Contributor Post Created with Sketch. Subsidy Upon Subsidies

 

1200px-Indian_Point_Nuclear_Power_PlantConfronted with a grassy bump in a playing field, a normal person would simply level it out to match the rest of the turf. But when government is put in charge — and egged-on by lobbies — the more common solution is bring in truck-load after truck-load of soil to raise the entire field to match the bump. For the latest and most cussedly frustrating example of the phenomenon, Ron Bailey brings us this report on energy subsidies in New York State:

Unable to compete with heavily subsidized wind and solar power or electricity generated using cheap natural gas, the operators of four upstate New York nuclear reactors were planning to shut them down. Closing the plants would be a significant setback for Gov. Andrew Cuomo’s ambitious plan to reduce the state’s carbon dioxide emissions from the electric power sector. Currently the state gets 32 percent of its electricity from nuclear power, 19 percent from hydropower, 3 percent from wind, and 0.1 percent from solar. Burning natural gas currently generates about 41 percent of the state’s electricity with the remainder from coal and oil.

In order to forestall these nuclear shut-downs, state regulators decided this week to subsidize nuclear power plants at a rate of $500 million per year. The deal was announced by the state’s Public Service Commission when it adopted a plan to mandate that 50 percent of the state’s electricity be produced using renewable energy by 2030. Under the new Clean Energy Standards, each nuclear plant will be allocated zero emissions credits, which utilities must purchase when buying power from them. It is estimated that the credits will sell for about $17.48 per megawatt-hour of electricity. That money will go to the bottom lines of the plant’s owners, Entergy and Exelon. Now everybody’s a subsidized rent-seeker.

There’s no shortage of reasons to take offense at this story — political, economic, technical, ecological, etc. — but it’s the moral one that kills me: That, upon seeing someone else unjustly given preferential treatment, our answer increasingly isn’t to ask for the injustice to stop, but to demand our own cut of the spoils.

There are 21 comments.

  1. Austin Murrey Inactive

    Just to make sure I understand the situation:

    New York State subsidizes wind and solar, 3.1 percent of their power generation.

    This makes nuclear power, 32 percent of their power, so uneconomical it would force closures of 4 plants.

    So rather than stop subsidies they’re going to subsidize nuclear power, because that won’t distort the market at all.

    If I understand the situation in what possible way does that make sense?

    • #1
    • August 8, 2016, at 8:56 AM PDT
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  2. Ulysses768 Inactive

    Don’t forget that two of the major cost drivers for nuclear power are regulation and licensing. A spiral of regulation and subsidy at the expense of the taxpayer.

    The US Energy Information Administration (EIA) calculated that, in constant 2002 values, the realized real overnight cost of a nuclear power plant built in the USA grew from US$ 1,500/kWe in the early 1960s to US$ 4,000/kWe in the mid-1970s. The EIA cited increased regulatory requirements (including design changes that required plants to be back-fitted with modified equipment), licensing problems, project management problems and mis-estimation of costs and demand as the factors contributing to the increase during the 1970s. Its 2010 report, Updated Capital Cost Estimates for Electricity Generation Plants, gave an estimate for a new nuclear plant of US$ 5,339/kW.

    http://www.world-nuclear.org/information-library/economic-aspects/economics-of-nuclear-power.aspx

    • #2
    • August 8, 2016, at 8:59 AM PDT
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  3. tigerlily Member

    Grrrrrr – it’s very maddening isn’t it?

    • #3
    • August 8, 2016, at 9:02 AM PDT
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  4. Orion Inactive

    Austin Murrey:Just to make sure I understand the situation:

    New York State subsidizes wind and solar, 3.1 percent of their power generation.

    This makes nuclear power, 32 percent of their power, so uneconomical it would force closures of 4 plants.

    So rather than stop subsidies they’re going to subsidize nuclear power, because that won’t distort the market at all.

    If I understand the situation in what possible way does that make sense?

    You understand the situation perfectly. And no, it does not make any sense…

    Welcome to the Peoples Republic of New York.

    • #4
    • August 8, 2016, at 9:05 AM PDT
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  5. Tom Meyer, Common Citizen Contributor

    Austin Murrey:So rather than stop subsidies they’re going to subsidize nuclear power, because that won’t distort the market at all.

