2/06/15 - MIDWEST ENERGY NEWS: Why the nuclear industry targets renewables instead of gas

By KARI LYDERSEN 

Cheap natural gas has upended the nation’s energy landscape and made aging nuclear power plants increasingly uncompetitive.

Yet the nuclear industry, which generates almost a fifth of the nation’s energy, has declared war not on gas but on wind and solar, which represent about 4 and 0.2 percent of our energy mix, respectively.

Nuclear generators have successfully fought against renewable and energy efficiency standards on the state level, and lobbied against tax incentives for wind and solar on the federal level. They’re in the process of securing changes in regional capacity markets that would benefit nuclear and harm solar and wind.

And as states develop their Clean Power Plans to fulfill the federal mandate to reduce carbon emissions, nuclear is often pitted against renewables.

In deregulated states like Illinois, Ohio, Michigan and Pennsylvania, nuclear generators have found it increasingly difficult to sell their power at a profit on open markets, because of competition primarily from gas but also from wind.

Meanwhile, energy efficiency and distributed solar generation have reduced demand for electricity and are part of a fundamental shift which could significantly shrink the role of large, centralized power plants.

Proponents describe nuclear energy as the ultimate clean fuel, with zero carbon or other harmful emissions and steady reliability.

“Nuclear energy produces more clean-air energy than any other source and is the only one that can produce large amounts of electricity 24/7,” says a fact sheet from the Nuclear Energy Institute trade association.

But nuclear critics point out the safety and environmental risks and long-term costs of nuclear power. And they fear that the nuclear industry’s tactics could hamper renewable energy development at a crucial time.

Illinois: Ground zero

Nuclear energy provides almost half of Illinois’ electricity; wind and solar provide almost five percent and less than a tenth of a percent, respectively.

Chicago-based Exelon, the country’s largest nuclear generator, has said that three of its six Illinois plants could close if state lawmakers don’t provide “market-based solutions” to help them become more profitable. A diverse group of business and clean energy interests are campaigning against an Exelon “bailout,” as critics call it, pegged at $580 million, saying citizens have already subsidized the company more than enough.

Exelon’s fortunes have plummeted in recent years, though a report recently released by Illinois state agencies indicated the company is exaggerating the crisis facing its Illinois plants.

As part of the report, required by a 2014 law pushed by Exelon, Illinois officials considered the possibility of a low-carbon energy standard similar to the state’s renewable standard. If nuclear energy were allowed to fulfill state clean energy goals, advocates fear the nuclear plants would overwhelm the program and leave little or no incentive for new renewable energy.

Exelon also pressured state legislators last spring to halt a planned “fix” of the state’s renewable energy standard, which would have facilitated the development of more wind and solar power. New wind development in Illinois has stalled because of the problems with the standard. Legislation to fix it will likely be introduced again this spring, with Exelon again weighing in and trying to tie any changes to support for its nuclear plants.


Ohio: Trouble in Toledo

In Ohio, FirstEnergy successfully lobbied to suspend the state’s renewable energy and energy efficiency standards. Now FirstEnergy is asking that ratepayers be forced to pay a guaranteed rate for energy from the troubled Davis-Besse nuclear plant near Toledo, under a proposal pending before the Public Utilities Commission of Ohio.

“Clearly FirstEnergy was seeing both energy efficiency and renewable energy as direct competitors,” said Allison Fisher, energy program outreach director of the watchdog group Public Citizen. “The arguments they were using were that these mandatory standards are distorting the market and are costly to ratepayers. But as soon as the standards were frozen, they turned around and proposed a plan that is looking to distort the market and going to cost $3 billion.”

If the plan is approved, the Ohio Consumers’ Counsel estimates it could cost ratepayers an extra $3.2 billion.

“It’s both their actions and the hypocrisy of their arguments that makes what they are doing so incredibly brazen,” Fisher continued.

FirstEnergy spokespeople Doug Colafella and Jennifer Young said in written answers that the Economic Stability Program, as the proposal regarding Davis-Besse is called, is “designed to provide an additional opportunity for our customers to benefit from the competitive market.”

They said that studies by FirstEnergy and other entities project energy prices will rise, which could mean customers will actually benefit from buying the Davis-Besse power at a fixed price. In fact FirstEnergy estimates that rather than losing $3.2 billion, customers will save $2 billion through the plan.

FirstEnergy’s generation mix is 57 percent coal, 23 percent nuclear, 8 percent natural gas and 11 percent renewables. FirstEnergy and the Nuclear Energy Institute say that the Davis-Besse plantpumps $1.1 billion into the state economy each year and is crucial to the region’s electricity supply.

