With US electricity demand stalled, expanding wind and solar power is increasing the economic pressure on equally low-emission nuclear power, writes Geoffrey Styles, Managing Director of independent US-based consultancy GSW Strategy Group. He notes that the beneficiaries of renewable energy subsidies resist new state incentives for nuclear plants. But according to Styles, wind and solar should not come at the expense of nuclear power, as all are low-emission sources.
It’s an old adage that a growth market has room for all participants, including new entrants. The US electricity market is now experiencing the converse of this, with increasing competition for static demand leading to headlines like the one I saw earlier this week: “Lifeline for Nuclear Plants Is Threatening Wind and Solar Power.”
The US is essentially swimming in energy, at least when it comes to resources that can be turned into electricity
The idea behind that headline is ironic, considering that for more than a decade renewables have depended on government mandates and incentives to drive their impressive expansion. Along with recently cheap natural gas, they have made conditions increasingly difficult for established generating technologies like coal and nuclear power. In the case of coal, that was an entirely foreseeable and even intentional outcome, but for nuclear power it has come as a mostly unintended consequence.
Inevitable fight
Much as the slowdown in gasoline demand brought on by the recession created a crisis for biofuel quotas, stagnant electricity demand has hastened and intensified the inevitable fight for market share and the resulting shakeout in generating capacity. US electricity consumption has been essentially flat since the financial crisis of 2008-9, thanks to a weak economy and aggressive investment in energy efficiency. More generation serving the same demand means lower prices for all producers, and fewer annual hours of operation for the least competitive of them.
At the same time abundant, low-priced natural gas from soaring shale production has made gas-fired turbines both a direct competitor in the 24/7 “baseload” segment that coal and nuclear power formerly dominated, and the go-to backup source for integrating more renewables onto the grid.
Less nuclear power doesn’t just mean more renewables. It also means more gas or coal-fired power
The US is essentially swimming in energy, at least when it comes to resources that can be turned into electricity. The only rationale left for the substantial subsidies that wind and power still receive–over $3 billion budgeted for wind alone in 2017–is environmental: mainly concerns about climate change and the emissions of CO2 and other greenhouse gases linked to it.
That’s the same reason why some states have become alarmed enough by the recent wave of nuclear power plant retirements to consider providing some form of financial support for existing facilities. Nuclear power isn’t just the third-largest source of electricity in the US; it is by far our largest producer of zero-emission power: 3.5 times the output of wind in 2016 and 22 times solar. A large drop in nuclear power is simply not compatible with the desire to continue cutting US emissions. Environmental groups like EDF are reaching similar conclusions.
Nuclear’s scale is even more of a factor when it comes to considering what could replace it. For example, it takes the output of about 2,000 wind turbines of 2 megawatts (MW) each–roughly half of the 8,203 MW of new US wind installations last year–to equal the annual energy production of a single typical nuclear reactor. An infographic I saw on Twitter makes that easier to visualize:
I can appreciate why utilities and others that are investing heavily in wind and solar power might be convinced that providing incentives to keep nuclear power plants from retiring prematurely is “the wrong policy.” After all, we have collectively pushed them to invest in these specific technologies, because it has been easier to reach a consensus at the federal and state levels to provide incentives for renewables, rather than for all low-emission energy.
We don’t have anything resembling a level playing field for electricity generation, even in states with deregulated electricity markets
As long as we are promoting renewables in this way, though, we should recognize that nuclear power is no less worthy. The biggest benefit of renewables is their low emissions (including non-greenhouse air pollutants) an attribute shared with nuclear power. Yet because of their much lower energy densities, requiring much bigger footprints for the same output, and their lower reliability, incorporating a lot more renewables into the energy mix requires additional investments in electricity grid modernization and energy storage, along with new tools like “demand response.” Nuclear power is compact, available about 90% of the time, and it works just fine with the existing grid.
Level playing field
By experience and philosophy, I’m a big fan of markets, so I would normally be more sympathetic to the view expressed by the American Petroleum Institute that states shouldn’t tip the scales in favor of nuclear power over gas and other alternatives. However, we don’t have anything resembling a level playing field for electricity generation, even in states with deregulated electricity markets. The existing federal incentives for wind and solar power, together with state Renewable Portfolio Standards, are already tipping the scales strongly in their favor. These subsidies will remain in place until at least 2022, consistent with the most recent extension by Congress. Why do renewables merit such subsidies more than nuclear power?
