Rick Perry’s One Step Forward, Three Steps Back
A Pyrrhic Victory for US Nuclear
Last week, the Department of Energy received almost universal criticism over its new electricity market rule proposal, designed to keep US coal and nuclear power plants from shutting down. And this criticism was deserved: though the rule would protect existing nuclear power plants—an essential goal for long-term decarbonization—it would do so by marrying the fate of low-carbon nuclear to high-carbon (and increasingly uneconomic) coal-fired power.
American energy policy should move the country toward lower emissions, denser fuels, and more affordable energy. This rule change would cause the most drastic power market regulatory reform in decades, all for one step forward and many steps back.
According to the Department of Energy, the proposed rule is designed to “ensure that certain reliability and resilience attributes of electric generation resources are fully valued.” On Monday, the proposal was “fast-tracked” by the Federal Energy Regulatory Commission. The rule provides cost recovery to power plants with more than 90 days of fuel on site. Only coal and nuclear plants usually have this much supply, so the rule amounts to a federal subsidy for coal and nuclear generation.
But in 2017, coal power is fundamentally uneconomic. Largely thanks to the US shale gas revolution, coal plants are being shut down based on costs alone. As my colleague Michael Goff has recently shown, replacing coal with gas has been the primary driver of lowered US greenhouse gas emissions. Since gas plants emit roughly half as much CO2 as coal plants, the transition from coal to gas and renewables has resulted in a 25% decline in US power sector emissions over the past ten years.
Throughout most of the 20th century, coal power was the cheapest source on the market. But as cleaner and more advanced forms of electricity generation have become available, it’s appropriate for policy to accelerate the transition away from coal. That’s what “making clean energy cheap” is all about. This policy does the opposite—it props up one of the dirtiest, costliest energy sources we have.
Protecting coal power doesn’t even guarantee reliability or resiliency in times of crisis. One of the country’s largest coal plants, Texas’s 2.5 gigawatt WA Parish plant, was partially shuttered and partially converted to gas during Hurricane Harvey. Meanwhile, the collapse of Puerto Rico’s transmission network after Maria proves that other steps, like undergrounding power lines, are much more important for improving reliability. A recent analysis from the Rhodium Group found that 96% of the electricity disruptions in the US over the past five years were caused by severe weather disrupting transmission and distribution. Fuel supply problems, on the other hand, caused a mere 0.0007%.
Undoubtedly, the proposed rule would also help nuclear plants: thanks to the high density of nuclear fuel, plants typically have 18-24 months of fuel on hand. Since both nuclear and coal plants can produce electricity at any time of day, they are grouped as “baseload” sources to be protected by the rule.
But that’s where the similarities end.
Nuclear is substantially cheaper to operate, more reliable, less polluting, and lower-carbon than coal. Deep decarbonization will almost certainly require protecting and expanding nuclear capacity, as nuclear plants provide consistent low-carbon power when intermittent renewables like wind and solar cannot. But meeting any reasonable climate goal will also require eliminating the remaining emissions from coal plants over the next few decades. Ultimately, the rule provides a much-needed lift to American nuclear power at the cost of a poorly designed subsidy for dirty, expensive, outdated coal.
What should DOE and FERC do instead? There are policies that energy regulators should consider to protect existing nuclear and accelerate cheap, reliable power-sector decarbonization. These include expanding renewable portfolio standards into low-carbon portfolio standards, advancing demonstration and commercialization policies for next-generation nuclear technologies, and investing in clean energy RD&D across the board. These policies would move the US power system in the right direction. DOE’s proposed rule change would not.