THE FATE OF NUCLEAR POWER
Do existing nuclear power plants need economic policy support if they are to be part of our carbon-free future?
Climate and Energy Program, Third Way
JEFFERY S. MERRIFIELD
Pillsbury, Winthrop, Shaw, Pittman, LLP
Electricity Consumers Resource Council
Union of Concerned Scientists
Moderated by: Jessica Lovering, The Energy for Growth Hub
Event Summary: The Fate of Nuclear Power
OurEnergyPolicy and Keystone Policy Center co-hosted a panel discussion on December 10, 2019, in Washington, D.C., on challenges facing the United States’ existing nuclear fleet. The discussion included potential policy solutions to keep nuclear plants economically competitive, including the Nuclear Energy Renewal Act (NERA) and the Nuclear Powers America Act. Thanks to NERA sponsor Senator Chris Coons (D-DE) for sponsoring the room for the event.
The panelists were Jackie Kempfer (Third Way), Edwin Lyman (Acting Director of the Nuclear Safety Project, Union of Concerned Scientists), Jeff Merrifield (Pillsbury, Winthrop, Shaw, Pittman LLP), and Devin Hartman (Electricity Consumers Resource Council). Jessica Lovering (Fellow, Energy for Growth Hub, and doctoral student, Carnegie Mellon University) moderated the panel.
Sections of This Summary (main panelist):
- Nuclear Power & Climate Change (Kempfer)
- Status of the Existing U.S. Nuclear Fleet (Merrifield)
- Competition & Nuclear Cost Overruns (Hartman)
- Safety & Economics (Lyman)
- Regulations & Safety of Nuclear Plants (Lyman & Merrifield)
- Active Legislation for Nuclear Economic Challenges (All)
Nuclear Power & Climate Change (Kempfer)
Nuclear power currently provides 53% of the United States’ carbon-free energy—more than wind power, hydropower, and solar power combined—and it makes up 19% of U.S. electricity generation. But as renewables and natural gas become increasingly cost-competitive and some policymakers push for a 100% renewable energy future, the fate of the existing nuclear fleet is unclear. In the last decade, 7 nuclear plants have closed prematurely, and another 12 are scheduled to close in the next 5 years.
“Every single [nuclear] reactor lost is a notable setback in climate mitigation efforts,” said Jackie Kempfer, Policy Advisor, Climate and Energy Program at Third Way. “Carbon-free electricity generation from nuclear power plants is the foundation upon which this [wind and solar] clean energy growth builds. And to be quite frank, that foundation is crumbling a bit right now in the United States.”
Kempfer mentioned a new emissions gap report from the United Nations showing that the world is far behind in reducing carbon emissions fast enough to keep warming below 1.5 degrees. The report shows that to get on track, the world would need to decarbonize at a rate of 7.6% each year, beginning in 2020 through 2030.
“That has never happened anywhere, in any city, in any state, in any country,” Kempfer said. Juxtapose this revelation with a Rhodium Group study that shows that the United States will likely lose 80% of its existing nuclear fleet—that’s 42% of the nation’s current carbon-free energy—by 2030 is natural gas prices stay the same, and “It’s a pretty jarring sort of comparison to think about,” Kempfer said.
As an example of how much even one nuclear reactor closure affects climate progress, Kempfer mentioned the 2014 closure of the Vermont Yankee nuclear plant, which reversed five years of declines in CO2 emissions in the New England Regional Electricity Systems. This caused emissions in 2015 to rise 5% over the prior year. Kempfer pointed to state and federal policy as necessary to value the carbon-free power that nuclear plants provide and keep more plants from closing.
Status of the Existing U.S. Nuclear Fleet (Merrifield)
Despite recent and imminent closures, Jeffrey S. Merrifield, former appointee to the Nuclear Regulatory Commission (NRC), said the nuclear industry is at its best by many measures. It is operating at its safest level with the fewest level of issues ever and is operating at a 90% capacity factor—the highest ever and “which, several decades ago was unheard of,” he said.
“[The nuclear fleet] is reliable, provides great resilience for the U.S., is carbon-free generation, is safe, and is an important element in the economy,” said Merrifield, who is now Partner at Pillsbury, Winthrop, Shaw, Pittman LLP.
