In Pennsylvania, the land of cheap gas-fired power, should we all pay a little extra just to keep nuclear power around?
Yes, says Lancaster County state Sen. Ryan Aument, who argues that a new bill introduced Wednesday will keep nuclear in a diverse, all-of-the-above energy pool for years to come at a cost of about $1.50 per month for the average residential user’s electric bill.
Aument’s bill is the second introduced this year to help higher-cost nuclear energy plants stay competitive - and in some cases, alive - in an energy marketplace that has been revolutionized by the Marcellus Shale fracking boom and slower overall growth for energy demand.
Supporters of nuclear, which currently powers about 40 percent of Pennsylvania’s electric supply, argue it is the best way to buy long-term energy reliability, protection against price surges in one sector of the market or another, and preserve what happens to be the biggest provider of zero-emissions energy as we intensify the fight against climate change and the greenhouse gases that contribute to it.
But opponents, who see themselves as footing the bill, are already lining up to fight it.
“Handouts to a profitable industry in Pennsylvania that includes a Fortune 100 company will force Pennsylvania residents, businesses, school districts and others to pay higher electric bills for years,” said Michael Peters, president of the Pennsylvania Energy Consumer Alliance, a coalition of businesses, manufacturers, colleges and other organizations that are heavy electric users.
“Some advocates are calling this legislation a bailout. It will be a handout to some of the richest energy companies in the world.”
The essence of Aument’s bill is that the free market can’t be trusted to help solve issues like climate change.
The help for nuclear would come in the form of adding nuclear power to a 2004 state law that requires power companies to buy a certain amount of their generation - or credits deemed equal to it - from carbon-free emissions sources.
His new “Tier 3” category would bundle nuclear with renewable energy generation sources including solar, wind, hydro-power and geo-thermal.
Electric companies would have to get 50 percent of their power - or buy credits to match that generation - from the Tier 3 sources, with nuclear accounting for somewhere between 38.5 percent and 41.5 percent, and the renewables accounting for the rest.
Aument says that lets nuclear get paid for the value of its clean energy, while giving the renewables a sure chance to grow beyond the 8 percent (by 2021) slice of the market that Pennsylvania’s current AEPS program already reserves for them.
“The very ambitious goals that many people in this building have with respect to reducing carbon emissions, from my perspective, cannot be accomplished without nuclear energy playing a significant role,” Aument said in an interview at his Capitol office Wednesday.
"I do also recognize there are many folks that are very interested in increasing opportunities and future growth for solar and wind, and I think by allowing them to compete within Tier III we’re accomplishing that.
“I think this accomplishes both goals. It recognizes the clean energy attributes of nuclear energy, and provides a path for expansion and greater innovation (in renewables).”
Aument’s proposal is likely to continue to run into strong opposition from the state’s natural gas and coal producers. Together, those fossil fuel resources produce about 56 percent of Pennsylvania’s electricity at present.
Aument’s bill wouldn’t strictly prohibit power companies from buying more gas and coal, keep in mind. But with income from the new credits, nuclear would receive a hand-up in its ability to compete on the wholesale power market.
Nuclear plant operators seeking to participate in the program would have to commit to continued operation of their plants for at least six years. That requirement could be lifted in the case of an emergency that forces a shutdown, the enactment of a carbon tax or other policies, or the expiration of a plant license.
Why are we talking about this now?
As Pennsylvania and other states have tapped into their vast Marcellus Shale gas reserves, gas prices have lowered and energy companies have begun switching from coal to gas as the primary source for their power plants.
Coupled with a stagnant demand for power since the Great Recession, the resulting dip in energy prices has made power generated by some of the state’s five nuclear power stations less competitive.
So much so that Three Mile Island, operated by Chicago-based Exelon Corp. - the largest nuclear power generator in America - has operated at a loss since 2015.
Exelon has said it will start taking steps to close the plant by this summer in the absence of state help. A second plant, Beaver Valley in western Pennsylvania, is also being targeted for a 2021 retirement by its operator, First Energy.
If those plants came off line, Pennsylvania would lose 26.8 percent of its nuclear generating capacity.
Do we need it?
