A Department of Energy (DOE) Task Force has just backed a key demand made over the last eight months by climate scientists and environmentalists organized by Environmental Progress: that the federal government end policy discrimination against nuclear power that is causing our clean energy crisis.
[E]lectricity markets must recognize the value of carbon-free electricity generation based on the social cost of carbon emissions avoided, either by assessing a carbon-emission charge on electricity generation or, alternatively, by extending a production payment on carbon-free electricity generation of about $0.027 per kilowatt-electric-hour (kWe-hr) ($213 million for a 1,000 MWe reactor operating at 90% capacity factor) for a period of time.
In calling for a price on carbon or the temporary support for nuclear, the DOE task force is acknowledging that energy production tax credits are not the ideal, long-term solution, but should be given temporarily to save America's largest source of clean power.
The federal government has subsidized wind energy production at a similar level for 23 years.
The report also endorses the call made by Environmental Progress to include nuclear in state renewable portfolio standards (RPS):
Potential Options to Address Renewable Energy Policies
• Establish new or expand current Federal or state financial supports for existing or new nuclear plants. The most direct approach would be a production payment, but other policy tools are available (e.g., investment tax credits and loan guarantees).
• Expand state RPS programs to become “Low-Carbon Portfolio Standard” programs or the equivalent by including nuclear and other zero-carbon technologies. A variant of this was recently adopted by New York State, where a new 50% RPS now requires incumbent utilities to “pay for the intrinsic value of carbon-free emissions from nuclear power plants” operating in the state by purchasing “Zero-Emission Credits.” 17
• Require renewable generators to bundle their intermittent generation with firming (i.e., backup) capacity in order to provide a non-intermittent resource and/or allocate a share of the incremental system costs resulting from intermittency.
Since January of this year, a group of prominent scientists, including James Hansen, and environmental leaders organized by Environmental Progress have published nine open letters, including to President Barack Obama last May, urging equal treatment of nuclear in federal and state subsidies and mandates. In our letter, we both urged equal treatment and acknowledged the problems with production tax credits:
While cheap natural gas is the immediate cause of today’s premature closures, policies that unfairly discriminate against nuclear are the underlying driver of the challenges faced by the industry. Solar and wind have boomed during a period of low natural gas prices because they receive substantially more in subsidies than nuclear does.
Fortunately, the cost of saving nuclear plants is low compared to the cost of deploying new sources of clean energy. Financially struggling nuclear plants need a subsidy of about 0.7 cents to 1 cent per kilowatt-hour, much less than the 2.3 cents per kilowatt-hour subsidy to wind turbines from the federal Production Tax Credit. (Other federal and state subsidies to wind and solar can easily double that amount.)
The cost of simply letting nuclear plants close is even bigger. Using the EPA’s price of $36 per ton for the social cost of carbon, replacing those 12 at-risk nuclear plants with gas-fired power would have a climate, pollution and social cost of $45 billion...
The federal government should include nuclear in federal clean-energy procurement mandates that currently exclude it. Subsidies should be equal for renewables and nuclear. Excessive fees charged by the NRC should be reduced. And FERC should promote rules for capacity markets that would better compensate nuclear plants for their exceptional reliability.
Last July, Will Boisvert, writing for Environmental Progress's web site, noted that the federal production tax credit for wind was harming nuclear:
The $23 per megawatt-hour federal Production Tax Credit for wind farms, for example, can be larger than the total wholesale price nuclear plants get for their power in some regions, according to Bloomberg data. (It’s also larger than the $5-15 per megawatt-hour subsidies Bloomberg reckons nuclear plants need to break even.)
State renewable portfolio standards require utilities to bring new renewable capacity onto their grids no matter how much it depresses markets, and renewable subsidies further erode electricity prices, especially in Midwestern states where subsidized wind farms bid very low—even negative—prices for their power.
New York Times economics columnist Eduardo Porter noted similar problems with the production tax credit for wind in a column last July, "How Renewable Energy is Blowing Climate Change Efforts Off Course."
Nuclear generators’ troubles highlight the unintended consequences of brute force policies to push more and more renewable energy onto the grid. These policies do more than endanger the nuclear industry. They could set back the entire effort against climate change.
California, where generators are expected to get half of their electricity from renewables by 2030, offers a pretty good illustration of the problem. It’s called the “duck curve.” It shows what adding renewables to the electric grid does to the demand for other sources of power, and it does look like a duck.
As more and more solar capacity is fed onto the grid, it will displace alternatives. An extra watt from the sun costs nothing. But the sun doesn’t shine equally at all times. Around noon, when it is blazing, there will be little need for energy from nuclear reactors, or even from gas or coal. At 7 p.m., when people get home from work and turn on their appliances, the sun will no longer be so hot. Ramping up alternative sources then will be indispensable.
Today's DOE report makes the same points as Boisvert and Porter:
However, in some cases, [Renewable Portfolio Standard] has suppressed wholesale prices during hours of high renewable output and resulted in the dispatch of renewable electrical generation ahead of base load power generators, including nuclear. This serves to adversely impact the value of base load generation (see footnote d). In some circumstances, the Federal renewable energy production tax credit, which allows producers to bid negative prices into energy markets and has driven hourly energy prices below zero, has reduced revenues to nuclear and other generators in competitive markets.
Environmental Progress, like the DOE task force, endorses temporary subsidies for nuclear, but also advocates strongly for more fundamental policy reform. Notes Boisvert:
Nuclear subsidies would help correct the biases plaguing energy policy. New York’s proposed Zero-Emissions Credit for nuclear power is a huge step in the right direction, and could serve as a model for other states.
But energy policy needs a more comprehensive rethink. It’s time to question the direction in which Big Green groups like NRDC and FOE, whose lobbying has dominated policy-making on this issue, are driving the country....
Politicians, regulators and planners need to sit down with a broader array of stake-holders and systematically plan the transition to a sustainable energy supply. They should do so with a clear understanding of the strengths and limitation of energy technologies, and take care to foster orderly markets that avoid the boom-and-bust cycles of the last two decades. And they should think carefully about how to value and conserve America’s vast resource of clean nuclear power.
With today's DOE Task Force report, it looks as though politicians, regulators and planners are finally starting to break free from the "renewables-only" anti-nuclear dogma that has held sway over the Democratic Party for 40 years.