this complicated, convoluted rule was to make sure that there is no incentive to keep existing nuclear plants open.

The EPA stated that the CPP now treats renewables and nuclear equally, with respect to both new and existing generation (with the clear exception of the CPP's Clean Energy Incentive Program/CEIP). It removed any credit for keeping existing nuclear plants open, but stated that it also removed any credit for keeping existing renewable capacity open. My take on this is that it was a shrewd move by the EPA (and the pro-renewable groups that heavily influenced the final plan) that perhaps was made to avoid any possibility of the legal action against the CPP by the nuclear industry.

The real truth is that existing renewable capacity is not under any threat of closure. That is due to very low operating costs (even lower than nuclear, once built) along with the very important fact that most renewable generation that exists today enjoys large, direct operating subsidies such as the production tax credit (of ~2 cents/kW-hr), as well as outright mandates (in many states) for their use. That is, they benefit from policies separate from the CPP, or the EPA in general.

With an apparently neutral CPP, combined with a myriad of existing policies that favor renewables, the nuclear industry would not have any legal case against the EPA. Its only option for getting a fair and level overall playing field would be the far more difficult task of suing to have all those other (state and federal) policies repealed.

One nuclear "win" is actually a loss

In what was described as a win for the nuclear industry in many news articles, the final CPP allowed emissions reductions from nuclear plants under construction to "count" toward a state's emissions reduction goals (under either the CO₂/year or CO₂/MW-hr options). That, as opposed to assuming that those plants will be finished and using that as the state's baseline (from which further reductions are required). The net effect of this is simply relaxed emissions reduction requirements for the three states that have reactors under construction (versus what the requirements would have been under the preliminary plan). Those states and the utilities involved had argued that the states should be given "credit" for their efforts, and shouldn't be "punished" for deciding to build those plants. The implied argument is that not getting such credit amounts to a kind of disincentive to engaging in nuclear projects.

The real truth is just the opposite. It all comes down to simple math and practicality. The simple fact is that the more stringent the emissions reduction requirement a state is faced with, the greater incentive they have to build new nuclear reactors (or uprate existing ones). Past decisions, and whether one gets a "reward" for them, is irrelevant. The real impact of this "victory" is that it would be somewhat easier for the utilities to decide to walk away from the Vogtle and Summer projects and build gas plants instead (not that that's at all likely). This change will also greatly reduce the likelihood that any more nuclear plants (such as those occasionally discussed by Southern Company's CEO) will be built in those states.

You can't blame the EPA for this. This is something that the "nuclear industry" asked for. Thus, the EPA thought it was helping the industry. It was viewed as a concession. The most polite way that I can describe this situation is that it is an example of where the interests of many of the entities involved in nuclear generation (utilities, states, etc.) diverge from the interests of "nuclear power" itself (defined as maximizing the amount of nuclear generation).

Overall impact of CPP on nuclear

As discussed in Part 1, the CPP provides some incentive to keep existing plants open under the CO₂/year limit option, but no such incentive at all under the CO₂/MW-hr limit option. Thus, it's unclear how much the CPP will help struggling existing plants such as those in Illinois. Right now, it appears that some of these plants may be closed unless the state provides some incentive for keeping them open. But why would Illinois provide such incentives if keeping the plants open doesn't help them meet the CPP goals? It may help them meet the CO₂/year goal, but why wouldn't the state just opt for the CO₂/MW-hr goal and let the plants close? More generally, the CPP will only help existing nukes if states generally choose the CO₂/year limit option. However, they may chose the CO₂/MW-hr limit option, especially if electricity demand (MW-hrs) increases in the future.

The CPP provides some incentive for new nuclear generation and uprates of existing plants, but it is unclear how significant those incentives will be. Some analyses have concluded that the CPP reduction goals are rather weak, and merely reflect what is going to happen anyway due to other policies, such as tightening regulations on other coal plant pollutants, renewable energy subsidies, and state mandates for renewable energy use. The main impact of the CPP would thus be prevention of backtracking if things change in the future (e.g., higher natural gas prices). If it is indeed true that the CPP will have only a small effect on the future energy mix, then incentives to build new nuclear will be rather weak (the CPP being the only policy input that gives an incentive for new nuclear).

The real truth is that policies outside the CPP have effectively handed almost all of the market for non-emitting generation to renewables, by fiat; the main example being state renewable portfolio standard (RPS) policies. The CPP does little to change that. The CPP does not ask for much more than the emissions reductions that would happen anyway due to those policies. After complying with renewables mandates, etc., a state will have most of the emissions reduction credits (ERCs) it needs to comply with the CPP goals. In fact, the CPP acts to hand even more of the non-emitting market to renewables through the CEIP.

Although the CPP ostensibly treats nuclear and renewables the same (perhaps as a way to avoid legal challenges by the nuclear industry), the fact is that U.S. energy policies overall do not treat nuclear and renewables anywhere near the same. In order to actually create a system where emissions reduction options can compete on a fair and level playing field, and in order to provide any significant incentive for new nuclear, policies such as the CPP (or cap-and-trade, or a carbon tax, etc.) must be put in place in lieu of policies such as state RPSs or tax credits for renewables only. Either that, or the reductions required by policies like the CPP would have to be significantly larger than those that would be produced through existing, renewables-only policies alone. Unless this happens, most if not all of the non-emitting generation market will be handed to renewables, and there will be little incentive to build new nuclear. There could be some hope for states that do not have RPS policies (such as those in the Southeast), but note that since the EPA did not consider the possibility of new nuclear plants in setting of state goals, states where large increases in renewables are not expected were given weak reduction goals.

Many within the nuclear industry are pleased with the CPP, despite the fact that it does little to nothing to keep existing plants open and that, overall, U.S. policies do not treat nuclear anywhere near the same as renewables, as an emissions reduction option. It's likely that they thought that the CPP was the best that they were going to get. This is a reflection of just how little political influence nuclear has relative to pro-renewable and pro-fossil interests.

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Jim Hopf is a senior nuclear engineer with more than 20 years of experience in shielding and criticality analysis and design for spent fuel dry storage and transportation systems. He has been involved in nuclear advocacy for 10+ years, and is a member of the ANS Communications Committee. He is a regular contributor to the ANS Nuclear Cafe.