Governors' Wind Energy Coalition

New Jersey this week became the fourth state to offer subsidies to its aging nuclear plants, setting off a debate about whether taxpayers and rate payers should help the industry compete against natural gas power plants and ever cheaper wind and solar energy.

Critics say the $280 million a year in aid for New Jersey’s three nuclear plants could distort electricity markets and would be better spent to reward new “clean energy” generation projects.

When it comes to nuclear power, “we need a new model without putting an extraordinary hidden tax on ratepayers,” Nora Brownell, who chaired the Federal Energy Regulatory Commission under President George W. Bush, said. She called the New Jersey move “uneconomic, unfair and unrealistic” and said “it will totally screw up [electricity] markets.” Brownell, who has her own consulting firm now, said the New Jesey plan was “greed disguised as green.”

The broad energy measure Gov. Phil Murphy (D) signed on Wednesday allocating $280 million a year aid for the state’s three nuclear reactors also recommitted to developing wind and solar projects, pledging to reach 10 percent “clean energy” by 2050.

Nuclear power provides about 20 percent of total electricity in the United States. Yet more than a quarter of the nation’s 99 nuclear power reactors don’t make enough money to cover their operating costs, according to Bloomberg New Energy Finance.

The Nuclear Energy Institute says that renewable energy received 27 times as much government support as nuclearbetween 2011 and 2016.

Yet critics from Friends of the Earth to the longtime Republican Brownell note that government incentives usually reward new installations, not old plants.

Moreover, they note that the bulk of aid to nuclear plants in past years has come from ratepayers, not federal programs.

Utilities received guaranteed cost recovery when building the plants, and further payments for “stranded costs” when electricity markets became more competitive. Ratepayers have also paid for the decommissioning costs of closing plants.

“There is no doubt that renewables have also received financial supports, through tax and investment credits, etc.,” Tim Judson, of the Nuclear Information Research Service, said in an email. “But the federal incentives have been far less consistent and are phasing out, whereas supports for nuclear are perpetual and now increasing.”

Judson said, “what we are debating now is whether old, uneconomical generators should be subsidized when new technology has become more viable.”

But in state houses, nuclear utilities have successfully argued that closing down plants would be more expensive that keeping them alive and would set back efforts to decarbonize the electricity grid. New York, Illinois and Connecticut have effectively adopted subsidies for nuclear power plants. The industry’s Nuclear Energy Institute is urging Ohio and Pennsylvania to do the same.

In Illinois, legislation supporters dubbed “The Future Energy Jobs Bill” provided $235 million in annual credits for carbon-free energy produced by 11 reactors. Exelon had threatened to shut down two of them.

Under the New York plan, six utilities and other energy suppliers must buy “zero emission credits” from three of the state’s nuclear power plants. In a lawsuit challenging the plan, opponents estimated that it would cost ratepayers $7.6 billion over 12 years.

In Connecticut, the state’s lone nuclear plant, Dominion Energy’s Millstone plant, will be allowed to enter auctions for fixed-price contracts with state-regulated utilities. Millstone will be allowed to appeal for extra reimbursement for not emitting carbon dioxide and providing fuel diversity — essentially leveling the playing field with renewables.

Yet states have been fighting court challenges that say the states cannot pay money explicitly to keep certain plants afloat.

In New Jersey, plants would be required to demonstrate that they make “a significant contribution” to New Jersey air quality and that they are at risk of closure within three years.

The New Jersey Board of Public Utilities will issue “zero emission credits” (ZEC) to assure that 40 percent of the state’s electricity continues to come from nuclear power. The board will have access to financial information to be certain that the ZEC payments are tailored to meet a plant’s actual financial need, the governor’s plan says. And plants would not be allowed to reduce staff size.

The state would reassess the plan after three years.

The effect will be to help three reactors located in relatively sparsely populated part of southwest Jersey along the Delaware River. PSEG Power owns a reactor at Hope Creek in Salem County. It also owns 57 percent of Salem 1 (completed in 1977) and Salem 2 (completed in 1981); Exelon owns 43 percent.

PSEG’s chief executive Ralph Izzo said recently that the nuclear reactors have been making money thanks to hedging contracts soon to expire. Such contracts amount to an educated bet on future prices. The company says that it might continue to make money on the plants, but at a rate so low that other investments would be more attractive. The company’s stock rose 1.5 percent the day Murphy signed the legislation.

Exelon said in a statement that Murphy was “taking a national leadership role in recognizing the environmental value of the state’s nuclear fleet.”

PSEG’s Izzo said the “measures create a forward-looking energy policy that makes New Jersey a national leader in advancing clean energy.”

But Jeff Tittel, director of the New Jersey Sierra Club, argued there was little justification for the subsidy. PSEG earned $1.6 billion last year and has a market value of $26 billion. It recently boosted its dividend by 4.7 percent.

“The utility has not been able to prove [its] need for the subsidy in the first place,” he said. “This is a huge giveaway to PSEG at the expense of the ratepayers and environment of New Jersey.”

Exelon is benefiting too, and not just in New Jersey. Six of its 23 reactors around the country will be receiving state government assistance.

“Preserving a nuclear plant usually costs pennies on the dollar to keep open as opposed to renewables,” said Exelon’s head of government relations Kathleen L. Barrón. “What the governor did today is say these are sources of low-cost emissions that we need to keep operating while we add solar and wind to our generation.”

But many utility and electricity experts say that ratepayers have already paid the entire cost of most nuclear power plants. Including payments for stranded costs, Brownell says they’ve paid twice over.