New York to Decide on $500 Million-a-Year Nuclear Power Lifeline

  • Upstate eactors may close if state bailout plan fails
  • Critics say subsidies will undermine clean energy goals

New York is poised to decide whether customers should spend about $500 million a year to save its money-losing nuclear reactors.

If New York approves the subsidies Monday, it would be the first state to throw such a lifeline to nuclear plants and the emission-free power they produce. The proposal is part of Governor Andrew Cuomo’s initiative to get half the state’s power from renewable sources by 2030. It’s a far cry from the approach in other states where reactors are being allowed to fail under their own weight.

Nuclear aid is among controversial measures the state Public Service Commission is weighing as renewable power becomes a larger part of its power portfolio. New York is also considering changes to regulations that require utilities to buy back excess power from homeowners and businesses with rooftop solar panels. So-called net metering rules have pitted utilities against renewable energy developers in states across the U.S.

“The public service commission and the governor intend to throw away billions of dollars on uneconomical, dirty nuclear plants when we should be investing in renewables and efficiency,” Jessica Azulay, program director for the Alliance for a Green Economy, based in Syracuse, New York, said by phone July 28. “New York needs a plan for a real long-term decarbonization of our energy system, not short-sighted bailouts.”

Market Signals

Exelon Corp. said it may close its Ginna and Nine Mile Point 1 units before their licenses expire unless subsidies are approved by September. Entergy Corp. plans to shut its FitzPatrick reactor around year-end, though Exelon said it’s willing to buy that plant and keep it running if subsidies are approved. Both companies back the proposal.

Others aren’t so sure. Independent power producers say the financial aid will put them at a disadvantage by making their product more costly by comparison.

“The competitive market is signaling that the nuclear facilities should be retired,” according to a filing by a group that includes Calpine Corp. and Dynegy Inc.

The proposal would be a “a blatant exercise of buyer-side market power,” and would suppress revenue for other generators according to the filing.

Emission Credits

Replacing power from the three upstate reactors would lead to “significant levels” of carbon dioxide from existing and new fossil fuel generators, commission staff said in a July 8 filing. Keeping them open would provide annual benefits of $1.7 billion. A fourth plant, Indian Point, about 40 miles (64 kilometers) north of New York City, won’t initially be eligible for help as it gets higher prices for its power.

“Given the state of the infrastructure, you can’t replace that zero-emissions power with other zero-emissions power quickly,”  Bloomberg Intelligence analyst Kit Konolige said by phone July 26. “It’s just not there.”

Under the plan, so-called zero emission credits would be allocated to each nuclear plant and purchased by the state at a price set by the commission. Utilities would be required to buy credits based on the share of power they provide. The cost would be passed onto customers based on their power use.

Failed Legislation

“It is a fair and accurate analysis of our energy climate and must be promptly implemented to facilitate critical business decisions,” Exelon spokesman Marshall Murphy said by e-mail. 

The proposal comes after Illinois lawmakers failed to pass legislation Exelon said was needed to keep reactors in that state open. Massachusetts lawmakers are weighing a renewable energy plan that may put New England’s last two nuclear plants out of business.

Nuclear plants accounted for 31 percent of New York power generation in 2014, second to natural gas-fueled plants at 37 percent and ahead of hydroelectric dams at 23 percent, according to a Jan. 25 state white paper.

“Adoption of a clean energy mechanism that is inclusive of all of the state’s existing nuclear facilities is itself a groundbreaking and critically needed step forward,” Entergy spokeswoman Kay Jones said by e-mail.

The subsidy would amount to $17.48 a megawatt-hour, or about $965 million, in the first two years with adjustments every subsequent two years through 2029 based on market prices and a U.S. government formula that calculates the cost of carbon pollution to society, according to the proposal.

“The ‘bridge’ of a dozen years proposed by staff appears to be too long,” utility owner National Grid Plc said in a filing. A 12-year subsidy “runs the risk of ultimately hurting customers and markets that will delay the needed transition.” It proposed a six-year commitment.

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