Federal energy regulators are considering significant reforms that could save the nuclear power industry. The Federal Energy Regulatory Commission (FERC) will consider removing pricing requirements for electricity from “fast-start” power generation sources put in place for sudden spikes in energy demand, which are often triggered by wind and solar power.
Such rules mean nuclear power is underpaid for the amount of power energy it produced and its reliable nature. Different generators bid into the market to sell their electricity, but they are not yet true markets. Other high cost generators used to get to make side deals that gave them a serious advantage which didn’t apply to nuclear. This undervalued the always-on and reliable power of nuclear plants.
A potential FERC ruling would reduce artificial market price suppression and accurately reflect the true cost of generating power, which would be great news for nuclear reactors. The rule notes it would have power markets incorporate the entire costs of ramping up generators, not just the cost of running them at the moment when they are needed.
The market gives special high payments to companies that can easily turn on or off their generation because stakeholders didn’t really trust the markets to make the right decisions. With appropriate regulations, the different generators can respond appropriately. This would help prevent nuclear power plants from being undervalued.
The undervaluation of nuclear power plants means that many of them are facing serious financial problems and are even at risk of closing early. About half of U.S. nuclear reactors are at risk of closing early.
In the past two years, six states have shut down nuclear plants and “dozens” of other plants across the U.S. are facing challenging economic conditions, placing them at risk of imminent retirement.
FERC has started a couple of different rule-makings to improve the state of price formation, but there are number of outstanding issues that they haven’t touched.
The average nuclear plant is required to spend $22 million annually simply complying with government regulations, far more than other energy sources, which puts nuclear at a competitive disadvantage. Getting regulatory approval from the Nuclear Regulatory Commission (NRC) to build a new reactor can take up to 25 years.
Other FERC issues like negative pricing for green energy are still big problem. Anybody who receives a subsidy for their power can bid in at below zero dollar levels. This can force nuclear plants to have to pay for the privilege of staying online, but that’s probably a smaller issue than this market reform.
Solar and wind power get 326 and 69 times more in subsidies, respectively, than coal, oil and natural gas per amount of energy generated according to 2013 Department of Energy data collected by Forbes. Green energy in the U.S. got $13 billion in subsidies during 2013, compared to $3.4 billion in subsidies for conventional sources and $1.7 billion for nuclear energy according to data from the Energy Information Administration (EIA). (The Daily Caller, 12/21/2016)