    34070322

    • #5
    • August 8, 2016, at 9:06 AM PDT
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  6. PsychLynne Inactive

    Austin Murrey:Just to make sure I understand the situation:

    New York State subsidizes wind and solar, 3.1 percent of their power generation.

    This makes nuclear power, 32 percent of their power, so uneconomical it would force closures of 4 plants.

    So rather than stop subsidies they’re going to subsidize nuclear power, because that won’t distort the market at all.

    If I understand the situation in what possible way does that make sense?

    In the way that says something like this:

    Climate change is a real, serious problem and needs to be addressed aggressively. Any immediate costs (say $500 million subsidies) need to be examined in light of the cost of doing nothing, which is destruction of the planet. In addition, with the flick of a pen, I can commit someone’s else’s money to solve this problem, which is doing the right thing because I know best and all my political colleagues agree with me.

    Too cynical?

    • #6
    • August 8, 2016, at 9:14 AM PDT
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  7. Jamie Lockett Inactive

    63594749

    • #7
    • August 8, 2016, at 9:15 AM PDT
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  8. Austin Murrey Inactive

    Tom Meyer, Ed.:

    Austin Murrey:So rather than stop subsidies they’re going to subsidize nuclear power, because that won’t distort the market at all.

    34070322

    I’m pretty sure as a conservative I qualify as Slytherin. Green and Silver Forever!

    • #8
    • August 8, 2016, at 9:27 AM PDT
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  9. Austin Murrey Inactive

    PsychLynne:

    Austin Murrey:Just to make sure I understand the situation:

    New York State subsidizes wind and solar, 3.1 percent of their power generation.

    This makes nuclear power, 32 percent of their power, so uneconomical it would force closures of 4 plants.

    So rather than stop subsidies they’re going to subsidize nuclear power, because that won’t distort the market at all.

    If I understand the situation in what possible way does that make sense?

    In the way that says something like this:

    Climate change is a real, serious problem and needs to be addressed aggressively. Any immediate costs (say $500 million subsidies) need to be examined in light of the cost of doing nothing, which is destruction of the planet. In addition, with the flick of a pen, I can commit someone’s else’s money to solve this problem, which is doing the right thing because I know best and all my political colleagues agree with me.

    Too cynical?

    Not as cynical as my take: someone in the state house’s friends/relatives run the solar and wind projects so rather than risk them losing their cushy non-job at the wind/solar farm better to pump more money to the nuke guys.

    • #9
    • August 8, 2016, at 9:28 AM PDT
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  10. Misthiocracy ingeniously Member
    Misthiocracy ingeniously Joined in the first year of Ricochet Ricochet Charter Member

    This doesn’t make much mathematical sense.

    Solar and wind are 3.1% of the state’s electricity supply. Nuclear is 32%.

    The nuclear industry says that the subsidies for wind and solar make nuclear unprofitable.

    So, they’re arguing that if nuclear was 35.1% of the state’s supply it would be profitable, but at 32% it’s not?

    I’m calling shenanigans on that claim.

    Those nuclear plants might very well be unprofitable, but I don’t see how solar and wind can be to blame. They simply don’t generate enough power to take profits away from nuclear. Those profits have to be going somewhere else, like regulatory compliance costs and/or the fact that the nuke plants are getting pretty long-in-the-tooth and rely on old technology.

    • #10
    • August 8, 2016, at 9:34 AM PDT
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  11. Ulysses768 Inactive

    I think the emphasis should be on the cheap natural gas part. But then again it’s not actually cheaper than uranium just less regulated in power generation. Of course the government solution to this problem would be to more heavily regulate natural gas, rather than lessen the burden on nuclear power.

    Unable to compete with heavily subsidized wind and solar power or electricity generated using cheap natural gas

    • #11
    • August 8, 2016, at 9:47 AM PDT
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  12. Boss Mongo Member

    Tom Meyer, Ed.: There’s no shortage of reasons to take offense at this story — political, economic, technical, ecological, etc. — but it’s the moral one that kills me:

    Concur. Would that the nuke operators had the stones to just pull the plug–and say “go ahead, fill the gap with renewables.”

