We couldn’t have written a better headline ourselves: Nuclear power industry under seige, FirstEnergy exec warns. Never mind the misspelling of “siege,” newspapers are having a hard enough time these days…
The article leads off: “The nuclear power industry finds itself buffeted by financial concerns, political pressure and increased scrutiny because of the Japanese disaster that could lead to the closures of more plants in the United States, a Western Pennsylvania utility executive said Tuesday.”
It then quotes FirstEnergy CEO Peter Sena III as warning of “rolling blackouts” if more nuclear reactors close. FirstEnergy owns the two-unit Perry reactors in Ohio and Beaver Valley reactors in western Pennsylvania. Later, Sena laments that no new reactors will be built in either Pennsylvania or Ohio because, as the article states, “utilities can’t recover the multibillion-dollar construction costs from ratepayers.”
Duh. In a deregulated marketplace, with far cheaper electricity sources readily available, multi-billion power plants of any kind can’t recover their construction costs–much as backwards utilities like FirstEnergy pine for the old days when they could spend billions of dollars on behemoth power plants and then charge ratepayers for them plus a hefty profit on their investment. And back then the bigger the investment the greater the profit. In most of the U.S., those days are gone.
The thing is, it was the utilities, especially nuclear utilities, that fought for this deregulated market in the first place. They wanted to be able to run their reactors as hard as they could, with as little ongoing maintenance and improvement investment as they could get away with, and reap the benefits of selling all that “low-cost” electricity. A lot of us were skeptical about deregulation back then, especially since the nuclear utilities asked for–and mostly received–billions of dollars in so-called “stranded costs” to pay for the nuclear construction costs they hadn’t yet recovered before deregulation began. In California alone, those stranded costs amounted to some $25 Billion added to everyone’s electricity bills, whether they chose to buy their electricity from a nuclear utility or a clean energy competitor.
It seemed to the nuclear utilities like a brilliant idea at the time. What they didn’t realize is that they were digging their own grave. They didn’t foresee a host of factors that have brought the industry to the knees, to the point where it is basically begging policymakers for help.
Those factors: the advent of natural gas fracking and the huge increase in gas supply, which drove down gas prices and is keeping them low (not that fracking is a good thing, it’s not); the plunging costs and increasing availability of renewables, especially wind and solar power, the latter of which, at the rooftop level, is enabling millions of homeowners to power their own homes more affordably than buying power from utilities; and Fukushima, which is increasing costs to nuclear utilities for upgrades and modifications (even if the NRC is doing its darnedest to keep those costs as low as possible for the utilities, far lower than is warranted from the NRC staff’s own safety analyses). Indeed, Sena warns that post-Fukushima safety efforts could themselves lead to more reactor closures.
But the point is, if the nuclear industry is indeed under siege, it’s the industry itself that led the charge to the barricades. And now that the barricades have fallen the industry suddenly realizes that its emperor (the deregulated marketplace) has brought the wrong clothes for the changing electricity climate. It’s no coincidence that the nuclear “renaissance” of a few years ago has dwindled to four reactors in still-regulated southeastern states where the regulators remain controlled by the utilities and ratepayers are held hostage to them both.
Now that the nuclear industry has understood it miscalculated, it’s full court pressure to somehow force ratepayers to subsidize it once again. That’s the point of articles like this one; part of a well-coordinated nuclear industry campaign to find new ways to rig the system (for other recent similar examples, see our April 1 post: You know the nuclear industry is desperate when…).
And that’s also why the industry has created the new front group Nuclear Matters, also mentioned in that April 1 GreenWorld article. Former Senators Evan Bayh of Indiana and Judd Gregg of New Hampshire were the first figureheads enticed to lead the charge (by how much nuclear green we don’t know); now Nuclear Matters has announced that former White House chief of staff Bill Daley (a lifelong friend of Exelon, one of the utilities with the most to lose in the current climate) and former DOE Secretary and Michigan Senator Spencer Abraham (who spent his time at DOE doing whatever the nuclear industry asked).
Exactly who is behind Nuclear Matters (www.nuclearmatters.com) isn’t clear. The group isn’t exactly transparent and doesn’t seem to have a physical address or actual staff; rather it appears to be largely a creation of the public relations firm Sloane and Company (www.sloanepr.com) which lists Exelon as its only utility/nuclear industry client.
For its part, Exelon isn’t exactly staying in the background. An article yesterday on Fierce Energy cites an Exelon honcho complaining that “flawed market rules and the current patchwork of state and federal energy policies subsidizing renewable energy do not properly compensate nuclear for its reliability and 24/7 emissions-free energy.” The exec, Kenneth Cornew who heads Exelon’s generation unit, added, “The economic viability of these highly reliable, low-carbon generation sources [nuclear reactors] is at risk, not because they can’t compete in the marketplace, but because they can’t compete when the playing field is uneven,” he said
That last sentence is a subtle upgrade from their previous messaging in the argument that “the playing field is uneven.” In fact, if you take out that clause and the word “not” before “compete,” the statement is exactly correct: the plain and simple fact is that aging and expensive nuclear reactors increasingly cannot compete with lower-cost alternatives, and the disparity is only going to grow as nuclear faces increased safety costs and continually falling renewables prices and reliability. A new graph published on Businessinsider.com dramatically shows the plunging cost of solar power, which is now competitive with both gas and coal (nuclear isn't competitive with any of the three).
Neither Exelon, nor its other most-threatened colleague Entergy, nor Nuclear Matters have laid out publicly the policy prescriptions they would like to see–rather, they’ve just focused on the argument that the market they created somehow has to change to favor nuclear power. The details, we presume, they’re explaining to policymakers in back rooms. But the one thing that is certain is that if any of their policy ideas were to be adopted, the result would be higher electricity prices for ratepayers–and that’s never a popular move for elected officials. Their added conundrum is that those higher rates would lead to even faster adoption of rooftop solar, further accelerating the nuclear utilities’ decline.
Yes, the nuclear industry is indeed under siege–one they set upon themselves more than a decade ago. And, at this point, it appears the industry may have no way out.
Note, a version of this post first appeared April 10, 2014 on GreenWorld, NIRS' daily blog chronicling the transition to a nuclear-free, carbon-free energy system.