Complicated Economics Challenging Nuclear

Duke University
The Nicholas Institute for Environmental Policy Solutions at Duke University

Speaking at the International Petroleum Week conference in London on Wednesday, International Energy Agency (IEA) Executive Director Fatih Birol voiced concerns that the United States and Europe aren’t investing enough in nuclear power, while China is charging ahead.

“China is coming back strong. Today there are about 60 nuclear power plants under construction and more than one third of them are in China,” said Birol, noting that U.S. leadership in nuclear power is threatened by two trends, few additions to nuclear capacity and no lifetime extensions for existing plants.

In The Conversation, I write about how policymakers must address increasingly precarious economics of nuclear power if it is to be part of a U.S. climate change strategy over the next century.

Many experts predict that Vogtle—now the only large-scale nuclear construction underway in the United States—will be the country’s last commissioned traditional light-water reactor. According to the Department of Energy, the cost of generating electricity from newly constructed nuclear plants is almost double that from a new natural gas combined-cycle plant.

Natural gas combined-cycle plants aren’t just outcompeting nuclear power on price. They also give power system operators flexibility to adjust quickly to the ebbs and flows of intermittent renewable sources, such as wind and solar power. Nuclear plants are designed to run more than 90 percent of the time, but they can’t ramp up or down on short notice.

It is hard to make a business case for building new nuclear plants, even in regulated states like Georgia and South Carolina, where utilities are allowed to recover construction costs from their customers. In deregulated Northeast and Midwest power markets, where generators compete to deliver electricity at the lowest cost, no new nuclear unit has been permitted for construction since 1977.

Many analyses suggest that nuclear generation is essential for reducing U.S. carbon emissions. In late 2016, the Obama administration published a Mid-Century Strategy for Deep Decarbonization, designed to reduce U.S. greenhouse gas emissions 80 percent or more below 2005 levels by 2050. Every scenario called for expanding nuclear power. A 2016 study by the Rhodium Group, an international consulting company, projected that if all “at risk” U.S. nuclear plants retire by 2030, greenhouse gas emissions from the U.S. power sector will double from 2020 to 2030.

What’s the best way to resolve this tension between nuclear power’s failing market prospects and its importance to U.S. climate strategy? The Vogtle decision offers some lessons and demonstrates how proactive and aggressive strategies will be necessary to maintain nuclear power’s role in the electric grid and to avoid opening a gaping hole in U.S. climate change strategy.

FERC Attempts to Boost Grid Resilience with New Rules on Electric Storage Resources

In Utility Dive, Norman Bay, former chairman of the Federal Energy Regulatory Commission (FERC) and a senior fellow at Duke University, wrote that utilities and green groups can advance each other’s aims “if the power industry commits to an even cleaner grid in exchange for support from environmentalists on electrification.” Utilities need electrification to counter flat demand, Bay said, and environmentalists seek investments in technologies for a cleaner grid.

FERC may have just facilitated investments in one such “win-win” technology: energy storage. Last week FERC members unanimously approved rules to remove barriers to batteries and other storage resources in U.S. power markets, a potential game-changer for integration of renewables onto the grid.

FERC directed the regional transmission organizations (RTOs) and independent system operators (ISOs) that run wholesale electricity markets to establish market rules that “properly recognize the physical and operational characteristics of electric storage resources” after finding in November 2016 that existing market rules created barriers to entry for those resources.

The new rules will “enhance competition and promote greater efficiency in the nation’s electric wholesale markets, and will help support the resilience of the bulk power system,” FERC said.

Under the rules, grid operators can use technologies such as batteries and flywheel systems to dispatch power, to set energy prices, and to offer capacity, energy, and ancillary services.

Commissioner Cheryl LaFleur called storage a “Swiss army knife” because of its capacity to provide energy alongside variable renewable generation, to regulate frequency, and to help defer distribution and transmission needs.

The new rules take effect 90 days after publication in the Federal Register. At that point, RTOs and ISOs have 270 days to provide compliance findings and then one year to implement tariff revisions.

Judge Orders DOE to Implement Energy Efficiency Standards

A federal judge ordered the Trump administration to put into effect energy efficiency standards adopted in the last days of the Obama administration. Last week’s ruling arose out of two lawsuits, one filed by 11 states and the other by environmental groups. The U.S. Department of Energy (DOE) now has 28 days to publish the standards in the Federal Register, which would make them legally enforceable.

The standards languished after the Trump administration failed to publish final efficiency standard rules. U.S. District Judge Vince Chhabria said in his ruling that the DOE’s failure to publish the standards “is a violation of the department’s duties under the Energy Policy and Conservation Act.”

Chhabria said he would consider putting his ruling on hold if it was appealed by the DOE, which said it was “looking into next steps.”

The states in the suit (California, Connecticut, Illinois, Maine, Maryland, Massachusetts, New York, Pennsylvania, Vermont, Oregon and Washington) argued that the standards reduce greenhouse gas emissions and conserve enough energy to power some 19 million households for a year.

The new standards relate to appliances such as commercial packaged boilers as well as to portable air conditioners, air compressors, and “uninterruptible power supplies,” all three of which, according to the states’ lawsuit, lack a federal energy standard.