    • #12
    • August 8, 2016, at 9:54 AM PDT
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  13. jmelvin Member

    Although I am one who will certainly benefit from these subsidies, in that I work for suppliers to this industry, I wish the utilities had pursued a path seeking that the subsidies for other technologies be withdrawn. However, even if the New York State government had withdrawn subsidies for wind and solar electrical power production, electrical utilities with wind and solar generation would likely continue to receive out of state subsidies that utilities with nuclear power generation facilities still do not receive, thus continuing to prop up wind and solar power facilities artificially.

    This strategy actually buys some time for the nuclear power facilities to weather the period in which wind and solar power generation is artificially competitive. Should the subsidies for all of these “carbon free” technologies go away at some point in the near future, there would be no way to quickly replace the approximately 4.5 Gigawatts of power production offered by these existing NYS nuclear power plants.

    • #13
    • August 8, 2016, at 10:30 AM PDT
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  14. jmelvin Member

    Boss Mongo:

    Tom Meyer, Ed.: There’s no shortage of reasons to take offense at this story — political, economic, technical, ecological, etc. — but it’s the moral one that kills me:

    Concur. Would that the nuke operators had the stones to just pull the plug–and say “go ahead, fill the gap with renewables.”

    They actually have and that was one of the big drivers behind the NYS legislature moving forward with the subsidies for the nukes. Each of these facilities employ 500 to 1000 people, generally in fairly rural areas that may already be economically depressed. Further, each of these facilities help the state meet their carbon reduction goals, since nuke plants are not carbon emitting. It is my understanding that electrical power utilities in both states do not have a regulated return on their power production, so in some cases, operation of otherwise good, reliable baselaod plants is not competitive in the market because of the all of the available subsidized power within the state and elsewhere.

    Although nuclear power plants can adjust their power levels to meet grid demand, they are designed and licensed to run at full power from breaker closing at the end of a refueling outage to breaker opening 18 to 24 months later for the next refueling outage. Thus they cannot accomodate constantly being up and down like coal or even gas plants can, where you just feed less fuel in. To ensure continued operation of that plant at or near full power, the utilities will sometimes sell the power at a loss during the periods when wind and solar are at their peak and are expected to be able to meet overall demand with their subsidized power (sourced from all over the various states that make up the controlled grid, not just NYS or Illinois). However, these utilities have to stay competitive to stay in business, even against subsidized power. Utilities will only operate in this way for so long before they say “We can’t continue to take losses on these assets” and close them down and eliminate the plants that can most reliably meet baseload demand when competing in an unsubsidized market.

    NOTE: I tried writing this quickly and I’m sure my thoughts are disjointed so I may need to adjust some of this or provide clarifications later.

    • #14
    • August 8, 2016, at 11:19 AM PDT
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  15. Boss Mongo Member

    @jmelvin, made sense to me.

    Here’s a follow-on question for you: is the ratio of power production (about 32% to 4% of the total, respectively) the approximately the same across the all the states plugged into the grid?

    • #15
    • August 8, 2016, at 11:28 AM PDT
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  16. Misthiocracy ingeniously Member
    Misthiocracy ingeniously Joined in the first year of Ricochet Ricochet Charter Member

    jmelvin: This strategy actually buys some time for the nuclear power facilities to weather the period in which wind and solar power generation is artificially competitive.

    I don’t buy it. I simply don’t see how wind and solar can possibly be taking business away from nuclear considering how little power they actually feed into the system.

    I find it far more plausible that nuclear wants these subsidies to “weather the period” where the technology it’s using is woefully out-of-date and inefficient, compared to alternative nuclear technologies.

    • #16
    • August 8, 2016, at 11:43 AM PDT
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  17. jmelvin Member

    Misthiocracy, show me where in the Code of Federal Regulations that thorium reactors are even license-able for power production in the USA and how a well meaning utility would get there even if they had a design available to build and wanted to start the process today. Feel free to start at Title 10 and Part 50. Once you get done with that you can then feel free to tell me who has one for sale and building.

    • #17
    • August 8, 2016, at 12:47 PM PDT
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  18. Misthiocracy ingeniously Member
    Misthiocracy ingeniously Joined in the first year of Ricochet Ricochet Charter Member

    jmelvin:Misthiocracy, show me where in the Code of Federal Regulations that thorium reactors are even license-able for power production in the USA and how a well meaning utility would get there even if they had a design available to build and wanted to start the process today. Feel free to start at Title 10 and Part 50. Once you get done with that you can then feel free to tell me who has one for sale and building.

    a) So they’re “weathering the period” until the government stops killing nuclear power innovation in its sleep, which is unlikely to ever happen.

    b) When was the last time a traditional light water fission reactor was built in the USA, either? Government regulation helps protect current reactors from new competitors entering the market (except for solar and wind, which can’t possibly produce enough power to be competitively relevant).

