As 2016 closes, there is ample evidence that we are in difficult times for nuclear energy in the United States, particularly for nuclear plants operating in merchant markets (i.e., not cost-of-service rate regulated frameworks). Even with excellent performance in terms of plant output and capacity factors, operating costs remain relatively high due to industry commitments and increased regulatory requirements such as security enhancements and post-Fukushima upgrades. Historically inexpensive and abundant natural gas is driving more expensive competitors, including nuclear plants, to close and to decommission regardless of any other attributes of each generation type. For example, absent state action such as the recent initiatives in New York and Illinois to adopt Zero Energy Credits for operating nuclear plants similar to Renewable Energy Credits, carbon-free nuclear plants will continue to close and be replaced by carbon-emitting combined cycle gas generation.
During the Obama Administration, the White House pursued, at least in name, an “all of the above” energy strategy that clearly contemplated retaining (if not growing) nuclear energy in the nation’s generation mix. Most of this was motivated by climate change and a sound desire to preserve nuclear as a key component of carbon-free generation capacity. For example, the Department of Energy actively considered ways to maintain the operating plants in the current economic environment. And, as an outgrowth of the Energy Policy Act of 2005, DOE continued to support new plant development. DOE also supported second license renewal and research and development of advanced and small modular nuclear energy technologies. As we previously reported, there has even been a “mini-renaissance” in plant licensing. (Since that report, the NRC has approved additional new licenses for Florida Power & Light’s Levy County project and Duke Energy’s Lee project.) But all of the consideration and support has led to few concrete results. Owners of operating plants continue to announce closures and none of the recent new license holders have plans to begin construction.
For the nuclear energy industry, a frequent question is, what will the Trump Administration mean for nuclear generation? There has been no clear policy direction during or since the campaign, so most of what has been offered to answer that question is speculative. And in that context, we can add our perspectives. Most significantly, the Trump Administration does not appear to have the driving animus that the Obama Administration had to support nuclear energy—a desire to address climate change. The Trump campaign focused only on restoring coal, which clearly would not be a climate change initiative. Coal, of course, is largely a victim of the same economic pressures from cheap natural gas as nuclear. But, the same or an even better argument can be made for nuclear as for coal, based on jobs (the obvious motivation behind the pro-coal focus) and infrastructure (fuel diversity and reliability). Compared with coal, nuclear creates more than three times as many jobs during construction and more than twice as many jobs during operation.
In this environment, a Trump Administration might take an interest in preventing nuclear plant closures to preserve quality jobs and the economic benefits of existing nuclear plants and to garner credit for doing so. To be most effective however, this would require action at the federal level similar to the recent state initiatives that treat nuclear like renewables. There would be policy bases for such action—and the action could resolve pending legal challenges to state initiatives. But, a distracted and divided federal government might be at least equally likely to leave this sort of action to state governments. So federal action in this area may be unlikely. The most the industry might reasonably expect would be renewed focus on the cost of existing and new regulations, in order to improve the operating plant cost structure. Legislation providing tax credits for major investments in operating plants or for second license renewal could also boost the economics of operating plants.
Continued support for advanced nuclear development and licensing does not seem controversial, other than for deficit hawks. Federal support is an investment in future economic competitiveness as well as a climate change initiative. Private investors also continue to work on Small Modular Reactors (SMRs) and newer Generation IV technologies and will push for federal support. These long-term initiatives might also prove to be less controversial than direct action (e.g., investment tax credits, production tax credits, loan guarantees) to spur development of plants already licensed. But those already-licensed projects would be closer to “shovel ready.” And, the scale of building out licensed-but-not-yet-constructed reactors and the near- and long-term benefits of those projects could be attractive to the President-elect (and to Congress). Nuclear plants are, if nothing else, mammoth job producers, large infrastructure projects, and significant spurs for maintaining and enhancing complex manufacturing capabilities. The climate-related benefits of nuclear could also blunt any criticism from environmentalists, who made progress in reducing coal generation under the Obama Administration, and draw international praise for taking a leadership role in reducing climate emissions (no matter the stated rationale here in the U.S.).
Finally, one area that will surely draw attention from both Congress and the incoming Administration will be Yucca Mountain. The project was summarily curtailed by the Obama Administration in service to the State of Nevada and Senator Reid in particular. With Senator Reid’s retirement, some members of Congress are interested in restarting the project, or at least the licensing of the project. Action on Yucca Mountain would be consistent with the Nuclear Waste Policy Act and the Federal Government’s obligations under that statute, could allow the DOE to start collecting the waste fees again, would have a political “pay back” element, and would be a significant infrastructure initiative. On the other hand, the waste issue has always had embedded federalism concerns that may bother some conservatives in Congress.
As always, there will be many issues to watch related to nuclear power policy in 2017. Some are new issues and some are recurring. The change in Administration will make the old issues new again and the new issues more unpredictable than ever. Stay tuned.