Wind and solar power are key parts of the emerging low-emission energy mix, and we will want more as their costs continue to fall, but not at the expense of much larger low-emission energy sources that are already in place. Less nuclear power doesn’t just mean more renewables. It also means more gas or coal-fired power. That’s the experience of Germany’s “Energiewende”, or energy transition.
As long as that is the case, and without corresponding incentives for equally low-emission nuclear plants, as well as for fossil-fuel plants that capture and sequester their CO2, we will end up with an energy mix in the next few years that is less diverse, less reliable, and emits more CO2 than necessary. I wouldn’t consider that progress.
Editor’s Note
Geoffrey Styles is energy expert, advisor and communicator. He is Managing Director of GSW Strategy Group in Virginia, an energy and environmental strategy consulting firm helping organizations and executives address systems-level policy. This article was first published on his blog Energy Outlook and is republished here with permission.
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Bob Wallace says
Geoffrey, how about we bring some honesty to this discussion?
“for more than a decade renewables have depended on government mandates and incentives to drive their impressive expansion. Along with recently cheap natural gas, they have made conditions increasingly difficult for established generating technologies like coal and nuclear power”
Between 1947 and 1999 nuclear received average annual subsidies of $3.50 billion. (53 x $3.50 billion = $185.6 billion)
Between 1994 and 2009 wind and solar received average annual subsidies of $0.37 billion. (15 x $0.37 = $5.6 billion)
http://www.dblinvestors.com/documents/What-Would-Jefferson-Do-Final-Version.pdf
Since the 2009 cutoff above wind and solar have been receiving subsidies in larger amounts. This is because many subsides are now based on new production. (If any new nuclear had come on line it would also received PTC subsidies.)
Out of curiosity I made a rough stab at calculating the amount wind and solar have received since 2009.
Based on EIA production numbers from the beginning of 2010 through 2015 solar produced 73,560 million kWh of electricity and wind produced 895,301 million kWh.
Ignoring the fact that some wind/solar farms chose the 30% ITC rather than the $0.023/kWh PTC and doing the math as if all wind and solar chose the PTC, wind and solar subsidies would have received subsidies (had their taxes lowered) by $22.3 billion.
Between 1994 and 2009 renewables received subsidies of $5.6 billion. Adding in the 2010 to 2015 (roughly calculated) subsidies the total comes to $27.9 billion.
Remember, nuclear received $185.6 billion before 1999. 6.6x as much as wind and solar have received in total.
The new reactors being constructed in Georgia and South Carolina received federal loan guarantees, which almost no wind and solar farms receive. Those reactors, if they come online, will receive production tax credits just like new wind and solar.
Of course there are subsidies for nuclear which are not included in the $185.6 billion. For example, if we were to experience a nuclear meltdown near a densely populated area the cost could easily run into trillions of dollars. And the US taxpayer is on the hook for that expense.
The federal government has to provide additional security for nuclear reactors which wind and solar do not require.
Local governments and hospitals have to stage emergency response exercises in the event that a reactor goes sour and people have to be evacuated/treated.
Taxpayers are going to pay for long term radioactive waste storage.
So, how about we hear nothing more about how badly nuclear is being treated when it comes to subsidies. That’s like Donald Trump talking about how he struggled to become rich.
Bob Wallace says
“That’s the same reason why some states have become alarmed enough by the recent wave of nuclear power plant retirements to consider providing some form of financial support for existing facilities”
Bull. Local governments are bailing out economically failing nuclear plants in order to save jobs. Low carbon electricity is only an excuse.
Bob Wallace says
“Nuclear’s scale is even more of a factor when it comes to considering what could replace it. For example, it takes the output of about 2,000 wind turbines of 2 megawatts (MW) each–roughly half of the 8,203 MW of new US wind installations last year–to equal the annual energy production of a single typical nuclear reactor.”
Geoffrey, roughly a fourth of paid off US reactors are economically failing because natural gas and wind provide cheaper electricity. Decisions to close US reactors is being made on economic grounds.
On top of that the US reactor fleet is old. As plants age, maintenance costs rise. Especially if the materials in the plant are constantly being bombarded with radiation. The ~75% reactors that are now economically competitive are getting older. These
old plants might make it to age 60, or even higher, but as time goes along stuff will break and the cost of produced electricity will have to be increased. You very well know that we’ve already shut down reactors due to the cost of putting them back into service when they’ve broken down.
Now. The real issue is whether it makes sense to build new reactors.
