After New York props up nuclear power generation sector, is Pennsylvania next?
Early in August, nuclear operators in New York got the breather they’ve been wishing for in other states: a way to keep struggling nuclear reactors afloat in a tough market by paying subsidies to the plants for not emitting carbon dioxide.
As part of that state’s Clean Energy Standard, utilities will be required to buy “zero emission credits,” providing what is estimated to be a $500 million annual subsidy to keep the nuclear plants open. Nuclear power comprises nearly 30 percent of New York’s electricity supply.
The move came after nuclear operators warned they might be forced to shut down reactors early if they didn’t receive financial support for the zero-carbon fuel. Already, more than half a dozen nuclear plants across the country have been pegged for early retirement because they are losing money.
With victory in New York, it’s only natural for nuclear operators to use the momentum to go after subsidies in other states, wrote Kit Konolige, a senior utility industry analyst at Bloomberg Intelligence, in a recent note.
“Companies probably will end up seeking billions of dollars from Pennsylvania, New Jersey, Ohio and Connecticut,” he wrote. “Closing nuclear plants could lead to higher carbon emissions and thousands of layoffs. Subsidizing them would boost electric bills and hurt rival generators’ margins.”
He speculated that the three operators of Pennsylvania’s five nuclear plants — Akron-based FirstEnergy, Illinois-based Exelon, and Talen Energy, based in Allentown — “could unite in Pennsylvania aid push” on the heels of the New York decision.
It’s not yet clear what the ask will look like and if it will rely on regulations or laws to prop up struggling nuclear plants.
Mr. Konolige noted that while Exelon, which operates two plants in New York, was successful in getting support through that state’s public utility commission, efforts to push nuclear subsidies through the legislature in its home state of Illinois did not pan out.
“It’s too early to tell which route will be taken in Pennsylvania,” Mr. Konolige wrote.
Nuclear plants, for decades a source of baseload generation and 20 percent of the electricity in the U.S., are falling victim to the same market dynamics pushing out coal plants: the low price of natural gas, which tends to set the electricity price paid to all sources on the grid.
Natural gas power plants also can ramp up and down fairly quickly, while nuclear plants must run continuously. That means when the grid price is lower than the operating costs, nuclear reactors have no choice but to run and lose money.
All the while, nuclear supporters say the fuel isn’t being given the credit it deserves in supplying a large chunk of electricity generation without carbon emissions. The federal Clean Power Plan doesn’t credit existing nuclear plants for their zero-emission profile, they say.
Pennsylvania has five nuclear power stations, most in the eastern part of the state. It is a deregulated energy market, which means utilities can’t own generation plants and they can’t make a profit off supplying other companies’ kilowatts to their customers. Instead, the cost of the electricity itself is a pass-through to the consumer.
