Nuclear bailout shows why it’s tough to green the grid

Source: Benjamin Storrow, E&E News reporter • Posted: Wednesday, March 13, 2019

Pennsylvania lawmakers introduced a bill yesterday to save the state’s ailing nuclear facilities, setting up a legislative showdown over the future of the electric grid in one of America’s most carbon-intensive states.

The bill’s introduction prompted swift debate in Harrisburg, the state capital, where lawmakers have long mulled efforts to prop up struggling nuclear facilities.

Nuclear interests and organized labor hailed the legislation, saying it would protect jobs and maintain low electricity rates. Environmentalists labeled it a windfall for nuclear operators and said the bill contained little to reduce carbon emissions. And natural gas interests argued it would send consumers’ electric rates soaring.

The legislation makes Pennsylvania the fifth state to consider a rescue effort for its nuclear fleet. It comes in advance of the expected shutdown of Three Mile Island, an 852-megawatt nuclear facility outside Harrisburg, later this fall.

And it underscores the difficult choices that face climate hawks seeking to green the grid.

While cheap natural gas has undercut Pennsylvania’s traditional dependence on coal and sent carbon emissions tumbling, it now threatens to close two of the state’s nuclear facilities and push carbon levels higher.

“The cost to our consumers of doing nothing is higher than the cost of keeping these plants open,” said state Rep. Thomas Mehaffie, the measure’s Republican sponsor, in a press conference at a Harrisburg union hall, where he was flanked by ironworkers, power plant employees and local Chamber of Commerce officials.

“That’s why I introduced H.B. 11, the ‘Keep Powering Pennsylvania Act,’ which properly values the environmental benefits of the nuclear power industry that has been delivering benefits to our state for decades — no different than how we’re currently valuing the benefits of other carbon-free electricity generation methods.”

Mehaffie’s legislation would create a new category for zero-emission power in the state’s Alternative Energy Portfolio Standard, requiring the state’s power companies to purchase half their electricity from nuclear, wind, solar and hydropower. He estimated the measure would cost $500 million annually and add $1.77 per month to consumers’ monthly electric bills. Yet he argued those costs were far outstripped by the long-term costs associated with closing nuclear plants.

In an interview, Mehaffie argued Pennsylvania is unlikely to meet the 26 percent reduction in carbon reductions envisioned under a recent executive order issued by Gov. Tom Wolf (D) if it fails to prevent the closure of its nuclear facilities. Nuclear plants today account for 93 percent of all of Pennsylvania’s low-carbon power, he said.

“You can’t replace that with renewables, and you’re going to have a tough time replacing it with gas,” Mehaffie said.

Critics rejected those arguments. Natural gas interests and consumer groups questioned the need to bail out nuclear facilities. They pointed to a finding from PJM Interconnection LLC’s Market Monitor — which covers the regional electricity market encompassing the state — that Pennsylvania’s five nuclear plants collected $640 million in profits in 2018.

“Adding already profitable nuclear power plants to the AEPS is a bailout that would significantly increase consumer electricity prices, eliminate consumer choice and fundamentally change the way Pennsylvania’s competitive energy markets operate,” said Steve Kratz, a spokesman for Citizens Against Nuclear Bailouts, a group backed by natural gas interests.

Environmentalists said the bill was structured in a way that would ensure nearly all the power purchased by utilities would come from nuclear, leaving renewables like wind and solar at the wayside.

“This bill is nothing more than a windfall for aging, uneconomical nuclear power plants,” said Mark Szybist, a senior attorney at the Natural Resources Defense Council. “It fails to limit carbon pollution or advance commonsense energy policy that transitions Pennsylvania away from nuclear power and dirty fossil fuels to renewable sources and energy efficiency.”

Andrew Williams, director of regulatory and legislative affairs at the Environmental Defense Fund, said the bill does little to actually reduce emissions. He argued it is time for the state to cap the power sector’s carbon levels.

“This is an expensive Band-Aid that saddles consumers with the majority of risk,” he said.

Pa.’s shifting energy mix

For their part, nuclear interests signaled support for the measure. Exelon Corp., the operator of Three Mile Island, estimated the bill would help preserve 16,000 jobs associated with the state’s nuclear industry and save consumers $788 million in energy costs.

“Exelon Generation urges support for this legislation, which will put Pennsylvania on a path to a clean energy future,” said Dave Marcheskie, a spokesman for the company.

Few states mirror the wholesale change that has swept the power sector in recent years quite like Pennsylvania (Climatewire, Jan. 22). A torrent of natural gas production from the Marcellus Shale formation that lies beneath much of the state has eroded Pennsylvania’s historic dependence on coal and reduced carbon emissions.

Coal has fallen from almost two-thirds of the state’s electricity generation in 1990 to a little more than a third in 2015, according to state figures. Gas, meanwhile, has risen from virtually none of the state’s power production to nearly a quarter in that time.

The shift has been accompanied by a drop in carbon emissions. Between 2005 and 2015, carbon levels fell 12 percent.

But the trend now threatens to close two nuclear facilities and push emissions higher. In addition to Three Mile Island, FirstEnergy Solutions Corp. has taken preliminary steps to retire its Beaver Valley Power Station in 2021. The state’s recent climate action plan found maintaining Pennsylvania’s nuclear fleet would reduce emissions by almost 29 million tons in 2025 and nearly 40 million in 2050.

“Obviously the loss of any low carbon power is a challenge to meet climate targets,” said Costa Samaras, a professor who tracks the power sector and climate policy at Carnegie Mellon University. “As gas helped retire the older uneconomic coal units in the Mid-Atlantic, are the nuke plants next? I don’t know. If a nuclear plant retires, and something other than renewables replaces, that’s bad for climate.”

The debate over Pennsylvania’s nuclear fleet creates a potential opening for Wolf, who has signaled renewed interest in climate action in recent months, observers said. In Illinois and New Jersey, environmentalists were able to extract large commitments to renewables and energy efficiency in exchange for supporting nuclear subsidies.

But Wolf will need to thread the needle to ultimately win passage of legislation that mirrors those proposals. Republicans, who control the Legislature, are split on support for nuclear. At the same time, more climate commitments are likely necessary to win enough Democratic votes to secure the bill’s passage, observers said.

For now, Wolf is largely sitting back. J.J. Abbott, a spokesman for the governor, said Wolf empathizes with families associated with potential closures and believes nuclear energy is an important part of efforts to prevent greenhouse gas pollution.

“At the same time, any solution to ensure the sustainability of nuclear facilities should have a fair cost-benefit ratio for consumers and be based on full transparency from operators seeking assistance,” Abbott said. “Governor Wolf will continue to engage with the General Assembly and concerned citizens as this discussion moves forward and will begin formally reviewing the bill now that it is introduced.”