Regarding FirstEnergy’s lobbying against the efficiency and renewable standards, the spokespeople said: “It was clear that the mandates imposed a significant cost to customers that had to be thoughtfully looked at. Ohio can continue to promote the wise use of our natural resources while lifting an undue cost burden on our customers, especially our job creators in Ohio.”

Renewable energy advocates say it is ironic that companies with nuclear plants are asking for government assistance because their plants are facing challenges on the open market – given that the same companies pushed for deregulation in years past, when nuclear plants stood to benefit from market conditions.

“They are operating in a deregulated market, but they’re trying to re-regulate again,” said Fisher. “It’s important to remember that they’re failing in the marketplace and they’re not making changes to their business model, instead they’re going into the political and regulatory arenas. Their strategy is killing their competition by eliminating energy efficiency and renewable energy as incentivized [sources], then going to regulators asking to bail them out.”

Nuclear engineer Arjun Makhijani, president of the Institute for Energy and Environmental Research, called the nuclear generators’ requests for subsidies “outrageous.”

“These free-marketeers are going to the government with hat in hand whenever they have trouble raising revenues,” he said. “But when they make a lot of money they don’t offer to give the excess back to ratepayers.”

Why attack renewables?

The advent of horizontal hydraulic fracturing (fracking) about a decade ago provided an abundant fuel for natural gas plants which can quickly ratchet up and down to match demand. Cheap natural gas has driven the closing of scores of coal plants nationwide, and has had a major impact on the nuclear industry.

So why isn’t the nuclear industry trying to curb the influence of natural gas?

Energy experts point to straightforward political and business reasons and the complicated structure of the auctions where energy is sold.

“The fact of the matter is natural gas and wind power both compete with Exelon’s nuclear generation,” said Environmental Law & Policy Center director Howard Learner. “Exelon can’t do anything about the market price for natural gas, so Exelon is training its fire on trying to stop and hold off wind power and solar energy development.”

 Some companies that own nuclear generation are also heavily invested in natural gas. Nuclear makes up 81 percent of Exelon’s generation and 54 percent of its capacity, while natural gas makes up 10 percent of its generation and 22 percent of its capacity. Wind and solar make up 1.9 and 0.3 percent of Exelon’s generation, respectively.

 “One thing to understand about the nuclear industry is that nuclear is also the coal and natural gas industry,” said Tim Judson, executive director of the Nuclear Information and Resource Service, which published the September 2014 report “Killing the Competition” about nuclear attacks on renewables. “Wind and efficiency are just boutique elements of their portfolios.”

Nuclear Energy Institute spokesman Thomas Kauffman said that the institute does not take a position on renewable energy subsidies and that it, “supports the Obama administration’s all-of-the-above energy strategy.” He declined to answer further questions and said that groups weighing in about recent developments have “a history of opposing nuclear power.”

Colafella and Young of FirstEnergy said “we believe that a diverse mix of generating assets, including renewables, is needed to keep power flowing reliably and affordably.”

“Low market prices – which are largely driven by low-cost natural gas, not renewables – are putting pressure on baseload generating plants that reliably deliver power to our customers around the clock,” they added. But, they reiterated they expect prices to rise, reviving the nuclear plants’ profits.

Auction action

Nuclear energy and wind power are both known as “price-takers” in the regional auctions where generators sell their energy. In these auctions, all sellers get the same price for energy sold at a given time. They are all paid the price of the most expensive bid that is accepted into the auction to meet demand.

Nuclear plants and wind turbines both generate energy very cheaply, even though the overall costs of maintaining and running a nuclear plant are high. Before the fracking revolution, natural gas-fired power was typically much more expensive than other sources, so nuclear and coal generators would enjoy getting paid at the same rate as natural gas. These days natural gas-fired power is cheap, but wind is even cheaper.

So a lot of wind on the market not only edges out other energy sources in the auction, it also can lower the price that all players are paid for their energy.

The nuclear industry is striking back at wind in a specific type of market known as capacity, where energy providers are essentially paid for promising to be ready to provide energy at peak times. The PJM regional market has adopted changes that greatly increase the capacity payments that Exelon’s nuclear plants will receive, while making it extremely difficult for wind and solar to benefit from these payments. Exelon lobbied hard for the changes, which must still be approved by federal regulators.

Paradigm shift

Nuclear companies also appear to oppose the proliferation of distributed solar and other renewable generation for the same reasons that apparently motivate utility companies like We Energies in Wisconsin.

 Even if renewables make up only a small amount of generation, they represent a shift to a more decentralized energy system, less reliant on big baseload coal or nuclear power plants. While Exelon’s unregulated generation arm runs the nuclear plants in Illinois, Exelon is also a regulated utility in the process of acquiring Washington D.C.-area Pepco Holdings, which would make it the country’s largest utility.