    Either way, they want subsidies to help them “weather a period” that isn’t going to end any time soon. i.e. a permanent subsidy

    • #18
    • August 8, 2016, at 12:54 PM PDT
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  19. jmelvin Member

    Boss Mongo:@jmelvin, made sense to me.

    Here’s a follow-on question for you: is the ratio of power production (about 32% to 4% of the total, respectively) the approximately the same across the all the states plugged into the grid?

    I actually don’t know the answer to that question. I do know that NYS is one of the three states with the most operating nuclear power plants (Illinois has 6 sites I think, Pennsylvania has 6 sites, and NYS has 4). Some of these sites have 2 plants in operation, whereas others just have one. Some states that may be on the same grid as NYS, probably Maine and New Hampshire have none. Vermont had one (Vermont Yankee), but I think it now has closed due to being similarly economically unviable.

    • #19
    • August 8, 2016, at 12:56 PM PDT
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  20. jmelvin Member

    When was the last time a traditional light water plant came online in the USA? 2016. Watts Bar Unit 2 came online earlier this year. Unit 2 was finished after being started in the mid 1970s. Its sister unit, Watts Bar Unit 1 was the last nuke completed in the USA in 1995. There are some others out there that had their building started in the late 70s or early 80s and came online in the 80s or 90s though.

    That said, all of the new nuclear power plants being built in the USA now (2 at Vogtle and 1 or 2 at VC Summer) are pretty similar to the PWR (pressurized water reactor) plants built in the 70s and 80s. There are some technology updates, some variations in system configurations, and wider use of passive safety systems, but they are broadly pretty close to what we have nearly 50 years of experience operating. Many of these newer designs were in the works when the last batch of plants were being finished and incorporated many of the lessons learned to that time. The designs (such as the Westinghouse AP1000) were further updated again before being built in Georgia and South Carolina.

    The US has already had one thorium reactor plant, Fort St. Vrain in Colorado. It shut down in the late 1980s after a series of problems that resulted in the plant being too expensive to continue operation.

    • #20
    • August 8, 2016, at 1:28 PM PDT
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  21. jmelvin Member

    One of the biggest drivers of this effort was the NYS directive to achieve a high percentage of its electrical power from low or no carbon power production sources. This is as a result of the NYS legislature, which is elected by the people of NYS. However, with the real possibility that some or all of these plants may be shuttered, there is nearly no likelihood that the equivalent capacity could be made up by wind or solar generation in a short period of time. So, understanding the mandates put in place at the will of the people, the legislature determined that the only path to achieve this goal was to subsidize the state’s existing nuclear power plants.

    Although these three plants (2 units at Nine Mile, 1 at FitzPatrick, and 1 at Ginna) account for maybe 2000-2500 MW total production capability at any given time with all of them operating, they all have the ability to make that full capacity at all times, excepting their 1 month refueling shutdowns every 18 to 24 months. Thus they have a high capacity factor, which accounts not just for how many MW they can put to the grid, but also for how many hours they can supply it. Since they can supply it reliably for long periods, they have a very high capacity factor ((megawatts made x hours those megawatts were made) / (rated plant megawatt maximum / hours in a year)).

    However, to ensure that there is similar power available for the state’s (or grid’s) customers at any period of time, nearly 9,000 MW of new solar capacity would need to be added or 22,000 MW of on-shore wind capacity would need to be added to ensure that adequate power is available at all times, because these generating means have rather low capacity factors. That is to say they may make power, but only for short periods at a time, when compared to the hours in a year. Adding that much capacity in a short period of time is not achievable, so if the state’s priority is on the production of “clean” power, then subsidizing nuclear power plants was the only choice (since the state is not the main source of subsidies for wind and solar.)

    Here’s another article on the whole mess: http://www.utilitydive.com/news/with-clean-energy-standard-new-york-looks-to-save-nukes-skirt-legal-chall/423673/

    • #21
    • August 8, 2016, at 5:04 PM PDT
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