He added that nuclear power provides the “backbone” of energy production in many U.S. states and keeps us from producing more carbon emissions. He noted that the NRC is working hard to relicense existing facilities and to ensure that they operate safely.
Competition & Nuclear Cost Overruns (Hartman)
Devin Hartman, President and CEO of Electricity Consumers Resource Council—which represents large industrial users of electricity—said although nuclear power has a strong value proposition, this needs to be reconciled with good economic policy. The cost overruns of nuclear plants in the 1970s and 1980s were the single largest catalyst in motivating reforms of opening up markets to greater competition through the Public Utility Regulatory Policies Act (PURPA). Only one nuclear plant in that time period actually came in on budget, he said.
“There is a big difference of whether these plants need market support and whether they should receive it,” Hartman said. “If [nuclear] can compete on its own merits, great. If it can’t, then so be it.”
Hartman said good policy should facilitate conditions to enable technologies and companies to compete on their own merits in open, competitive markets. This approach rewards heavy industry and is “how you do policy right.” He emphasized the importance of lowering actual costs rather than merely “cost shifting” (such as transferring costs from companies to ratepayers without lowering actual costs) and said that right-sizing the regulatory agenda may tilt the scales for some facilities that are ready to close but is not likely to change the overall paradigm.
“We need to have a more productive dialogue that focuses more on improving the quality of our policies and institutions,” Hartman said, “not pre-determining what a given technology or fuel type’s role is in the future and then channeling all of these out-of-market interventions in order to secure that.”
Safety & Economics (Lyman)
Edwin Lyman, said that as apparent as the threat of climate change is to the Union of Concerned Scientists, “you can’t compromise on nuclear power safety and security.” To do so, he said, would jeopardize the long-term viability of nuclear power as a resource and would undermine public acceptance, and therefore, “it’s in everyone’s best interest to ensure that safety and security are paramount.”
“Although safety improvements often go hand-in-hand with better economic performance, that’s not always the case,” continued Lyman, who is the Acting Director of the Nuclear Safety Project at the Union of Concerned Scientists. “Sometimes the need to cut operating and maintenance costs can compromise safety and security.”
Lyman said the cost of safety and security regulations is not a major factor in the economic challenges of nuclear power plants, but there could be problems to public safety if developers seek to make nuclear power more economically competitive without considering safety. Certain indicators seem to show that the nuclear industry is going in the wrong direction for safety.
“We believe nuclear power has a role to play in the context of a comprehensive low-carbon electricity system, but investments that ensure that safety and security are preserved are non-negotiable,” Lyman said. “And it takes vigilance on the part of Congress, on the part of the Nuclear Regulatory Commission, to ensure that that safety and security is maintained.”
Regulations & Safety of Nuclear Plants (Lyman & Merrifield)
Lyman said the nuclear fleet needs to make changes to continue to operate safely, such as increase inspections while the plants age and manage the potential impacts of increased flooding and climate change. He said there are safety issues that were unaddressed after the Fukushima nuclear disaster in Japan and that existing plants still have an “unacceptable risk” for loss of cooling.
“You can’t skimp on the investment that you need to ensure that the plants are in good working order,” Lyman said.
Lyman expressed concern about a January 2019 NRC decision not to require nuclear plants to upgrade their flooding and seismic protection, saying it goes against the recommendations from current analysis. He said the cost of safety and security regulation is not a major factor in the economic challenges that nuclear power plants face.
He said that over the last several years, the number of unplanned nuclear reactor shutdowns has increased, indicating that nuclear safety is faltering. Lyman said the public is not getting the full picture of nuclear power safety from the NRC, demonstrated by a discrepancy between the NRC’s nuclear reactor safety ratings and those determined by the Institute of Nuclear Power Operations (an independent entity).
Merrifield responded that safety ratings by the NRC and the Institute of Nuclear Power Operations do not contradict each other. The NRC’s role is to protect public health and the environment and to regulate to an adequate protection standard. He said the Institute of Nuclear Power Operations is a utility self-regulatory body in Atlanta, Georgia, and it seeks to hold itself to a higher standard than the NRC. Backfit rules require that analysis of the cost of modifying a nuclear plant be factored into decision making.
Merrifield said that NRC is not perfect, but the men and women who work there take their mission of protecting public health and the environment very seriously.
