Closure of FitzPatrick and Other Plants – Reasons and Possible Responses – Part 2

Policies

As I've stated in pervious posts, nuclear is essentially required be a clean energy source (i.e., is required to spend whatever it takes to reduce even the chance of pollution to negligible levels), but then it is essentially treated like a dirty energy source under current policy.  It is required to compete directly in the wholesale electricity market with fossil sources that are allowed to emit CO₂ and pollute the environment for free.

Despite much talk about the need to reduce emissions, and nuclear's essential role, no policies that provide any tangible support to existing nuclear plants have been adopted, anywhere.  While renewable sources get large subsidies and outright mandates for their use, existing nuclear plants get no financial support or recognition for their non-polluting nature.  Even the EPA's new Clean Power Plan, if promulgated, would do nothing at all to incent continued operation of existing plants.

The situation is very frustrating in that the level of support needed to keep these existing nuclear plants open is less than 1 cent/kW-hr, much smaller than the support given to renewables.  Also, it is likely that the nuclear plant support would only need to be temporary (until gas prices rise or various transmission lines are built, etc.).

Providing a small (and likely temporary) amount of financial support to keep existing nuclear plants open, that will result in decades of large-scale, 24/7, emissions-free generation, is one of the least expensive emissions reduction methods you will ever find.  There is simply no excuse for having zero incentive to keep existing nuclear plants open, especially for policies whose stated goal is CO₂ emissions reduction.  As it is, this lack of incentive to keep plants open may result in nuclear plant closures that will offset much of the impact of all the efforts we've made in the area of renewable energy.

Electricity Markets

Nuclear operators have complained that, in addition to not getting any credit for being non-polluting, nuclear plants do not get sufficient credit for their contribution to grid reliability.  It possible that changes to capacity auction rules may improve this situation somewhat, but it may not be enough.

A bigger issue is the market distortions caused by heavy subsidies for intermittent renewable sources, most notably wind.  In merchant power markets, non-renewable plants have to make all their money through power sales in the wholesale market.  Due to heavy subsidies and/or outright mandates, renewable generators are built even if additional generation is not needed.  As a result, when the wind blows, the market goes into a state of glut, which greatly reduces wholesale power prices.  The way the market is structured, this greatly harms the profitability of existing (e.g., nuclear) plants.  The wind farms are still viable because they don't get most of their money from wholesale market sales.  They get it from other sources, i.e., taxpayers and retail electricity buyers.

If wind farms had to get all their money from wholesale market power sales, it's not clear how many such farms would be built.  The reason for this is that whenever they have power to sell (i.e., when the wind blows), the market would immediately go into glut and the market price would immediately fall to negligible levels.  Thus, they would rarely get a good price for their power, i.e., a price sufficient to pay all their costs.  That would be how a real (unperturbed) market would naturally apply an appropriate penalty for intermittent and/or unneeded (excess) generation.

Regulations

In addition to biased policies and markets, much of the problem is due to ever escalating operating costs for existing nuclear plants.  Apparently, some of these (small, single-unit) plants have operating costs of ~5 cents/kW-hr.  As someone who was always taught that, once built, nuclear had the lowest operating costs (by far), I find this shocking.  I'd been taught that they were ~2 cents/kW-hr.  How did this happen?  It seems clear that most of the reason for escalating costs are due to ever-escalating regulations and requirements.  Enhanced plant security requirements (post 9/11) and new, post-Fukushima requirements are of particular note with respect to increasing operating costs, particularly for smaller plants.

It seems increasingly clear that something has to be done about nuclear regulations, especially now that we're seeing several nuclear plants close.  One has to ask why nuclear plants have such strict security requirements when all sorts of facilities that would actually result in a greater loss of life if successfully attacked have much lower security requirements, or none at all (such facilities including chemical plants, large dams, LNG terminals, oil refineries, tall buildings or any place where people gather such as high schools).  One also has to ask why the response to Fukushima is yet more regulations (with no existing regulations being relaxed or eliminated) despite the fact that Fukushima showed the consequences of even a worst-case accident/release to be far smaller than we had always assumed.

It should be noted that the low cost natural gas that is undercutting nuclear on price is not just due to advances in drilling technology, but is also (perhaps mainly) due to the fact that the Energy Policy Act of 2005 gave gas fracking operations exemptions from the Clean Water, Safe Drinking Water and other acts.  This is an example of how large an impact regulations can have on economics.  Is it a coincidence that the fracking boom ("miracle") happened right after that law passed?  Would fracking even be economically viable if it had to meet the full rigors of the two above laws?  Meanwhile, no such regulatory relief is ever even considered for nuclear.  The regulatory burden just steadily increases.

This is all something to consider when someone tries to tell you that nuclear is simply (inherently) uneconomic.  It's as uneconomic as policies make it.

Lack of Political Support

There is a lot of talk about the need for nuclear, and support for its operation, but as of now it has been almost entirely lip service.  It is the lack of political support (and the resulting biased policies) that is causing nuclear's economic problems.

Cuomo and Schumer speak of trying to keep FitzPatrick open, but we've heard nothing tangible yet.  When discussing Pilgrim's closure, all the Massachusetts governor talked about is the need to line up alternative sources (such as gas or Canadian hydro), as opposed to doing anything to keep the plant open.  In fact, the state was taking active steps to bring that alternative generation about, which was one factor leading to Pilgrim's closure.  As for Vermont, well, everyone knows how the state did everything in its power to close the plant.  Lack of political support also played a major role in San Onofre's closure. The Obama administration recently discussed the need to keep nuclear plants open, but stated that there is little they can do about it.

In general, we more often hear politicians talk about efforts to address the impacts of closure (new jobs for workers, etc.).  So far, we haven't had any high ranking politicians get behind giving nuclear tangible financial credit (subsidy) for its non-polluting nature.  Treating nuclear the same as renewables, or relaxing overly-burdensome regulations has been completely off the table.  Compare that with politicians from coal states, who do anything they can to block regulations that could cause coal plant closures, regardless of the regulations' merit (i.e., even allowing 10,000 American deaths per year from coal plant pollution and doing nothing about global warming).

Possible Federal Actions

One (albeit politically unlikely) option for the federal government would be to consider relaxation of some nuclear regulations that are a significant burden for these small plants, and are leading to their closure.  Security requirements are a notable example.  Is it at all possible to convince NRC or policymakers that these requirements may actually result in increased overall public health risk, if they cause nuclear plants to close and be replaced by fossil fuels?

Also, current regulations make is so that once a plant is closed (thus allowing staff reduction), it is very difficult to reopen.  It is imperative that those policies change, so that reopening a closed nuke is not much more difficult than reopening a closed fossil plant.  We can't afford to permanently lose these multi-billion dollar non-emitting assets.  If nothing else, we need to preserve the option of reopening them when natural gas costs increase, etc.  It's also true that if the details of current policy (concerning the decommissioning fund, etc.) actually provide a financial incentive to permanently close a plant, such policies must be revised.

Finally, the best policy of all would be some federal policy that results in a tangible financial incentive to keep all existing non-emitting generation sources operating.  That could include an improved EPA Clean Power Plan (perhaps it's not too late!), some type of Clean Energy Standard, cap and trade, or any policy that puts a price on carbon, such as a fee and dividend policy.

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 regular contributor to the ANS Nuclear Cafe.