Julian Spector is a former editorial fellow at CityLab, where he covers climate change, energy, and clean tech.
State lawmakers are debating whether to keep ailing nuclear plants alive. The outcome will set a precedent for more states to come.
With hard times setting in for some nuclear power plants, Illinois state legislators are trying to decide whether they should put nuclear facilities on life support, or lay them to rest early.
A combination of market forces and policy choices has made the nuclear business tougher in recent years, and that’s the case at two facilities in Illinois operated by Exelon. The company is telling lawmakers that the money-losing reactors will have to be brought offline prematurely unless the state lends support. That would result in lost jobs and a big dip in the state’s capacity to produce electricity—one that could have dirty, carbon-burning power plants stepping up to close the gap. With jobs, tax dollars, and environmental quality at stake, it’s turned into a dramatic battle in the final days of the state’s legislative session.
Exelon is searching for a way to subsidize the struggling plants, arguing that the steady, zero-carbon energy source is a public good worthy of public support. One idea in particular is dividing environmental groups: Should nuclear plants, by virtue of being carbon-free, be grouped in with solar, wind, and other renewable energy sources in state initiatives to clean up the grid? It’s a dilemma that could soon spill over into other states as the business and policy landscapes change around clean energy.
When nuclear goes
Nuclear plants produce lots of energy without emitting carbon, but more and more of them are failing to keep up with the low prices of their competitors in wind, solar, and natural gas. That has put thirteen American nuclear plants at risk of closing early in the next two years, according to Environmental Progress, a pro-nuclear clean energy advocacy group that has been active in the Illinois case.
In other markets where nuclear plants have shut down recently, renewables haven’t been able to scale up fast enough to fill the gap. In California, New England, Germany, and Japan, utilities turned to fossil fuels to meet the demand. This puts policymakers in a rather awkward position: do they allocate hundreds of millions of dollars to prop up particular nuclear plants belonging to otherwise profitable multi-billion dollar energy corporations, or let them shutter, inviting more carbon emissions and job losses?
It’s not just local officials who are torn: This choice has also divided the environmental community among those who think that reducing carbon emissions is paramount and see nuclear as necessary for that, and those who want to end nuclear energy and believe renewables offer a viable alternative in the long run. Then there are the consumers to think about: in a world of carbon constraints, is it cheaper to subsidize some nuclear plants than replace them with a slew of other clean energy infrastructure?
"It would be a blow from a sheer carbon perspective” to lose the nuclear plants, says Dick Munson, Midwest clean energy director at the Environmental Defense Fund. “Obviously, there are some environmentalists and anti-nuclear groups that view reactors from more than simply their carbon emissions perspective."
The Illinois plan
Negotiations are ongoing in the waning days of the legislative session, so the details of the bill will likely change. The whole thing could collapse if the different players can’t find enough common ground.
Things started last year with Exelon asking for help for all its nuclear plants, to be paid for by a surcharge on electricity bills. That didn’t go over well, so earlier this month the utility suggested a change to how the state rewards clean energy. Currently, Illinois requires 25 percent of the energy sold by utilities in the state to come from renewable sources, mostly wind and solar. Renewable standards like this have been a crucial driver of growth in wind and solar energy nationwide, though technical problems have marred Illinois’ plan.
Exelon proposed a change: switching from a renewable energy standard to a clean—or zero-emissions—standard. That would give nuclear a new role in the state’s non-carbon energy regulations and, proponents argue, give the struggling plants just enough of a boost to keep them open.
Opponents fired back, saying this amounts to a subsidy for the nuclear plants that don’t have financial troubles and that it’s not fair for ratepayers to bail out an industry that’s making money overall. Exelon and its allies came back with a more targeted proposal to subsidize just two plants, Clinton and Quad Cities, that it says would have to close in the next two years under current conditions (Exelon is publicly traded, and investors don’t like their companies holding onto money-losing assets for long). The bill would set a floor price for the plants, as Steve Daniels reported for Crain’s Chicago Business:
Exelon would furnish data to state utility regulators on expected costs and revenues, and then the state would approve a surcharge on bills to make up the difference. Yearly revenues from the surcharge are capped at $290 million.