From a strict keeping-the-lights-on perspective, probably not.
But the question is more complex than that.
Nuclear energy also happens to be the nation’s largest source of carbon-free power, which means that it is kind of a foundational piece in the building fight to reduce greenhouse gas emissions to limit the effects of climate change.
Supporters of the subsidy effort here note that at present, nuclear provides 93 percent of the all the zero-carbon energy produced in Pennsylvania.
Any near-term drop in that nuclear generation would most likely be picked up by burning more natural gas which, while cleaner than coal, is still a fossil fuel and would add to Pennsylvania’s carbon loading and undermine progress the state has made in reducing greenhouse gas emissions over the last decade.
"I personally do think it’s important to keep these plants on line for the zero-carbon power” they produce, said Christina Simeone, senior fellow with the University of Pennsylvania’s Kleinman Center for Energy Policy.
“At the end of the day, if we’re talking about de-carbonizing our power sector we’re going to need these resources.”
That is the heart of the case nuclear subsidy supporters are making: American energy markets as structured today simply don’t appropriately value the benefit of the carbon-free nature of nuclear energy even as tax credits and other incentives have been used to increase the affordability of renewables.
Other subsidy supporters say they like having nuclear around because of its proven reliability (accidents at TMI, Chernobyl and Fukishima notwithstanding) and simply for the fact of preserving a long-term diversity of energy sources as a protection in the case of natural gas price spikes.
And if you retire a nuclear power station, it’s next to impossible to bring it back.
“Our energy market has worked well because you had diversity" in the supply, said Sen. Robert “Tommy” Tomlinson, a Republican from Bucks County who is leaning in favor of the subsidy proposal. But as coal dwindles and nuclear struggles, he worries Pennsylvania’s traditional three-legged stool of power sources may be turning into more of a natural gas pillar.
“And I am very concerned that if you end up with a monopoly of one, then they can call whatever price they want,” Tomlinson said.
Opponents - including an array of rate-payers ranging from businesses whose usage dwarfs residential accounts, and the state chapter of AARP - counter that nuclear operators are really trying to leverage the struggles of a few plants to get a payday for the industry as a whole.
They shouldn’t, they argue, have to pay more do that.
According to an economic analysis prepared for PJM Interconection last fall, all but three of the 18 nuclear plants in its grid should be profitable over the next four years. The three that project at a loss, including TMI in Pennsylvania, are all single-reactor sites that have higher operating costs per megawatt hour than multiple-reactor plants.
In other words, some argue, doing nothing won’t be a death knell for the overall nuclear industry.
“I have a hard time saying that somebody that’s making $640 million (the estimated net profit of the five Pa. nuclear plants in 2018) needs help from the government,” said Sen. Gene Yaw, R-Williamsport and the chair of the Senate Environmental and Energy Resources Committee.
Some so-called “Green Dog” Democrats in the legislature, meanwhile, have said they will only consider a nuclear assist if the market carve-out for renewables - a sector where Pennsylvania has lagged the rest of the nation - is pushed to something more along the lines of 30 percent over the next decade.
Simeone, as an independent observer of the debate, said Wednesday that in her view a more general carbon pricing policy would be preferable to Aument’s proposal.
“These bills recognize carbon benefits for a single industry (nuclear), largely ignoring other zero or lower carbon resources," she said. "In addition, these bills anticipate retaliatory action from federal regulators that will contribute to cost increases to consumers.”
Simeone explained as single states line up to offer credits to nuclear power, it is increasingly likely the Federal Energy Regulatory Commission will take counter-measures to preserve competitiveness in the wholesale energy markets, which operate on a regional level.
That could add additional cost to consumers. In addition, she fears the policy could further delaying the broader implementation of true carbon pricing by placating the most powerful zero carbon industry.
Aument’s bill joins a companion piece introduced this winter by Rep. Thomas Mehaffie, R-Dauphin County, in the state House. The first in what is expected to be a series of public hearings on the issue is scheduled Monday before the House Consumer Affairs Committee.
With the threatened shutdown of Three Mile Island looming, the issue is expected to become a top tier agenda item for Gov. Tom Wolf and the legislature this spring.