“They are dedicated to making sure they are doing the right thing in protecting the interests of the public in regulating a nuclear facility,” Merrifield said.
Merrifield said he doesn’t disagree with Lyman on instances in which NRC inspectors could have done a better job and sharpened their skill sets. However, he said the NRC has a very successful baseline inspection program to make sure nuclear plants meet applicable regulatory requirements, and they don’t need an ever-increasing number of regulatory inspections.
Active Legislation for Nuclear Economic Challenges
Panelists discussed the Nuclear Energy Renewal Act and the Nuclear Powers America Act of 2019 (S 1134, H.R. 2314), which were introduced in the U.S. Congress to address concerns in the nuclear power industry.
Senator Chris Coons (D-DE) with cosponsor Senator Martha McSally (R-AZ) introduced the Nuclear Energy Renewal Act (S. 2368) in July 2019. It would direct the Secretary of the Department of Energy to establish and enhance programs to help reduce the operation and maintenance costs of U.S. nuclear power plants. It would also expand modeling and simulation tools, bolster research and development, and address the shrinking nuclear energy workforce through an apprenticeship program.
“Certain aspects of [this bil] are very important, and we think it’s a good investment for research and development,” Lyman said. He said that although the Union of Concerned Scientists (UCS) does not have an official position on the bill, UCS does support the U.S. Department of Energy’s Light Water Reactor Sustainability Program, which this bill would expand.
Lyman said they’d like to see a more comprehensive bill that addresses ways in which safety may be compromised by attempting to achieve more economic performance and explicit instructions of how to avoid that. “To put the focus exclusively on efficiency and economics is misguided,” he said.
Merrifield expressed his support for the Nuclear Energy Renewal Act and said he has no negative comment for what is in the bill. “I think it’s a very good piece of legislation,” Merrifield said.
Merrifield suggested that the bill add a component that changes the costs (imposed by the Omnibus Budget Reconciliation Act of 1990) that new nuclear applicants must bear in applying for licenses before the NRC. He mentioned that nuclear developer NuScale has had to pay $40–$50 million in fees to the NRC, and no other form of energy generation in the United States has to pay a national regulator fees of this amount to put their plants online.
Kempfer said of the two bills: “These are two really good examples of things that can help provide an important foundation, in my mind, for federal support for our existing fleet.”
Senators Kevin Cramer (R-ND) and Ben Cardin (D-MD) introduced the Nuclear Powers America Act of 2019 (S. 1134) in April 2019, and Congressman Darin LaHood (R-IL) introduced the companion bill (H.R. 2314) in the House. Combined, the bills have 44 cosponsors. The bill would provide a 30% investment tax credit for continued capital investment in existing nuclear plants.
Kempfer explained that the bill allows nuclear plants to increase their capacity and efficiency, and to remain competitive in the market. To qualify for the credit, a unit must have applied for or received a 20-year license extension, and the credit only applies to capital expenditures that are spent to replace large components and fuel–investments that will keep the plants running through their license life.
“One of the things which is beneficial about this…is there is an opportunity for the plants to do a lot of investment,” Merrifield said. “[It] puts the plant in better condition to operate safely for a longer period of time.”
Lyman said UCS does not have a position on this bill, either, but that they would pay attention as to whether it singles out a single, low-carbon technology in a way that could potentially cut against the others. “We’d be concerned about not addressing all low-carbon electricity sources in a comprehensive and unified way,” he said. He said they would also want an assessment of how the impact of additional power changes or rapid fluctuations on the power of nuclear power to adjust to other changes on the grid might put additional strains on aging nuclear plants.
Hartman said his views on the legislation would be determined in large part by whether the politics would actually reduce costs or just shift them. Tax credits don’t shift costs; they only reduce them, he said. Electricity Consumers Resource Council also does not take an official position.
“There’s plenty of economic evidence that shows that when you extend an investment tax credit to any kind of application of technologies, that encourages overcapitalization of that asset base,” Hartman said. “Going forward, when we talk about lowering costs for nuclear and any aspect of fuel or technology, let’s focus on reducing the artificial costs and actually lowering costs and not transferring them elsewhere, and I think gets us more to regulatory streamlining and other considerations.”
Alicia Moulton, Communications Manager
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