New Nuclear Power Seen as Winner in Obama’s Clean Power Plan

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Obama's Clean Power Plan in Two Minutes

The Obama administration gave the struggling U.S. nuclear industry a glimmer of hope this week by allowing new reactors to count more toward meeting federal emissions limits.

States can take more credit for carbon-free electricity to be generated by nuclear power plants under construction as they work to comply with emission-reduction targets set in the U.S. Environmental Protection Agency’s Clean Power Plan released Monday. Cuts from existing reactors won’t count, casting the fate of units at risk of premature retirement in doubt.

Under last year’s draft of the plan, the yet-to-be completed reactors were counted as existing units that wouldn’t be fully credited for carbon reductions generated in the future after they had started operating. The nuclear power industry complained that amounted to a penalty on the plants and made state targets harder to achieve.

“We tend to view new rules as potentially the first bit of good news for the struggling nuclear industry,” Julien Dumoulin-Smith, an analyst for UBS, wrote on Monday in a research note.

Nuclear operators are facing high maintenance and clean-up costs, as well as competition from cheap natural gas-fueled power plants and low-cost wind and solar generation. About 10 percent of the nation’s nuclear output may retire early because of low energy prices, according to Moody’s Investors Service.

The question of waste disposal also hangs over the industry as efforts to establish a federal repository at Yucca Mountain in Nevada have stalled.

Existing Reactors

The Nuclear Energy Institute, a Washington-based trade group, said it was “pleased” that the EPA recognized that nuclear plants under construction “should count toward compliance when they are operating.”

Marvin Fertel, president of the group, said by e-mail that the industry was disappointed that existing reactors won’t get credit for their carbon-reduction value, given that some are at risk of early retirement. States would have been allowed to count 6 percent of nuclear generation toward clean energy targets under the EPA’s draft rule released last year.

“The final rule does not incorporate the carbon-abatement value of existing nuclear power plants—the largest source of carbon-free electricity,” Fertel said. “What the final rule fails to recognize is that CO2 emissions will be significantly higher if existing nuclear power plants shut down prematurely.”

New Reactors

New reactor projects, the first in decades, have been plagued by delays and cost increases.

Beneficiaries of the rule changes would include Southern Co. and Scana Corp., which are building new reactors in Georgia and South Carolina, respectively. The Tennessee Valley Authority, which is building a reactor at its Watts Bar facility near Spring City, Tennessee, would also get a boost.

“Nuclear facilities will be credited because it’s new, zero-carbon generation that will be credited as part of a compliance strategy,” said U.S. EPA Administrator Gina McCarthy. “That’s entirely consistent and appropriate.”

Utility Concerns

The rule changes address one of TVA’s “major concerns” with the EPA plan, Scott Brooks, a spokesman for TVA, said in a statement Monday. “That means we can count Watts Bar Unit 2, scheduled to be online within the next year, as part of our compliance plan,” he said.

Southern is reviewing the final rules and remained concerned that they “impede state’s authority to act in the best interests of customers,” Tim Leljedal, a company spokesman, said by e-mail Monday.

Southern said in January that delays may add more than $700 million in costs to the twin reactors its building at Plant Vogtle near Augusta, Georgia. The company has said customers won’t have to pay for those setbacks.

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