The quick answer is “No”. We now know that the power from Vogtle, if those reactors come online, will be somewhere higher than $0.13/kWh. That is the wholesale price. It’s higher than the average US price of electricity. It’s higher than the cost of retail electricity in Georgia.
Wind, unsubsidized, is now under $0.03/kWh. PV solar is now dropping below $0.04/kWh.
Tucson Electric Power (TEP) this week announced it would buy solar energy from a new 100MW solar plant at the historically low price of less than US 3c/kWh – less than half of what it had agreed to pay in similar contracts over the last few years.
The project will also include 30 MW/120 MWh of battery storage, and the company says that the power purchase agreement for the combined output is “significantly less” than US4.5c/kWh – nearly two-thirds cheaper than the previous such contract struck in Hawaii, and well below the cost of a gas-fired peaking plant.
It is the first time in the US that a solar contract has fallen below US 3c/kWh, although it has already occurred in Dubai (which holds the record low of 2.54c/kWh), Chile and Mexico. The prices in those countries are unsubsidised, and the US price includes the benefit of a 30 per cent tax credit, which pushes the unsubsidised price back up to near US 4c/kWh.
http://reneweconomy.com.au/stunning-new-lows-in-solar-and-battery-storage-costs-13929/
Three cents means that the solar farm is generating for less than 4c/kWh. For the first ten years of a likely 20 year contract (PPA) they can get a 2.3c/kWh production tax credit. 1.15/kWh over 20 years. That takes 3c to 4.15/kWh but that price also includes the farm’s profits.
At 4.5c/kWh the solar farm will be producing dispatchable electricity. It will compete with the most expensive electricity of the day.
Storage for 1.5 c/kWh. Wind and solar for 3 to 4c/kWh. New nuclear cannot compete in that market when renewables can provide the power needed at half or a third the cost.
It’s not how many units that must be built, Geoffrey. It’s the cost of electricity produced. The market wants the least expensive solution to problems.
Bob Wallace says
Geoffrey, Geoffrey, Geoffrey….
” Less nuclear power doesn’t just mean more renewables. It also means more gas or coal-fired power. That’s the experience of Germany’s “Energiewende”, or energy transition.
As long as that is the case, and without corresponding incentives for equally low-emission nuclear plants, as well as for fossil-fuel plants that capture and sequester their CO2, we will end up with an energy mix in the next few years that is less diverse, less reliable, and emits more CO2 than necessary. I wouldn’t consider that progress.”
We’ve shoveled money into the nuclear industry. Those numbers are in another of my comments to you. New nuclear (Vogtle and Summer) are more heavily subsidized than any wind or solar installation. And I did not even bring up the issue of consumers in both Georgia and South Carolina “subsidizing” the new reactors via state supported increases in their electricity rates.
South Carolina consumers are now paying a 30% extra charge per kWh which is given to the utility for nuclear construction.
South Carolina consumers have been “taxed” $1.4 billion to date with that money given to South Carolina Electric and Gas as additional subsidies. With the reactors only about half finished we should expect the total seized-subsidy to exceed $3 billion.
Now, let’s look to Germany and the Energiewende.
Yes, had German citizens not decided to close their reactors early they would be further along with lower fossil fuel use and their CO2 emission levels would be lower. But Germans decided that they wanted to sleep better at night by not having to worry about living through a nuclear disaster in their country.
You are free to disagree with their decision, but they are the people living there among those reactors.
How has the Energiewende worked out? Germany has cut both fossil fuel use and CO2 emissions.
https://goo.gl/W8odxK
Germany has the second most reliable grid in the EU. Second only to that wind giant, Denmark. And much more reliable than highly nuclear France.
https://goo.gl/W8odxK
” fossil-fuel plants that capture and sequester their CO2″ – Surely thou jests.
Baras says
Good article, although you go too easy on wind and solar. Antiquated wind and solar cannot provide power on demand. The energy they do produce is either too much or too little at unpredictable — and sometimes disastrous times.
Grid instability becomes more of a problem as erratic wind and solar penetrate too deeply into the energy schemes of well meaning but power-ignorant societies.
Helmut Frik says
Grid stability in germany rises with rising shares of wind and solar….
So things are by far not that simple.