The Climate Post offers a rundown of the week in climate and energy news. It is produced each Thursday by Duke University’s Nicholas Institute for Environmental Policy Solutions.

Renewables and Grid Reliability Focus of Court Ruling, Report

The Nicholas Institute for Environmental Policy Solutions at Duke University

This week the U.S. Court of Appeals for the District of Columbia Circuit unanimously upheld the Federal Energy Regulatory Commission’s (FERC) approval of new performance rules for power plants, rejecting environmentalists’ arguments that the rules discriminate against intermittent energy sources such as wind and solar (subscription). The court said FERC acted in a reasonable way when it allowed the PJM, the independent transmission operator in 13 Mid-Atlantic and Midwestern states and Washington, D.C., to charge penalties to power plants that clear its capacity market but fail to provide continuous capacity. The rule change was prompted by the PJM’s grid reliability concerns in the wake of the East’s unusually cold winter in 2014, when a significant amount of natural gas generation became unavailable.

Concerns about grid reliability were also the subject of a new report, published in anticipation of a forthcoming study ordered by U.S. Department of Energy (DOE) Secretary Rick Perry on the electricity grid. The DOE study is planned to be released next month and is feared by environmentalists to undercut support for renewables (subscription).

The report released this week by consulting firm Analysis Group concluded that the addition of new natural gas-fired units and renewable energy capacity are increasing the nation’s electric reliability, not undermining it. According to the report, commissioned by the Advanced Energy Economy Institute and the American Wind Energy Association, efficient natural gas-fired generation and renewables increase reliability by increasing electric system diversity.

In calling for the grid study, Perry had suggested that renewable energy subsidies and related policies were jeopardizing reliability by decreasing the financial viability of baseload resources such as coal plants. The Analysis Group study said such policies were “a distant second to market fundamentals in causing financial pressure” on coal plants without long-term contracts. The biggest contributors to coal plants’ inability to compete, the report found, are new and efficient natural gas plants, low natural gas prices and flat electricity demand.

Moreover, the analysis challenged Perry’s statement, in the April 14 memo ordering the grid study, that “Baseload power is necessary to a well-functioning electric grid.” The report authors found that fears about the risks renewables pose to “baseload generation” don’t reflect understanding of a properly functioning electricity grid. They said “‘baseload resources’ is an outdated term in today’s electric system,” which seeks a combination of generation assets and grid-service technologies to allow for continuous power delivery.

Or as report co-author Susan Tierney, an Analysis Group senior advisor (and Nicholas Institute for Environmental Policy Solutions Advisory Board member), summed it up, “The transformation now under way in the electric power system is driven primarily by market forces. . . The result is a more diverse set of energy resources on the grid that is being capably managed in a way that provides reliable electric power.”

At a DOE budget hearing on Tuesday, Perry skirted details on his forthcoming policy declaration on baseload power and grid security.

Asked about his grid report, Perry said electric power security “requires a baseload capability that can run 24/7,” adding that the administration supports an “all of the above” approach to energy and that it is “[n]ot trying to pick winners and losers, but let the facts fall where they may” (subscription).

DOE Secretary Disputes Core Climate Science Finding

Department of Energy (DOE) head Rick Perry denied on Monday that carbon dioxide emissions from human activities are the main driver of the earth’s record-setting warming. Instead, Perry said, the driver is most likely “the ocean waters and this environment that we live in.”

“The idea the science is somehow settled, and if you don’t believe it’s settled you’re somehow or another a Neanderthal, that is so inappropriate from my perspective,” he said. “If you’re going to be a wise intellectual person, being a skeptic about some of these issues is quite all right.”

Those comments came a week after the DOE confirmed it was shuttering its international climate office and just days before Perry began defending to Congress the agency’s $28 billion budget request, which would slash many clean-energy programs, make a 17 percent cut in DOE’s Office of Science, and reduce by more than half research and development funding at the Office of Fossil Energy, which supports carbon capture and sequestration technology.

Oil Majors Sign on to Carbon Tax Proposal

Nearly a dozen multinational corporations, including oil giants Exxon and Shell, on Tuesday backed a plan from senior Republican statesmen to replace the Obama administration’s greenhouse gas regulations with a revenue-neutral carbon tax—that is, one that gives revenue directly back to citizens—a concept popular with economists. In a newspaper ad, the companies called for a “consensus climate solution that bridges partisan divides, strengthens our economy and protects our shared environment.” Exxon and the others were listed as founding members of the plan, along with the green groups Conservation International and the Nature Conservancy.

The proposal calls for a rising tax, starting at $40 for every ton of carbon dioxide pollution from fossil fuels, and a charge on imports in exchange for the Environmental Protection Agency being stripped of most powers to issue new emissions control regulations and repeal of the Clean Power Plan. Its proponents say this approach would create deeper emissions cuts than regulations—more than enough to meet the U.S. pledge under the Paris Agreement on global warming—and that in the first year the average family of four would receive approximately $2,000 as a carbon dividend.

The proposal was put forward by the Climate Leadership Council in February as part of a “free-market, limited government” response to climate change. It would require action from Congress, but the GOP, which controls both chambers, has shown no indication it would take it up. In fact, the House last year passed a nonbinding resolution—supported by every Republican member—to denounce a potential carbon tax.