 “It goes back to the concept of maintaining the old model of utilities as long as possible because you have control, as opposed to something out of their control like solar panels on rooftops,” said Dave Kraft, director of the Nuclear Energy Information Service.

Ongoing improvements to the grid, including new transmission and increased grid storage, also pose a challenge to centralized power. When it gets easier to move electricity around or to store it on the grid, energy generated by the sun and wind can be better used when and where it is needed.

Scared by solar?

 Exelon runs a 10 MW solar farm on Chicago’s South Side. But critics say this does not make the company a friend of solar. In different jurisdictions Exelon has argued that people with solar panels should not be paid the retail rate for energy they send back to the grid. This same position has been taken by utilities around the country looking to curb distributed solar generation; in most cases it has met withstrong opposition from both the public and regulators. Exelon’s stance on solar has stoked resistance to the company’s proposed merger with Pepco.

Exelon spokesman Paul Adams said, “As technology continues to evolve, it is important that we maintain a reliable, secure and universally available electric grid and ensure that energy policies do not permit shifting the costs of maintaining the grid from some customers to others, creating energy ‘haves’ and ‘have nots.’”

This is the same argument that We Energies has made in its highly controversial rate case in Wisconsin. Makhijani called Exelon’s point disingenuous, especially since the changes Exelon pushed in the capacity market will likely increase Illinois customers’ rates 11 percent or more.

“It’s crocodile tears, the crocodile feeling very sorry for this deer it just caught,” Makhijani said. “Suddenly there’s this huge concern for the poor.”

Louisiana-based Entergy has also promoted policies that pay low rates to customers with solar panels for the energy they send back to the grid. Entergy has nuclear plants that sell their power on the open market as well as regulated nuclear plants where the company is guaranteed to recoup its costs from ratepayers.

 Fighting over subsidies

Nuclear proponents have long depicted tax breaks for wind and other renewables as unfair and a threat to reliability.

In 2012 Exelon was expelled from the American Wind Energy Association (AWEA) and its board, because of Exelon’s aggressive lobbying to end the federal Production Tax Credit which provided tax breaks crucial for wind development.

“It was simply a fact that they no longer supported the aims” of promoting wind power, said AWEA spokesman Peter Kelley. “They were marshaling allies, teaming up with anti-wind organizations that have always been against wind energy.”

Kelley said that cheap natural gas prices have had a much more profound impact than wind on the viability of nuclear plants.

“You have to ignore the real reasons and exaggerate a few outlier moments when wind had any impact on their business at all,” to be convinced by Exelon’s arguments, Kelley said. “They’re ignoring the real reasons and blaming wind because they may think it’s [politically] expedient.”

Adams said the Exelon “believes the transition to clean energy should be left to the free market, rather than through the government picking technology winners and losers through tax subsidies. We believe that the wind PTC has served its purpose and oppose its reinstatement.”

Exelon had argued that the Production Tax Credit was causing a phenomenon known as “negative pricing” when power from its nuclear plants could not be delivered where it was wanted. In March 2014 AWEA released a study criticizing Exelon for what it called exaggerations and distortions on that issue. AWEA said negative pricing was rare, was caused more by congestion on power lines and other factors than by wind, and had nothing to do directly with the tax credit.

 Critics point out that the nuclear industry was built on government subsidies and continues to be heavily subsidized. A 2011 report by the Union of Concerned Scientists describes a host of past and ongoing nuclear subsidies related to construction, operation, insurance, waste management and uranium mining.

“It’s the throwing stones from glass houses problem,” said Makhijani. “They have more glass in their house than any other industry.”

Clean power plans

Nuclear plants could benefit substantially from the clean power plans that states are developing in keeping with the Environmental Protection Agency (EPA)’s rules on reducing carbon emissions from power plants.

Much depends on how the final EPA rules play out and how states decide to achieve their required reductions. The Nuclear Energy Institute wrote a letter in December to EPA Administrator Gina McCarthy asking the EPA to treat avoided carbon emissions from existing nuclear plants the same way that reduced emissions are treated. And it noted that the EPA’s calculations show that per ton of carbon avoided, nuclear plants are cheaper than creating new sources of renewable energy.

“Renewable energy, nuclear energy and hydro receive vastly different treatment under the proposed [EPA] rule, but nuclear energy does not receive appropriate credit,” says the letter.

Environmentalists say that rewarding existing nuclear plants for their zero-carbon power is not in the spirit of the EPA rules.

“Exelon has talked about redefining clean energy to include nuclear plants that produce large amounts of highly radioactive waste,” said Learner. “That too-clever definition is simply not credible with the public. To redefine clean energy to include nuclear power really doesn’t pass the straight-face test.”