George Barnett says
Geoffrey’s piece sums it up well, we’re driving ourselves to inefficiencies. Our problem is that none of us have a clear idea on costs of any source of power because all sources are colored by differing political inclinations. When there is a politically unfettered and unmanipulated cost in the market place for alternative energy sources, consumers will jump on board while weighing their own views of greenhouse gas emission, and so on. Our local nuke, 2,000 mw San Onofre is shutdown because of a gross technical failure of the regulators that let the owner/operator install a mal-designed replacement steam generator that failed on startup. And everyone has yet desided who is to pay for the $4 billion price tag to permanently mitigate the site. If anyone thinks replacing the equivalent of 1,000 zero emission wind turbines has been successful, they all mislead.
Bob Wallace says
I have no idea where you got the idea that we don’t know the cost of power sources. It’s not at all difficult to tease out the subsidy part for facility cost. Every year the DOE releases cost data for wind and solar PPAs.
And new power sources are installed around the world without subsidies. The cost of wind, solar, nuclear and other sources is readily available.
“Our local nuke, 2,000 mw San Onofre is shutdown because of a gross technical failure of the regulators that let the owner/operator install a mal-designed replacement steam generator that failed on startup. ”
That’s an interesting spin. It was the regulators fault that the reactor owners installed faulty parts, the regulators caused the people doing the repairs to do them wrong. Very interesting.
California has over 13,000 wind turbines. I don’t recall the state struggling with their installation.
The struggle that SoCal had was in losing that much generation without prior notice. The grid could probably have dealt with losing a single reactor but had not planned for losing both reactors at once. California ran up against the myth of nuclear reliability.
Mulp says
Wind, solar, storage have gotten cheaper for both capital and operations steadily for decades.
Gas generation has gotten cheaper for capital steadily for decades with quick response operations getting cheaper, and general power generation operations about the same as several decades ago.
Coal capital and operations has gotten steadily more expensive for capital and operations as it can no longer outrun the 1970 Clean Air Act intent.
Nuclear capital and operations has gotten more expensive over the decades as government indirect subsidies for military nuclear have fallen. For example, the Federal government training nuclear engineers and techs for military purposes supplied trained and experienced boomer workers to the nuclear power industry by the 80s, but since, government employment and it’s training have been cut way back.
Without government demand for nuclear, nuclear everywhere has remained immature as an industry. France government run nuclear was a success, but since being privatized, the same French nuclear workforce and structure has failed to match “government waste, fraud, and abuse” levels of competency.
China may be succeeding as a government central planned nuclear industry powerhouse better than France, but warning signs exist, so it’s too soon to declare China to have the economic formula for nuclear power.
Bob Wallace says
I believe that France’s nuclear industry is only 15% privatized. And, IIRC, that 15% was sold to semi-insiders.
China’s cost for nuclear will almost certainly increase along with rising labor costs.
Robert Hargraves says
Bob Wallace wrote “nuclear received $185.6 billion before 1999.” That’s pretty incredible; where’s the backup?
Geoffrey et al, here’s a great new article that explains the “markets” in which nuclear and renewables compete.
https://americanaffairsjournal.org/2017/05/no-free-market-electricity-can-ever/
Bob Wallace says
Are you asking me where the backup for that claim is? It’s right after the statement….
“Between 1947 and 1999 nuclear received average annual subsidies of $3.50 billion. (53 x $3.50 billion = $185.6 billion)
Between 1994 and 2009 wind and solar received average annual subsidies of $0.37 billion. (15 x $0.37 = $5.6 billion)
http://www.dblinvestors.com/documents/What-Would-Jefferson-Do-Final-Version.pdf ”
I didn’t have time to read your linked AAJ article carefully but I noticed some problems.
They state that “Yet electricity cannot readily be conserved.” We ‘conserve’ electricity by storing it.
They seem to not mention nuclear subsidies while spending time discussing wind and solar subsidies. Remember, if the Vogtle and Summer plants come online they will be more heavily subsidized than wind and solar entering the grid at the same time. In fact, wind and solar subsidies may no longer be available when those reactors are finished.
The paper talks about too much wind and solar. That’s common. But we never seem to talk about too much coal generation, too much CCNG, or too much gas peaker.
Coal and CCNG have capacity factors between 50% and 60%. Gas peakers have a CF around 5%. That tells us that when we don’t need full output from coal or gas we turn the plant off. Why do we talk about wind and solar differently? If we do find ourselves generating more than we can use or store then we simply turn some off.
The impact on price is will be the same. Fixed costs will have to be spread over fewer MWh produced regardless of whether the generator is a steam plant, a gas turbine, a wind turbine or a solar panel.
The overall point of the paper is, IMHO, correct. Electricity does not operate in a totally free market. Pretty much nothing does.