Nuclear Plants Don’t Need a Taxpayer Bailout: Profits Could Top $279 Million in 2021
Congress and the Administration have taken several positive steps to improve America’s infrastructure and build a stronger, cleaner, more affordable power grid. Renewable resources and reliable, low-carbon natural gas generation plants are at their lowest cost ever in competitive power markets, greening the grid through private investment without passing costs to consumers and encouraging reliability to keep the lights on. But growing efforts to extend billions of unnecessary taxpayer dollars to bail out existing, profitable nuclear power plants undermine progress in reducing carbon emissions, investing in new clean technology, and “building back better.” What’s more – the plants don’t need the extra cash to stay open. Voices across the political and ideological spectrum – from Friends of the Earth to The Heritage Foundation – are raising alarm.
Over the weekend, the Senate Energy and Natural Resources committee released the Energy Infrastructure Act discussion draft. Overall, the discussion draft is a positive step and will facilitate much-needed investment in America’s aging energy infrastructure. However, the draft also includes a subsidy program for existing nuclear power plants. The proposed program would cost $1.2 billion each year from 2022 through 2026, granting credits to existing plants. This follows President Biden’s new budget proposal including $1 billion annually in nuclear tax credits.
Biden’s proposal came just two days after Sen. Ben Cardin withdrew an amendment to attach a $50 billion bailout to the Clean Energy for America Act. Friends of the Earth decried the proposal as wrong for taxpayers, wrong for ratepayers and wrong for the environment.
These federal nuclear bailout proposals are not new; five states have enacted legislation to subsidize nuclear resources with little to no transparency into whether financial assistance is actually needed. When Americans are finally beginning to recover from the economic impacts of a once-in-a-generation pandemic, every wasted dollar matters.
Three points – and the facts – illustrate why bailouts to existing resources undermine the effort to “Build Back Better.”
First, there is no crisis – and power plant owners don’t need a handout from taxpayers. Expert analysis shows no nuclear units are at risk of retirement – with profits even expected to exceed $279 million in 2021. We’ll dig into those numbers further down.
Second, a dollar spent on the old diverts money from new clean energy. As I outlined in a letter to the Senate Finance Committee, providing cash payments to legacy resources will leave private developers of new low- and zero-emissions resources with little to no incentive to invest in and build the electric generation necessary to reliably and affordably decarbonize the economy.
Third, nuclear owners have already been bailed out time and again – and had the opportunity to earn ample revenue in competitive markets – with consumers paying higher costs as a result. At the advent of electric restructuring, in almost every case, competitive nuclear asset owners were nearly fully paid for stranded cost recovery (by consumers). Upon joining competitive markets, those same plants earned high profits until the shale revolution ushered in lower cost energy options. Yet now, they seek a cash bailout, saying that as zero-emission resources the plants are necessary to avoid harmful increases in carbon emissions. The claim ignores the reality.
Before heading down a costly road, a look into the profitability of existing nuclear resources is warranted. A 2020 independent assessment found that none of the sixteen nuclear reactors in the largest regional grid in the U.S.—serving over 65 million people—are at risk of retirement. They are in fact quite profitable, many to the tune of tens of millions of dollars each year, as demonstrated in charts from Monitoring Analytics 2021 State of the Markets Report. For those already receiving subsides at the state level, profits are expected to exceed $279 million in 2021. Hardly justification for additional bailouts from the American people.
Additionally, policies that pick winners and losers can harm consumers and the political process. They are often fraught with misaligned incentives that can lead to less-than-ideal behavior on the part of the companies standing to benefit from the subsidy. In Ohio, lawmakers repealed a troubled nuclear subsidy after it was revealed that the company standing to benefit donated millions in dark money to the then-speaker of the Ohio House of Representatives to pass the legislation.
EPSA is not opposed to nuclear energy; it is reliable, affordable, and produces no emissions. Our member companies own and operate competitive nuclear facilities. However, unjustified bailouts are not the answer.
There’s a better solution. An economy-wide price on carbon will ensure that consumers get the best deal, innovation is encouraged and all resources—including existing nuclear—can compete to reduce America’s carbon footprint. Consensus is growing around this path, which economists have long known to be the most efficient approach to reducing emissions. Alternatively, if designed correctly, a Clean Energy Standard can approach the efficiency of a carbon price and provide a market-based alternative to carbon reduction and clean energy goals.
In the end, handing out taxpayer money to profitable private companies to retain specific assets and undermine the development and deployment of new and innovate technologies gets us no closer to the affordable, reliable and cleaner energy future we all want. Competition is building it – better, faster, and cheaper.
Todd Snitchler is president and CEO of the Electric Power Supply Association (EPSA), the national trade association representing America’s competitive power suppliers providing about 150,000 MW of electric generation from all resources including natural gas, renewables, and nuclear.