The Myth of “Nuclear Bailouts”

“FirstEnergy nuclear bailout bill could exceed out-of-pocket subsidies…Nuclear Bailout Bills in Pennsylvania, Ohio Take Heat Over Cost…Ohio’s Nuclear Bailout Plan Balloons to Embrace Coal (while Killing Renewable Energy Rules)…”

Notice the wave of “bailouts” for nuclear power plants reported in popular media – where plants and their owners are portrayed as criminal enterprises, being held in jail and awaiting trial? Charged with unprofitability, mismanagement, and poisoning the environment, state politicians inexplicably seem determined to bail them out.

Why would any responsible politician (or any politician, for that matter) want to let them off the hook?

Politicians recognize nuclear power has gotten a bad rap – that it generates carbon-free, clean electricity; that nuclear plants employ thousands of constituents in high-paying jobs; that nuclear is not only safe, but the safest way to generate dispatchable power. Legislators know nuclear plants are not uneconomical, but too economical – they threaten entrepreneurs selling unreliable solar panels, wind turbines, and fossil-fuel gas who want to exclude nuclear because it provides real value to electricity customers – not more vain hopes for the future.

So keeping them open is a good thing, for many reasons. And in truth, the zero emission credits (ZECs) labeled “bailouts” serve the same purpose as renewable energy credits (RECs) already used by 26 states to reward renewables for their clean energy. ZECs only level the playing field – they don’t bail out nuclear plants, but allow them to compete fairly.

With ZECs, consumers get more for their money. Unlike RECs, which allow renewable electricity to be counted twice (first by the generator, second by any coal or gas plant which buys the generator’s Renewable Energy Certificate), recipients of zero emission credits are only paid for what they deliver: the social cost of carbon their clean generation has avoided. That’s all. Kind of like a carbon tax, but one that rewards clean plants instead of penalizing dirty ones.

As of June 14, 2019 New York, Illinois, Connecticut, and New Jersey have adopted zero emission credits or mandated PPAs (Power Purchase Agreements); each represents a different variation on the basic theme, summarized below.

New York

  • Name: Clean Energy Standard (CES)
  • Status: Adopted Aug. 1, 2016
  • In 2015 New York’s nuclear plants generated 59% of the state’s clean electricity, and prevented 41 million tons of CO2 pollution
  • Upstate nuclear plants receive one Zero Emission Credit (ZEC) for each megawatthour they produce
  • Structured to parallel the state’s RPS
  • NY State Research and Development Authority (NYSRDA) pays nuclear plant owners for the megawatthours they produce
  • Load-Serving Entities (LSEs) required to buy ZECs produced from the NYSRDA.
  • Number of credits each must buy determined by percentage share of their electricity generation consumed in New York
  • Initial price of ZECs set at $17.48/MWh, based on social cost of carbon and other factors
  • NY Resident Action Item: Call Gov. Cuomo’s office (518) 474-8390 and demand ZECs for upstate plants apply to Indian Point Energy Center, the source of 25% of New York City’s electricity — and nearly all of its clean electricity!

Illinois

  • Name: Future Energy Jobs Bill
  • Status: Adopted Dec. 1, 2016
  • Each utility must purchase ZECs equivalent to 16 percent of the megawatthours it sold in 2014 (based on existing RPS)
  • Plant owners contracted for a term of 10 years as a prerequisite for qualification
  • 2016 value of ZEC: $16.50/MWh, based on social cost of carbon, generators may charge customers
  • Value increases $1/MWh each year starting 2023
  • Values will be reduced if rates exceed a Market Price Index, calculated annually based upon projected power prices for the upcoming year
  • Baseline 2017 MPI calculated at $31.40/MWh
  • Should the cost of the ZECs result in a rate increase greater than 1.65 percent, then the number of ZECs to be purchased are reduced to a level that would comply with this constraint rather than the goal of 16 percent of total electricity sales.

New Jersey

  • Name: S-2313
  • Status: Adopted May 23, 2018
  • Establishes a zero emission credit program (ZEC) in support of the state’s three existing nuclear plants – Salem, Hope Creek, and Oyster Creek
  • The ZEC is expected to reward New Jersey nuclear plants with an additional $300 million each year billed to ratepayers
  • To be eligible under this program, nuclear plants must demonstrate that they benefit New Jersey air quality and are at risk of closing within three years
  • After S-2313 was passed by the state legislature and signed by Governor Murphy in May 2018, the New Jersey Board of Public Utilities (BPU) launched a proceeding to create the ZEC program in August. Together with its application process, the ZEC program was finalized in November 2018
  • BPU also approved tariff modifications, setting a rate for the ZEC program at $4.00 MWh ($.04/kWh). In April 2019, BPU awarded two ZECs to Salem Units 1 & 2 and one to Hope Creek.
Connecticut

  • Name: Dominion Power Purchase Agreement
  • Status: Signed Mar. 15, 2019
  • Millstone (nuclear) Power Plant will continue its carbon-free contribution to the New England grid, thanks to a 10-year power purchase agreement (PPA) between Dominion Power and Connecticut utilities Eversource and United Illuminating.
  • The plant was at risk of shutting down due to possibilities for expanded profit from natural gas self-dealing
  • Millstone will be required to produce 9 terawatthours/yr for UI and Eversource customers
  • Governor Ned Lamont, together with the state Department of Energy and Environmental Protection, facilitated the effort via a Memorandum of Understanding signed by New England state governors to help maintain critical nuclear and clean energy facilities
  • That regional commitment will likely have bearing on the continued operation of the Seabrook nuclear plant in New Hampshire, whose operating license was recently extended to 2050 by the Nuclear Regulatory Commission
  • Millstone generates 45% of the Connecticut’s electricity and 98% of its carbon-free electricity.

Ohio (proposed)

  • Name: Ohio Clean Air Program
  • Status: passed by House of Representatives, in Senate Energy & Public Utilities Committee (June 2019)
  • Applies to solar and nuclear only
  • Must continue to meet definition of “clean air resource”
  • Residential electricity customers pay monthly fee:
    • 2020: 50¢
    • 2021-2026: $1
    • Separate charges for commercial/industrial
  • Monthly charges deposited into Ohio Clean Air Program Fund
  • Resource may be decertified if Air Quality Development Authority (AQDA) decides certification “not in public interest”
  • Resources report number of MWh generated in preceding month
  • Resources earn a clean air credit for each MWh
  • Authority pays resource $9 for each credit
  • Program terminates Dec. 31, 2026
  • Ohio Resident Action Item: Call Gov. Mike DeWine (614) 644-4357 and urge him to support HB 6 – the Ohio Clean Air Program. After eleven years of expensive, missed environmental goals with wind, solar, and dirty gas – enough is enough!

Without legislative support for Perry and Davis-Besse nuclear power plants, Ohio will lose 4,300 jobs and 90% of its clean energy