Plain as the Nose on Your Face: Nuclear Subsidy Food Fights Miss Market-Oriented Climate Solution

As I’ve written, the deep decarbonization effort that’s needed to salvage a habitable climate is in deep trouble.  As the public policy clown car careens toward the climate cliff, special interest politics are playing out in state capitals– including in our own Harrisburg-despite an obvious opportunity to do the right thing and craft smart, market-oriented, and (God forbid) effective public policy on climate.

The nation’s nuclear fleet- which is responsible for about sixty percent of the nation’s carbon-free electricity generation (here in Pennsylvania, it’s about 95%) is in peril.  That predicament is thanks to cheap natural gas– something affirmed by even a flawed recent study by the U.S. Department of Energy.

Faced with economic obsolescence, the nuclear industry has pressed its case in state capitals for operating subsidies that would allow currently uneconomic plants to keep running.  Court battles in three northeastern states– two of which center on policies that would keep nuclear power plants viable- have affirmed that states have the power to favor certain types of generation with financial incentives. 

But fossil fuel plant owners have howled in protest and plan appeals.  And the natural gas empire has struck back in Pennsylvania, leading a coalition that opposes a Keystone State nuclear “bailout.”

Meanwhile, another coalition has formed in Pennsylvania to extol the local economic benefits of the embattled Three Mile Island nuclear plant.

Subsidies make for a complicated policy game.  Their contemplation makes for even more interesting politics–if you happen to be a fan of watching well-endowed, heavy-hitting special interests slug it out for favored policy primacy in states like Pennsylvania.

But it all could be so much simpler, more straightforward, more protective of our carbon-polluted atmosphere, and more market-friendly.

There’s actually no need to go “around-market” with market-distorting subsidies for imperiled zero-carbon generation. 

Instead, using climate protection as the organizing principle could encourage-indeed guarantee- an efficient energy market response.

But don’t believe me.  Just ask PJM Interconnection.

PJM has published a series of analyses that offer a clearheaded path to aligning competitive markets with public policies that advantage climate-protective generation, including nukes. 

Essentially, PJM asserts that a “uniform footprint-wide carbon price” is the most efficient and cost-effective approach to valuing low- or no-carbon generation in a robust, competitive electricity market. 

PJM’s analyses are essential-and crucially timely- reading for policymakers at all levels:

• Context for PJM Market Design Proposals Responding to State Public Policy Initiatives;
• Energy Price Formation and Valuing Flexibility;
• Capacity Market Repricing Proposal; and
• Advancing Zero Emissions Objectives through PJM’s Energy Markets:  A Review of Carbon-Pricing Frameworks

Climate protection and smart, market-based public energy policies are tantalizingly within our grasp in Pennsylvania, in the PJM service territory, and beyond.

Will legislators and Governors listen to the lobbyists- or the experts?

John Quigley

Senior Fellow, Kleinman Center

John Quigley is a senior fellow at the Kleinman Center and previously served on the Center’s Advisory Board. He served as Secretary of the PA Department of Environmental Protection and of the PA Department of Conservation and Natural Resources.