This subsidy would be wrapped into a broader package of support for renewable energy and energy efficiency. The bill offers something to the renewables advocates, while keeping the clean power from nuclear. The key will be whether both sides feel they’re getting enough.
Finding a fair deal
In order to succeed, the deal has to please not just environmentalists and the utility, but the ratepayers at large. That means it can’t impose onerous rate hikes to prop up the plants that are losing money. Another point would be capping the profits the power companies can receive from the deal if things get better, says David Kolata, executive director of the consumer advocacy nonprofit Citizens Utility Board.
“When you start dealing with the nuts and bolts of the issues, the details really matter and you have to make sure you don’t give consumers the bill without giving them the benefits,” Kolata tells CityLab.
The risk in setting a price floor for the nuclear plants, Kolata says, is that “you socialize risk and privatize profit.” When Exelon is making a lot of money, they don’t hand it back to the citizens; when they’re losing money, they want the public to help them. He suggests that any price floor should come with a price ceiling, so that if market conditions change and the distressed plants start earning profits beyond a certain threshold, that money goes back to the consumers.
Illinois Attorney General Lisa Madigan thinks there’s no good deal to be had for citizens. “This proposal would force consumers to pay more only to boost the companies' profits further," she said in a statement.
As for whether or not nuclear plants should play a role in the state’s energy future, Kolata thinks there are plausible arguments on both sides. He’d like the legislation to send this question to be settled in an evidence-based contested hearing process before the state’s public utility commission. If Illinois has to meet a certain carbon reduction goal, either from the federal Clean Power Plan (currently moving through the courts) or a state-wide target, then it should be possible to calculate the portfolio that produces the best deal for ratepayers. Shutting down a nuclear plant would eliminate one expense, but impose other costs, like replacing it with new low-carbon capacity and adding new transmission lines.
"The goal from both a climate and a health perspective is to reduce pollution from power plants as much as possible,” Munson tells CityLab. “If we can create a mix for the near term that might include some reactors, but allows for the transition to resources that are totally clean, EDF would be open to considering it."
The case for a clean energy standard
Illinois’ dilemma on how to deal with its struggling nuclear fleet stems from the broader challenge of figuring out how to value clean energy when the markets currently don’t. A carbon tax, for instance, would make fossil fueled electricity more expensive, and clean energy sources a better deal. Since the U.S. hasn’t been able to do that, policymakers turn to more blunt tools, like tax credits and portfolio standards for wind and solar.
That amounts to policy discrimination against nuclear energy, says researcher Michael Shellenberger, president of pro-nuclear Environmental Progress. Subsidies help wind and solar cut into nuclear plants’ market share—production tax credits, for instance, let wind producers sell at a loss and still turn a profit; nuclear plants don’t have that luxury. Shellenberger is concerned that policies meant to boost the newest clean energy industries are driving out the largest one: nuclear produces 87 percent of Illinois’ zero-carbon energy, for now.
Instead, he’d like to see a 100 percent clean energy standard that ramps up by a set date, with legal caps on how much rates can increase, in order to protect ratepayers. This is the same idea that other environmental groups rejected in the earlier draft of the Illinois bill, because they didn’t want to support profitable nuclear plants, or lump nuclear in with renewables, among other arguments. Shellenberger counters that if the purpose of the policy is to combat climate change, there shouldn’t be a problem with supporting any and all forms of clean energy.
“Everybody that got sold to do renewables portfolio standards was sold on the pollution and climate benefits of renewables,” Shellenberger says. “To then go and say, ‘Oh no, this wasn’t about climate, it’s about renewables,’—I think most people would go, ‘Wait a second, that’s a bait and switch.’”
Mandates for wind and solar have proven their efficacy in helping those industries move past their infancy. They are now the fastest-growing energy sources in the world. At a certain point, clean energy policies will need to move from the short-term goal of fostering wind and solar to the long-term goal, which climate experts say needs to be deep decarbonization. If energy markets shift and natural gas prices rise, nuclear plants might survive on their own. If not, though, states will need to decide how much they value these low-emissions energy sources, and what they’re willing to do to keep them running.