Important Contributions and Missed Opportunities
By Scott Segal
Construction of Plant Vogtle. Photo courtesy: Southern Company
When the U.S. Environmental Protection Agency (EPA) finalized its Clean Power Plan, or CPP, in August 2015, several substantial changes from the proposed rule were immediately evident. Because CPP is the centerpiece of the Administration strategy to reduce global greenhouse gas (GHG) emissions, the question of the preferred combination of electric generation is a critical one for determining the effectiveness of the rule, its cost, and the impact on reliability.
The final rule expressed a marked preference for renewable energy sources and seemed to hold natural gas-fired generation to a “business as usual” level given current market conditions. While natural gas has half the GHG footprint of the coal capacity it replaces, it shares the base-load convenience of coal to the extent that it can be dispatched as needed to meet consumer demand. Traditional renewables like wind and solar power are critical elements but, by contrast, are variable energy sources that cannot be dispatched like coal, natural gas or nuclear.
The only other dispatchable energy source with a zero-carbon profile is nuclear power. While nuclear plants that are currently under construction can be credited toward the GHG emission reductions of 32 percent from 2005 levels, CPP stopped short of the ringing endorsement for which many in the nuclear sector had hoped. Six percent of existing nuclear generation is no longer considered as part of the “best system of emissions reduction,” the calculation that determines the carbon rate or mass reduction necessary to be achieved in each state. But the carbon-abatement value of plants under construction may be counted once those plants begin operation. So-called “power uprate” projects that enhance production at existing plants can also count. These are marked improvements in the final rule.
For the five new nuclear reactors currently being developed, the acknowledgement of under-construction credit is no doubt welcome and appropriate. For example, state officials and the regulated community in Georgia had argued that the proposed CPP worked an essential unfairness on the state for failing to give credit for the new construction at the Alvin W. Vogtle Electric Generating Plant near Waynesboro, Georgia. The Georgia Power-led project at Vogtle 3 and 4 will add over 2200 MW of carbon-free power when the project is complete. The Vogtle project is arguably the largest job-producing project in the state, with over 5,000 construction jobs and 800 permanent operations jobs.
Despite the gains for new construction like Vogtle and power uprates, there is little doubt that nuclear advocates were hoping for a bit more from the rule, particularly for the existing nuclear fleet. Currently, just under a hundred nuclear power plants in the United States generate about 19 percent of our nation’s electricity. The trouble is that much of the existing fleet is over three decades old. According to the Nuclear Energy Institute, these plants are the largest source of zero-carbon electric generation in more than half of the states. The existence of a mass-based approach to state compliance with the rule places some importance of maintaining the existing fleet. As EPA axiomatically observes in the final rule, “Existing nuclear generation helps make existing CO2 emissions lower than they would otherwise be.”
Given the age of the nuclear fleet, an increasing number of nuclear operators are coming up for license renewal before the U.S. Nuclear Regulatory Commission (NRC) in coming years. The sustained low commodity price of natural gas coupled with needed capital expenditures and poor market conditions in several states makes a certain number of retirements likely. The baseline CPP assumptions include the prediction that nuclear power will retain its current market share through 2030. However, CPP includes no affirmative steps to ensure against nuclear retirements in order to ensure this necessary result. The Third Way organization, with the assistance of MIT-trained researchers, found that, “Emissions increases due to nuclear retirements would sabotage the carbon reductions targeted by the EPA’s Clean Power Plan and, in the worst case, could wipe out a decade’s worth of progress by effectively returning U.S. electricity sector emissions to 2005 levels.”
As President Obama himself noted in 2010, “To meet our growing energy needs and prevent the worst consequences of climate change, we’ll need to increase our supply of nuclear power. It’s that simple.” But what is then missing from CPP that could encourage re-licensing? License renewals are themselves major investments costing anywhere from $500 million to $1.5 billion. Expenditures of this magnitude are in the range of new natural gas and renewables projects. One missed opportunity in the final CPP is the failure to heed the suggestion that facilities subject to license renewal explicitly count, in whole or in part, towards CPP compliance.
The CPP does not exist in a vacuum. For example, renewable energy projects require construction of power lines or offshore cables. Enhanced reliance on natural gas requires construction of pipelines. In the same way, enhanced reliance on nuclear power and prolonging the lifespan of the existing fleet would benefit significantly from a smarter nuclear waste policy. Despite the fact that CPP attempts to transition to a low-carbon energy future, neither the rule itself nor any related policy pronouncements seeks to deal with storing or reprocessing of spent nuclear fuel. As the U.S. Energy Information Administration notes, electric generation adds about 2,000 metric tons of nuclear waste each year to the 75,000 tons currently being stored on site around the country. The Administration, while formulating the CPP, perhaps should have considered changes to waste policy, including responsible options for a secure national repository and fuel reprocessing.
The failure to fully embrace nuclear power, as well as efficient natural gas facilities and even advanced clean coal technologies, has resulted in a rule that is far less likely to achieve the kind of deep decarbonization which many climate change activists called upon western governments to produce. A report soon to be released by the Energy Innovation Reform Project indicates that variable or intermittent sources of energy like renewables at penetration rates of 30 percent or greater of electric generation substantially exceed the cost of dispatchable zero-carbon sources like nuclear power. Even if intermittency is controlled for by the use of advanced storage technology, the fact that solar and wind power varies by season (and not just over the course of a day or two) still dictates superior cost-effectiveness for deep decarbonization up to 60 percent or more reductions for dispatchable sources like nuclear power. An optimal policy would lead the electric generation mix with dispatchable sources, followed by solar and then wind. Ironically, the centerpiece of the Administration’s GHG reduction policy – the Clean Power Plan – has it backwards, leading with variable sources and holding dispatchable low-carbon sources to business as usual or worse.
In conclusion, the CPP gets some things right for a nuclear future, such as favorable treatment for new construction, uprates, and clearer discussion of mass-based compliance strategies. But the Administration does not go out of its way to enhance the prospects for license renewals or safe and appropriate waste policy. Further, by expressing favoritism for variable energy sources like solar and wind over dispatchable sources like nuclear, EPA has not put the power system on the road to substantial carbon reductions at anywhere near acceptable affordability or reliability.
This situation is all the more troubling as the U.S.
prepares for the international climate negotiations scheduled for December in Paris. State Department Special Envoy for Climate Change Todd Stern recently stated that, “We have proposed and pushed the idea of successive rounds of targets, so you keep ratcheting ambition up. The first round of targets is hugely significant. They’re very good, but they’re not enough. What we need is a multi-part package for ambition, successive rounds of ratcheting up targets over time [and] long-term targets as well.”
If the CPP is the initial round, then successive rounds must include a more robust role for nuclear power, efficient natural gas, and cleaner coal technologies. Ideally, we should reverse the order to maximize effectiveness.
Scott Segal is founding partner of the Policy Resolution Group at Bracewell & Giuliani LLP